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Large Accelerated Filer x	Accelerated Filer o
Non-accelerated Filer o (Do not check if a smaller reporting company)	Smaller Reporting Company o

PART I.		Financial Information	Page
ITEM 1.		Financial Statements (Unaudited):
		Condensed Consolidated Balance Sheets — as of July 3, 2009 and January 2, 2009	3
		Condensed Consolidated Statements of Income — for the Three and Six Months Ended July 3, 2009 and June 27, 2008	4
		Condensed Consolidated Statements of Cash Flows — for the Six Months Ended July 3, 2009 and June 27, 2008	5
		Notes to Condensed Consolidated Financial Statements	6
ITEM 2.		Management's Discussion and Analysis of Financial Condition and Results of Operations	21
ITEM 3.		Quantitative and Qualitative Disclosures about Market Risk	31
ITEM 4.		Controls and Procedures	32
PART II.		Other Information
ITEM 1.		Legal Proceedings	32
ITEM 1A.		Risk Factors	32
ITEM 4.		Submission of Matters to A Vote of Security Holders	32
ITEM 6.		Exhibits	34
SIGNATURES			35

 

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PART I – FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

TR IMBLE NAVIGATION LIMITED

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

		July 3, 2009				January 2, 2009
(Dollars in thousands)
ASSETS
Current assets :
Cash and cash equivalents		$	190,154			$	147,531
Accounts receivable, net			199,928				204,269
Other receivables			9,747				17,540
Inventories, net			168,272				160,893
Deferred income taxes			36,358				41,810
Other current assets			18,392				16,404
Total current assets			622,851				588,447
Property and equipment, net			48,905				50,175
Goodwill			746,159				715,571
Other purchased intangible assets, net			223,682				228,901
Other non-current assets			49,446				51,922
Total assets		$	1,691,043			$	1,635,016
LIABILITIES
Current liabilities:
Current portion of long-term debt		$	48			$	124
Accounts payable			55,596				49,611
Accrued compensation and benefits			45,196				41,291
Deferred revenue			68,603				55,241
Accrued warranty expense			14,161				13,332
Other current liabilities			39,160				63,719
Total current liabilities			222,764				223,318
Non-current portion of long-term debt			151,460				151,464
Non-current deferred revenue			9,145				12,418
Deferred income taxes			36,453				42,207
Other non-current liabilities			63,877				61,553
Total liabilities			483,699				490,960
Commitments and contingencies
EQUITY
Shareholders' equity:
Preferred stock no par value; 3,000 shares authorized; none outstanding			-				-
Common stock, no par value; 180,000 shares authorized; 119,612 and 119,051 shares issued and outstanding at July 3, 2009 and January 2, 2009, respectively			699,790				684,831
Retained earnings			466,243				427,921
Accumulated other comprehensive income			36,934				27,649
Total Trimble Navigation Ltd. shareholders' equity			1,202,967				1,140,401
Noncontrolling interests			4,377				3,655
Total equity			1,207,344				1,144,056
Total liabilities and equity		$	1,691,043			$	1,635,016

See accompanying Notes to the Condensed Consolidated Financial Statements.

 

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TR IMBLE NAVIGATION LIMITED

 CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

		Three Months Ended								Six Months Ended
		July 3, 2009				June 27, 2008				July 3, 2009				June 27, 2008
(Dollars in thousands, except per share data)
Revenue  (1)		$	290,063			$	377,767			$	579,017			$	733,063
Cost of sales (1)			147,263				190,668				292,259				371,588
Gross margin			142,800				187,099				286,758				361,475
Operating expenses
Research and development			33,457				39,405				67,594				76,750
Sales and marketing			45,163				51,904				94,098				103,062
General and administrative			26,622				25,289				52,664				47,979
Restructuring charges			1,302				2,414				4,925				2,414
Amortization of purchased intangible assets			7,530				5,163				14,499				10,306
Total operating expenses			114,074				124,175				233,780				240,511
Operating income			28,726				62,924				52,978				120,964
Non-operating income, net
Interest income			223				508				422				965
Interest expense			(465)				(413)				(958)				(1,175)
Foreign currency transaction gain (loss), net			(216)				1,253				(32)				2,221
Income from joint ventures			352				2,618				520				4,633
Other income (expense), net			1,161				153				447				(754)
Total non-operating income, net			1,055				4,119				399				5,890
Income before taxes			29,781				67,043				53,377				126,854
Income tax provision			8,631				18,444				14,530				38,188
Net income			21,150				48,599				38,847				88,666
Less: Net income attributable to noncontrolling interests			293				-				525				-
Net income attributable to Trimble Navigation Ltd.		$	20,857			$	48,599			$	38,322			$	88,666
Basic earnings per share		$	0.17			$	0.40			$	0.32			$	0.73
Shares used in calculating basic earnings per share			119,551				121,523				119,406				121,495
Diluted earnings per share		$	0.17			$	0.39			$	0.32			$	0.71
Shares used in calculating diluted earnings per share			121,897				125,712				121,411				125,435

 

 

(1) Sales to related parties, Caterpillar Trimble Control Technologies Joint Venture (CTCT) and Nikon-Trimble Joint Venture (Nikon-Trimble), were $3.5 million and $8.7 million for the three months ended July 3, 2009 and June 27, 2008, respectively, with associated cost of sales to those related parties of $2.3 million and $7.2 million, respectively.  Sales to CTCT and Nikon-Trimble were $7.9 million and $15.2 million for the six months ended July 3, 2009 and June 27, 2008, respectively, with associated cost of sales of $5.2 million and $11.8 million, respectively.  In addition, cost of sales associated with related party net inventory purchases were $6.0 million and $7.4 million for the three months ended July 3, 2009 and June 27, 2008, respectively, and $10.5 million and $13.5 million for the six months ended July 3, 2009 and June 27, 2008, respectively.  See Note 4 regarding joint ventures for further information about related party transactions.

See accompanying Notes to the Condensed Consolidated Financial Statements.

 

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TR IMBLE NAVIGATION LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

			Six Months Ended
			July 3, 2009				June 27, 2008
(Dollars in thousands)
Cash flow from operating activities:
Net income		$	38,847			$	88,666
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense			9,071				9,274
Amortization expense			25,348				21,811
Provision for doubtful accounts			3,053				119
Amortization of debt issuance costs			113				113
Deferred income taxes			(3,406)				(2,791)
Stock-based compensation			8,780				7,777
Income from joint ventures			(520)				(4,633)
Gain on bargain purchase			(386)				-
Excess tax benefit for stock-based compensation			(304)				(5,249)
Provision for excess and obsolete inventories			2,933				3,283
Other non-cash items			(2,360)				1
Add decrease (increase) in assets:
Accounts receivable			4,117				(26,832)
Other receivables			5,242				481
Inventories			(7,556)				(8,997)
Other current and non-current assets			2,289				(464)
Add increase (decrease) in liabilities:
Accounts payable			4,790				4,637
Accrued compensation and benefits			2,808				(303)
Accrued liabilities			8,591				(597)
Deferred revenue			7,224				3,974
Income taxes payable			-				10,093
Net cash provided by operating activities			108,674				100,363
Cash flow from investing activities:
Acquisitions of businesses, net of cash acquired			(39,029)				(45,082)
Acquisitions of property and equipment			(7,415)				(7,932)
Acquisitions of intangible assets			(26,839)				(165)
Other			(513)				302
Net cash used in investing activities			(73,796)				(52,877)
Cash flow from financing activities:
Issuances of common stock			5,775				15,425
Excess tax benefit for stock-based compensation			304				5,249
Repurchase and retirement of common stock			-				(36,293)
Payments on long-term debt and revolving credit lines			(149)				(60,314)
Net cash provided by (used in) financing activities			5,930				(75,933)
Effect of exchange rate changes on cash and cash equivalents			1,815				5,068
Net increase (decrease) in cash and cash equivalents			42,623				(23,379)
Cash and cash equivalents, beginning of period			147,531				103,202
Cash and cash equivalents, end of period		$	190,154			$	79,823

See accompanying Notes to the Condensed Consolidated Financial Statements.

 

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NO TES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

 

NOTE 1. OVERVIEW AND BASIS OF PRESENTATION

Trimble Navigation Limited (the Company), incorporated in California in 1981, provides positioning solutions to commercial and government users in a large number of markets.  These markets include surveying, agriculture, construction, asset management, mapping, and mobile resource management.

The Company has a 52-53 week fiscal year, ending on the Friday nearest to December 31, which for fiscal 2008 was January 2, 2009. The second quarters of fiscal 2009 and fiscal 2008 ended on July 3, 2009 and June 27, 2008, respectively.  Fiscal 2009 is a 52-week year and fiscal 2008 was a 53-week year.  Unless otherwise stated, all dates refer to the Company’s fiscal year and fiscal periods.

The Condensed Consolidated Financial Statements include the results of the Company and its majority-owned subsidiaries.  Inter-company accounts and transactions have been eliminated.  Noncontrolling interests represent the minority shareholders’ proportionate share of the net assets and results of operations of the Company’s majority-owned subsidiaries.

 

The accompanying financial data as of July 3, 2009 and for the three and six months ended July 3, 2009 and June 27, 2008 has been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the U.S. have been condensed or omitted pursuant to such rules and regulations.  The Condensed Consolidated Balance Sheet as of January 2, 2009 is derived from the audited Consolidated Financial Statements included in the Annual Report on Form 10-K of Trimble Navigation Limited for fiscal year 2008. Certain amounts from prior periods have been reclassified to conform to the current period presentation.  The following discussion should be read in conjunction with the Company’s 2008 Annual Report on Form 10-K.

The preparation of financial statements in accordance with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the amounts reported in its Condensed Consolidated Financial Statements and accompanying notes.  Management bases its estimates on historical experience and various other assumptions believed to be reasonable. Although these estimates are based on management’s best knowledge of current events and actions that may impact the company in the future, actual results may be different from the estimates.

In the opinion of management, all adjustments necessary to present a fair statement of financial position as of July 3, 2009, results of operations for the three and six months ended July 3, 2009 and June 27, 2008 and cash flows for the six months ended July 3, 2009 and June 27, 2008, as applicable, have been made.  The results of operations for the three and six months ended July 3, 2009 are not necessarily indicative of the operating results for the full fiscal year or any future periods.  Individual segment revenue may be affected by seasonal buying patterns and general economic conditions. The Company has evaluated all subsequent events through August 10, 2009, which is the date that these financial statements have been filed with the Securities and Exchange Commission (“SEC”).  No material subsequent events have occurred since July 3, 2009 that required recognition or disclosure in these financial statements.

NOTE 2. UPDATES TO SIGNIFICANT ACCOUNTING POLICIES

There have been no changes to the Company’s significant accounting polices during the six months ended July 3, 2009 from those disclosed in the Company’s 2008 Form 10-K. 

Recent Accounting Pronouncements

 

Updates to recent accounting standards as disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended January 2, 2009 are as follows:

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” which clarifies the definition of fair value, establishes a framework for measuring fair value within GAAP, and expands the disclosures regarding fair value measurements.  In February 2008, the FASB issued FASB Staff Position No. FAS 157-2 deferring the effective date of SFAS No. 157 to fiscal years beginning after November 15, 2008 and interim periods within those fiscal years for nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis.  The Company adopted SFAS No. 157 in its first quarter of fiscal 2008, except for those items specifically deferred under FSP No. SFAS 157-2, which were adopted in the first quarter of fiscal 2009. The adoption of SFAS No. 157 did not have a material impact on the Company’s financial position, results of operations, or cash flows.

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations”. SFAS No. 141(R) establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree, and recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase.  SFAS No. 141(R) also sets forth the disclosures required to be made in the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Accordingly, the Company adopted this standard in its first quarter of fiscal 2009.  The Company expects SFAS No. 141(R) will have an impact on the Company’s financial position, results of operations, or cash flows, but the nature and magnitude of the specific effects will depend largely upon the nature and size of the Company’s business combinations. SFAS No. 141(R) did not have a material impact in the first half of fiscal 2009.  

 

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In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51”. SFAS 160 changed the accounting and reporting for minority interests, which were re-characterized as noncontrolling interests and classified as a component of equity. This new consolidation method significantly changed the accounting for transactions with minority interest holders.  SFAS 160 required retroactive adoption of the presentation and disclosure requirements for previously existing minority interests. All other requirements of SFAS 160 are applied prospectively.  SFAS 160 is effective for fiscal years beginning after December 15, 2008. The Company adopted this standard in the first quarter of fiscal 2009.  The adoption of SFAS 160 did not have a material impact on the Company’s financial position, results of operations, or cash flows.

In March 2008, the FASB issued SFAS No. 161, “Disclosures About Derivative Instruments and Hedging Activities - An Amendment of FASB Statement No. 133”, which requires enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Company adopted this standard in the first quarter of fiscal 2009.   The adoption of SFAS 161 did not have an impact on the Company’s financial position, results of operations, or cash flows.

In May 2009, the FASB issued SFAS No. 165, “Subsequent Events”, which became effective for and was adopted by the Company during the second quarter of fiscal 2009.  SFAS 165 establishes the accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued.  Specifically, this standard sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date.  SFAS 165 is effective for interim or annual financial periods ending after June 15, 2009.  Adoption of SFAS 165 did not have an impact on the Company’s financial position, results of operations or cash flows, other than the disclosures required by SFAS No. 165.

In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)”.  SFAS No. 167 amends FIN 46(R), “Consolidation of Variable Interest Entities,” and changes the consolidation guidance applicable to a variable interest entity (“VIE”). It also amends the guidance governing the determination of whether an enterprise is the primary beneficiary of a VIE, and is, therefore, required to consolidate an entity, by requiring a qualitative analysis rather than a quantitative analysis. The qualitative analysis will include, among other things, consideration of who has the power to direct the activities of the entity that most significantly impact the entity’s economic performance and who has the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. This standard also requires continuous reassessments of whether an enterprise is the primary beneficiary of a VIE. Previously, FIN 46(R) required reconsideration of whether an enterprise was the primary beneficiary of a VIE only when specific events had occurred.   SFAS 167 is effective for interim and annual reporting periods that begin after November 15, 2009. The Company will adopt this standard in fiscal 2010.  The Company is evaluating the impact of the adoption of SFAS No. 167 on its financial position, results of operations and cash flows. 

In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles”.   SFAS 168 establishes the FASB Accounting Standards Codification (the “Codification”) as the source of authoritative accounting principles recognized by the FASB to be applied by non-governmental entities in the preparation of financial statements in conformity with U.S. GAAP. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. SFAS 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Codification will supersede all accounting standards in U.S. GAAP, aside from those issued by the SEC.  The Company will update its disclosures to conform to the Codification in its Form 10-Q for the third quarter of 2009.

NOTE 3. SHAREHOLDERS’ EQUITY

Stock Repurchase Activities

In January 2008, the Company’s Board of Directors authorized a stock repurchase program (“2008 Stock Repurchase Program”), authorizing the Company to repurchase up to $250 million of Trimble’s common stock under this program. During the six months ended June 27, 2008, the Company repurchased approximately 1,255,000 shares of common stock in open market purchases at an average price of $28.90 per share, for a total of $36.3 million. To date, the Company has repurchased approximately 4,243,000 shares of common stock in open market purchases at an average price of $29.67 per share, for a total of $125.9 million. The purchase price was reflected as a decrease to common stock based on the average stated value per share with the remainder to retained earnings. No shares of common stock were repurchased during the six months ended July 3, 2009.  Common stock repurchases under the program were recorded based upon the trade date for accounting purposes.  All common shares repurchased under this program have been retired. As of July 3, 2009, the 2008 Stock Repurchase Program had remaining authorized funds of $124.1 million.  The timing and actual number of future shares repurchased will depend on a variety of factors including price, regulatory requirements, capital availability, and other market conditions.  The program does not require the purchase of any minimum number of shares and may be suspended or discontinued at any time without public notice.

 

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Stock-Based Compensation

The Company accounts for its employee stock options and rights to purchase shares under its stock participation plans at fair value, in accordance with SFAS 123(R), “Share-Based Payment.” SFAS 123(R) requires stock-based compensation to be estimated using the fair value on the date of grant using an option-pricing model. The value of the portion of the award that is expected to vest is recognized as expense over the related employees’ requisite service periods in the Company’s Condensed Consolidated Statements of Income.

The following table summarizes stock-based compensation expense, net of tax, related to employee stock-based compensation included in the Condensed Consolidated Statements of Income in accordance with SFAS 123(R) for the three and six months ended July 3, 2009 and June 27, 2008.

 

		Three Months Ended								Six Months Ended
		July 3, 2009				June 27, 2008				July 3, 2009				June 27, 2008
(Dollars in thousands)
Cost of sales		$	477			$	487			$	915			$	980
Research and development			854				916				1,638				1,833
Sales and marketing			1,062				931				2,066				1,961
General and administrative			2,161				1,461				4,161				3,003
Total operating expenses			4,077				3,308				7,865				6,797
Total stock-based compensation expense			4,554				3,795				8,780				7,777
Tax benefit (1)			(726)				(458)				(1,117)				(552)
Total stock-based compensation expense, net of tax		$	3,828			$	3,337			$	7,663			$	7,225

 

 

(1) Tax benefit related to U.S. non-qualified options and restricted stock units, applying a Federal statutory and State (Federal effected) tax rate for the respective periods.

Options

Stock option expense recognized during the period is based on the value of the portion of the stock option that is expected to vest during the period. The fair value of each stock option is estimated on the date of grant using a binomial valuation model. The Black-Scholes model was used to value those options granted prior to the fourth quarter of fiscal 2005. Similar to the Black-Scholes model, the binomial model takes into account variables such as volatility, dividend yield rate, and risk free interest rate. For options granted during the three and six months ended July 3, 2009 and June 27, 2008, the following weighted average assumptions were used:

		Three Months Ended						Six Months Ended
		July 3, 2009			June 27, 2008			July 3, 2009			June 27, 2008
Expected dividend yield		--			--			--			--
Expected stock price volatility		46.7%			39.8%			46.7%			39.7%
Risk free interest rate		1.8%			2.7%			1.9%			2.7%
Expected life of option		4.3 years			4.1 years			4.2 years			4.1 years

Expected Dividend Yield – The dividend yield assumption is based on the Company’s history and expectation of dividend payouts.

Expected Stock Price Volatility – The Company’s computation of expected volatility is based on a combination of implied volatilities from traded options on the Company’s stock and historical volatility, commensurate with the expected life of the stock options.

 

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Expected Risk Free Interest Rate – The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for the expected life of the stock options.

Expected Life Of Option – The Company’s expected life represents the period that the Company’s stock options are expected to be outstanding and is determined based on historical experience of similar stock options with consideration to the contractual terms of the stock options, vesting schedules, and expectations of future employee behavior.

NOTE 4. JOINT VENTURES

Caterpillar Trimble Control Technologies Joint Venture

On April 1, 2002, Caterpillar Trimble Control Technologies LLC (CTCT), a joint venture formed by the Company and Caterpillar, began operations. CTCT develops advanced electronic guidance and control products for earth moving machines in the construction and mining industries. The joint venture is 50% owned by the Company and 50% owned by Caterpillar, with equal voting rights. The joint venture is accounted for under the equity method of accounting. Under the equity method, the Company’s share of profits and losses are included in Income from joint ventures in the Non-operating income, net section of the Condensed Consolidated Statements of Income.  During the three and six months ended July 3, 2009, the Company recorded $0.9 million and $1.6 million, respectively, as its proportionate share of CTCT net income.  During the comparable period of 2008, the Company recorded $2.9 million and $4.7 million, respectively, as its proportionate share of CTCT net income.  During the three and six months ended July 3, 2009 and June 27, 2008, there were no dividends received from CTCT.  The carrying amount of the investment in CTCT was $8.6 million at July 3, 2009 and $7.0 million at January 2, 2009 and is included in Other non-current assets on the Condensed Consolidated Balance Sheets.

The Company acts as a contract manufacturer for CTCT.  Products are manufactured based on orders received from CTCT and are sold at direct cost, plus a mark-up for the Company’s overhead costs to CTCT.  CTCT then resells products at cost, plus a mark-up in consideration for CTCT’s research and development efforts to both Caterpillar and to the Company for sales through their respective distribution channels. Generally, the Company sells products through its after-market dealer channel, and Caterpillar sells products for factory and dealer installation.  CTCT does not have net inventory on its balance sheet in that the resale of products to Caterpillar and the Company occur simultaneously when the products are purchased from the Company.  During the three and six months ended July 3, 2009, the Company recorded $0.6 million and $1.5 million of revenue, respectively, and $0.6 million and $1.4 million of cost of sales, respectively, for the manufacturing of products sold by the Company to CTCT and then sold through the Caterpillar distribution channel.  During the comparable three and six months ended June 27, 2008, the Company recorded $3.5 million and $6.2 million of revenue, respectively, and $3.1 million and $5.4 million of cost of sales, respectively, for the manufacturing of products sold by the Company to CTCT and then sold through the Caterpillar distribution channel.  In addition, during the three and six months ended July 3, 2009, the Company recorded $6.0 million and $10.5 million in net cost of sales for the manufacturing of products sold by the Company to CTCT and then repurchased by the Company upon sale through the Company’s distribution channel.  The comparable net cost of sales recorded by the Company for the three and six months ended June 27, 2008 were $7.4 million and $13.5 million, respectively.

In addition, the Company received reimbursement of employee-related costs from CTCT for company employees dedicated to CTCT or performance of work for CTCT totaling $2.6 million and $5.3 million for the three and six months ended  July 3, 2009, respectively, and totaling $3.5 million and $7.5 million for the three and six months ended June 27, 2008, respectively. The reimbursements were offset against operating expense.

At July 3, 2009 and January 2, 2009, the Company had amounts due to and from CTCT.  Receivables and payables to CTCT are settled individually with terms comparable to other non-related parties.  The amounts due to and from CTCT are presented on a gross basis in the Condensed Consolidated Balance Sheets.  At July 3, 2009 and January 2, 2009, the receivables from CTCT were $5.0 million and $4.1 million, respectively, and are included within Accounts receivable, net, on the Condensed Consolidated Balance Sheets.  As of the same dates, the payables due to CTCT were $5.9 million and $3.1 million, respectively, and are included within Accounts payable on the Condensed Consolidated Balance Sheets.

Nikon-Trimble Joint Venture

On March 28, 2003, Nikon-Trimble Co., Ltd (Nikon-Trimble), a joint venture, was formed by the Company and Nikon Corporation.  The joint venture began operations in July 2003 and is 50% owned by the Company and 50% owned by Nikon, with equal voting rights. It focuses on the design and manufacture of surveying instruments including mechanical total stations and related products.

The joint venture is accounted for under the equity method of accounting.  Under the equity method, the Company’s share of profits and losses are included in Income from joint ventures in the Non-operating income, net section of the Condensed Consolidated Statements of Income.  During the three and six months ended July 3, 2009, the Company recorded a loss of $0.6 million and $1.1 million, respectively, and during the three and six months ended June 27, 2008, the Company recorded a loss of $0.3 million and $0.1 million, respectively, as its proportionate share of Nikon-Trimble net income.  During the three and six months ended July 3, 2009, there were no dividends received from Nikon-Trimble. During the three and six months ended June 27, 2008, dividends received from Nikon-Trimble, amounted to $0.2 million, and were recorded against Other non-current assets on the Condensed Consolidated Balance Sheets.  The carrying amount of the investment in Nikon-Trimble was $12.8 million at July 3, 2009 and $13.9 million at January 2, 2009, and is included in Other non-current assets on the Condensed Consolidated Balance Sheets.

 

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Nikon-Trimble is the distributor in Japan for Nikon and the Company’s products.  The Company is the exclusive distributor outside of Japan for Nikon branded survey products. For products sold by the Company to Nikon-Trimble, revenue is recognized by the Company on a sell-through basis from Nikon-Trimble to the end customer.

The terms and conditions of the sales of products from the Company to Nikon-Trimble are comparable with those of the standard distribution agreements which the Company maintains with its dealer channel and margins earned are similar to those from third party dealers. Similarly, the purchases of product by the Company from Nikon-Trimble are made on terms comparable with the arrangements which Nikon maintained with its international distribution channel prior to the formation of the joint venture with the Company.  During the three and six months ended July 3, 2009, the Company recorded $2.9 million and $6.4 million of revenue and $1.7 million and $3.8 million of cost of sales for the manufacturing of products sold by the Company to Nikon-Trimble. During the three and six months ended June 27, 2008, the Company recorded $5.1 million and $9.0 million of revenue and $4.1 million and $6.4 million of cost of sales for the manufacturing of products sold by the Company to Nikon-Trimble.  The Company also purchases product from Nikon-Trimble for future sales to third party customers. Purchases of inventory from Nikon-Trimble were $2.4 million and $4.0 million during the three and six months ended July 3, 2009, respectively, and $4.1 million and $7.0 million during the three and six months ended June 27, 2008, respectively.

At July 3, 2009 and January 3, 2009, the Company had amounts due to and from Nikon-Trimble.  Receivables and payables to Nikon-Trimble are settled individually with terms comparable to other non-related parties.  The amounts due to and from Nikon-Trimble are presented on a gross basis in the Condensed Consolidated Balance Sheets. At July 3, 2009 and January 2, 2009, the amounts due from Nikon-Trimble were $2.5 million and $2.0 million, respectively, and are included within Accounts receivable, net on the Condensed Consolidated Balance Sheets.  As of the same dates, the amounts due to Nikon-Trimble were $1.7 million and $2.3 million, respectively, and are included within Accounts payable on the Condensed Consolidated Balance Sheets.

NOTE 5. GOODWILL AND INTANGIBLE ASSETS

Intangible Assets

 

Intangible Assets consisted of the following:

		July 3, 2009
(Dollars in thousands)		Gross Carrying Amount				Accumulated Amortization				Net Carrying Amount
Developed product technology		$	207,960			$	(97,729	)		$	110,231
Trade names and trademarks			20,805				(14,194	)			6,611
Customer relationships			125,142				(46,648	)			78,494
Distribution rights and other intellectual properties *			39,878				(11,532	)			28,346
		$	393,785			$	(170,103	)		$	223,682

		January 2, 2009
(Dollars in thousands)		Gross Carrying Amount				Accumulated Amortization				Net Carrying Amount
Developed product technology		$	188,391			$	(78,867	)		$	109,524
Trade names and trademarks			20,254				(13,100	)			7,154
Customer relationships			124,596				(40,263	)			84,333
Distribution rights and other intellectual properties *			37,913				(10,023	)			27,890
		$	371,154			$	(142,253	)		$	228,901

(*) Included within Distribution rights and other intellectual properties is a $25.0 million distribution right that the Company bought from Caterpillar, a related party, during fiscal 2008. The fair value of the distribution right was estimated using a discounted cash flow analysis. The distribution right is being amortized over its estimated economic life of eight years. The $25.0 million distribution right was accrued in the fourth quarter of fiscal 2008 and paid in the first quarter of fiscal 2009.

 

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The estimated future amortization expense of intangible assets as of July 3, 2009, was as follows:

(Dollars in thousands)
2009 (Remaining)		$	26,640
2010			51,639
2011			46,393
2012			38,572
2013			34,259
Thereafter			26,179
Total		$	223,682

Goodwill

The changes in the carrying amount of goodwill by operating segment for the six months ended July 3, 2009, were as follows:

		Engineering and Construction				Field Solutions				Mobile Solutions				Advanced Devices				Total
(Dollars in thousands)
Balance as of January 2, 2009		$	363,908			$	10,651			$	328,721			$	12,291			$	715,571
Additions due to acquisitions			10,017				7,883				1,152				-				19,052
Purchase price adjustments			5,158				(188)				1,245				-				6,215
Foreign currency translation adjustments			3,232				(1)				1,421				669				5,321
Balance as of July 3, 2009		$	382,315			$	18,345			$	332,539			$	12,960			$	746,159

The purchase price adjustments relate primarily to previous business acquisitions which closed prior to fiscal 2009. Of the total purchase price adjustments of $6.2 million recorded during the six months ended July 3, 2009, earn-out payments of $7.6 million were offset by a decrease of $1.1 million in tax adjustments and $0.3 million in purchase price allocation adjustments.

NOTE 6. CERTAIN BALANCE SHEET COMPONENTS

Inventories, net consisted of the following:

As of		July 3, 2009				January 2, 2009
(Dollars in thousands)
Raw materials		$	70,663			$	71,319
Work-in-process			4,288				5,551
Finished goods			93,321				84,023
Total inventories, net		$	168,272			$	160,893

Deferred costs of revenue are included within finished goods and were $19.4 million at July 3, 2009 and $15.4 million at January 2, 2009.

Other non-current liabilities consisted of the following:

 

As of		July 3, 2009				January 2, 2009
(Dollars in thousands)
Deferred compensation		$	7,282			$	6,631
Unrecognized tax benefits			35,939				34,275
Other non-current liabilities			20,656				20,647
Total other non-current liabilities		$	63,877			$	61,553

		Reporting Segments
		Engineering and Construction				Field Solutions				Mobile Solutions				Advanced Devices				Total
(Dollars in thousands)
Three Months Ended July 3, 2009
Segment revenue		$	147,240			$	79,787			$	39,065			$	23,971			$	290,063
Operating income			19,160				30,148				3,648				4,833				57,789
Three Months Ended June 27, 2008
Segment revenue		$	213,019			$	90,070			$	42,285			$	32,393			$	377,767
Operating income			45,161				34,808				1,942				6,578				88,489
Six Months Ended July 3, 2009
Segment revenue		$	274,891			$	178,944			$	77,353			$	47,829			$	579,017
Operating income			21,669				72,351				6,796				9,145				109,961
Six Months Ended June 27, 2008
Segment revenue		$	407,199			$	178,107			$	86,296			$	61,461			$	733,063
Operating income			82,115				69,903				4,395				11,270				167,683
As of July 3, 2009
Accounts receivable		$	121,191			$	39,289			$	26,284			$	13,164			$	199,928
Inventories			111,595				22,469				16,953				17,255				168,272
As of January 2, 2009
Accounts receivable		$	125,734			$	37,791			$	23,736			$	17,008			$	204,269
Inventories			104,934				21,778				16,391				17,790				160,893

		Three Months Ended								Six Months Ended
		July 3, 2009				June 27, 2008				July 3, 2009				June 27, 2008
(Dollars in thousands)
Consolidated segment operating income		$	57,789			$	88,489			$	109,961			$	167,683
Unallocated corporate expense			(12,513	)			(11,303	)			(23,647	)			(21,653	)
Amortization of purchased intangible assets			(13,050	)			(10,918	)			(25,348	)			(21,722	)
Restructuring charges			(3,500	)			(3,344	)			(7,988	)			(3,344	)
Consolidated operating income			28,726				62,924				52,978				120,964
Non-operating income, net			1,055				4,119				399				5,890
Consolidated income before taxes		$	29,781			$	67,043			$	53,377			$	126,854

NOTE 8. LONG-TERM DEBT, COMMITMENTS AND CONTINGENCIES

Long-term debt consisted of the following:

As of		July 3, 2009				January 2, 2009
(Dollars in thousands)
Credit Facilities:
Revolving credit facility		$	151,000			$	151,000
Promissory notes and other			508				588
Total debt			151,508				151,588
Less current portion of long-term debt			48				124
Non-current portion		$	151,460			$	151,464

(Dollars in thousands)
2009 (Remaining)		$	9,538
2010			15,861
2011			10,161
2012			7,569
2013			2,458
Thereafter			875
Total		$	46,462

Fair Value on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are categorized in the tables below based upon the lowest level of significant input to the valuations.

		Fair Values as of July 3, 2009
(Dollars in thousands)		Level I				Level II				Level III				Total
Assets
U.S. Treasury bills (1)		$	23,996			$	-			$	-			$	23,996
Deferred compensation plan assets (2)			-				7,472				-				7,472
Derivative assets (3)			-				474				-				474
Total		$	23,996			$	7,946			$	-			$	31,942
Liabilities
Deferred compensation plan liabilities (2)		$	-			$	7,282			$	-			$	7,282
Derivative liabilities (3)			-				593				-				593
Contingent consideration liability (4)			-				-				2,200				2,200
Total		$	-			$	7,875			$	2,200			$	10,075

As of		Level III liabilities July 3, 2009
(Dollars in thousands)
Balance as of January 2, 2009		$	-
Acquisitions			2,200
Balance as of July 3, 2009		$	2,200

Additional Fair Value Information

The following table provides additional fair value information relating to the Company’s financial instruments outstanding:

		Carrying Amount				Fair Value				Carrying Amount				Fair Value
As of		July 3, 2009								January 2, 2009
(Dollars in thousands)
Assets:
Cash and cash equivalents		$	190,154			$	190,154			$	147,531			$	147,531
Forward foreign currency exchange contracts			474				474				627				627
Liabilities:
Credit facility		$	151,000			$	143,423			$	151,000			$	127,754
Forward foreign currency exchange contracts			593				593				1,775				1,775
Promissory note and other			508				503				588				554

(Dollars in thousands)
Balance as of January 2, 2009		$	13,332
Accruals for warranties issued			9,744
Changes in estimates			2,163
Warranty settlements (in cash or in kind)			(11,078	)
Balance as of July 3, 2009		$	14,161

NOTE 12: RESTRUCTURING CHARGES:

Restructuring expense for the three and six months ended July 3, 2009 and June 27, 2008 was as follows:

		Three Months Ended								Six Months Ended
(Dollars in thousands)		July 3, 2009				June 27, 2008				July 3, 2009				June 27, 2008
Severance and benefits		$	3,500			$	3,344			$	7,988			$	3,344

(Dollars in thousands)
Balance as of January 2, 2009		$	1,917
Charges			7,988
Payments			(4,476	)
Adjustments			90
Balance as of July 3, 2009		$	5,519

NOTE 14: COMPREHENSIVE INCOME:

The components of comprehensive income, net of related tax, were as follows:

		Three Months Ended								Six Months Ended
		July 3, 2009				June 27, 2008				July 3, 2009				June 27, 2008
(Dollars in thousands)
Net income attributable to Trimble Navigation Ltd.		$	20,857			$	48,599			$	38,322			$	88,666
Foreign currency translation adjustments			23,631				(2,560	)			9,175				18,148
Net unrealized gain on investments/actuarial gain (loss)			60				3				110				(24	)
Comprehensive income attributable to Trimble Navigation Ltd.			44,548				46,042				47,607				106,790
Comprehensive income attributable to the noncontrolling interests			413				-				722				-
Comprehensive income		$	44,961			$	46,042			$	48,329			$	106,790

IT EM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U. S. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expense, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to product returns, doubtful accounts, inventories, investments, intangible assets, income taxes, warranty obligations, restructuring costs, and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the amount and timing of revenue and expense and the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

 

There have been no changes to our significant accounting polices during the six months ended July 3, 2009 from those disclosed in our 2008 Form 10-K. 

Recent Accounting Pronouncements

 

Updates to recent accounting standards as disclosed in our Annual Report on Form 10-K for the fiscal year ended January 2, 2009 are as follows:

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” which clarifies the definition of fair value, establishes a framework for measuring fair value within GAAP, and expands the disclosures regarding fair value measurements. In February 2008, the FASB issued FASB Staff Position No. FAS 157-2 deferring the effective date of SFAS No. 157 to fiscal years beginning after November 15, 2008 and interim periods within those fiscal years for nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis. We adopted SFAS No. 157 in its first quarter of fiscal 2008, except for those items specifically deferred under FSP No. SFAS 157-2, which were adopted in the first quarter of fiscal 2009. The adoption of SFAS No. 157 did not have a material impact on our financial position, results of operations, or cash flows.

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations”. SFAS No. 141(R) establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree, and recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase.  SFAS No. 141(R) also sets forth the disclosures required to be made in the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Accordingly, we adopted this standard in the first quarter of fiscal 2009.  We expect SFAS No. 141(R) will have an impact on our financial position, results of operations, or cash flows, but the nature and magnitude of the specific effects will depend largely upon the nature and size of our business combinations.  SFAS No. 141(R) did not have a material impact on our financial position, results of operations, or cash flows in the first half of fiscal 2009.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51”. SFAS 160 changed the accounting and reporting for minority interests, which were re-characterized as noncontrolling interests and classified as a component of equity. This new consolidation method significantly changed the accounting for transactions with minority interest holders.  SFAS 160 required retroactive adoption of the presentation and disclosure requirements for previously existing minority interests. All other requirements of SFAS 160 are applied prospectively.  SFAS 160 is effective for fiscal years beginning after December 15, 2008. We adopted this standard in the first quarter of fiscal 2009.  The adoption of SFAS 160 did not have a material impact on our financial position, results of operations, or cash flows.

 

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In March 2008, the FASB issued SFAS No. 161, “Disclosures About Derivative Instruments and Hedging Activities - An Amendment of FASB Statement No. 133”, which requires enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. We adopted this standard in the first quarter of fiscal 2009.   The adoption of SFAS 161 did not have an impact on our financial position, results of operations, or cash flows.

In May 2009, the FASB issued SFAS No. 165, “Subsequent Events”, which become effective for and was adopted by us during the second quarter of fiscal 2009.  SFAS 165 establishes the accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. Specifically, this standard sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date.  SFAS 165 is effective for interim or annual financial periods ending after June 15, 2009.  The adoption of SFAS 165 did not have an impact on our financial position, results of operations or cash flows, other than the disclosures required by SFAS No. 165.

In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)”.  SFAS No. 167 amends FIN 46(R), “Consolidation of Variable Interest Entities,” and changes the consolidation guidance applicable to a variable interest entity (“VIE”). It also amends the guidance governing the determination of whether an enterprise is the primary beneficiary of a VIE, and is, therefore, required to consolidate an entity, by requiring a qualitative analysis rather than a quantitative analysis. The qualitative analysis will include, among other things, consideration of who has the power to direct the activities of the entity that most significantly impact the entity’s economic performance and who has the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. This standard also requires continuous reassessments of whether an enterprise is the primary beneficiary of a VIE. Previously, FIN 46(R) required reconsideration of whether an enterprise was the primary beneficiary of a VIE only when specific events had occurred.   SFAS 167 is effective for interim and annual reporting periods that begin after November 15, 2009. We will adopt this standard in fiscal 2010.  We are evaluating the impact of the adoption of SFAS No. 167 on our financial position, results of operations and cash flows. 

In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles”.   SFAS 168 establishes the FASB Accounting Standards Codification (the “Codification”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with U.S. GAAP. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. SFAS 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Codification will supersede all accounting standards in U.S. GAAP, aside from those issued by the SEC.  We will update our disclosures to conform to the Codification in our Form 10-Q for the third quarter of 2009.

EXECUTIVE LEVEL OVERVIEW

Trimble’s focus is on combining positioning technology with wireless communication and application capabilities to create system-level solutions that enhance productivity and accuracy for our customers. The majority of our markets are end-user markets, including engineering and construction firms, governmental organizations, public safety workers, farmers and companies who must manage fleets of mobile workers and assets. In our Advanced Devices segment, we also provide components to original equipment manufacturers to incorporate into their products.  In the end user markets, we provide a system that includes a hardware platform that may contain software and customer support. Some examples of our solutions include products that automate and simplify the process of surveying land, products that automate the utilization of equipment such as tractors and bulldozers, products that enable a company to manage its mobile workforce and assets, and products that allow municipalities to manage their fixed assets. In addition, we also provide software applications on a stand-alone basis. For example, we provide software for project management on construction sites.

Solutions targeted at the end-user make up a significant majority of our revenue. To create compelling products, we must attain an understanding of the end users’ needs and work flow, and how location-based technology can enable that end user to work faster, more efficiently, and more accurately. We use this knowledge to create highly innovative products that change the way work is done by the end-user. With the exception of our Mobile Solutions and Advanced Devices segments, our products are generally sold through a dealer channel, and it is crucial that we maintain a proficient global, third-party distribution channel.

We continued to execute our strategy with a series of actions that can be summarized in three categories.

 

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Reinforcing our position in existing markets

* We believe these markets provide us with additional, substantial potential for substituting our technology for traditional methods. We are continuing to develop new products and to strengthen our distribution channels in order to expand our market.  In our Engineering and Construction segment, we introduced the MTS400 Machine Telematics System - a new rugged GPS locator unit for heavy equipment usage, in conjunction with updates to our Construction Manager software which now incorporates maps provided by Google Maps API Premier(TM).  In our Field Solutions Segment, we introduced the LB25 External lightbar accessory for use with the EZ Guide 250 and 500 lightbar guidance systems that facilitate better visibility, along with the AG25 GNSS antenna that features the Trimble proprietary Transcend Positioning Technology in a single rugged housing optimized for signal sensitivity on lower elevation satellites.   In our Mobile Solutions segment, we introduced a new version of our Vehicle Diagnostic Service giving managers the ability to view the gallons of fuel consumed while driving or idling.   All of these products strengthened our competitive position and created new value for the user.

 

Extending our position in new and existing markets through new product categories

* We are utilizing the strength of the Trimble brand in our markets to expand our revenue by bringing new products to new and existing users.  In our Engineering and Construction segment, expanded the Trimble VRS Now service to Estonia as well as launched the VRS I-Scope service in the United States. Also within Engineering and Construction, we entered the BIM software market through the acquisition of Quickpen, which will allow mechanical and HVAC contractors to automate project estimating, detailing, layout and construction. In our Field Solutions segment, the acquisition of NTech Industries extends our Precision Agriculture Solutions business with the addition of the GreenSeeker(R) nitrogen application and WeedSeeker(R) controlled herbicide application systems.  In our Mobile Solutions segment, we announced the acquisition of Accutest Engineering Solutions Ltd expanding our vehicle diagnostic capabilities.

Bringing existing technology to new markets

* We continue to reinforce our position in existing markets and position ourselves in newer markets that will serve as important sources of future growth. Our efforts are focused in Africa, China, India, the Middle-East and Russia. 

RECENT BUSINESS DEVELOPMENTS

The following companies and joint ventures were acquired or formed during the twelve months ended July 3, 2009 and are combined in our results of operations since the date of acquisition or formation:

Accutest

On June 5, 2009, we acquired Accutest Engineering Solutions Ltd, based in Derbyshire, UK. Accutest is a leading provider of vehicle diagnostics and telematics technologies for the automotive industry. Accutest’s performance is reported under our Mobile Solutions business segment.

NTech

On June 4, 2009, we acquired privately-held NTech Industries, based in Ukiah, Calif. NTech is a leading provider of crop-sensing technology that allows farmers to reduce costs and environmental impact by controlling the application of nitrogen, herbicide and other crop inputs.  NTech’s performance is reported under our Field Solutions business segment.

QuickPen

On March 12, 2009, we acquired privately-held QuickPen International, based in Englewood, Colorado. QuickPen is a leading provider of Building Information Modeling (BIM) software for the heating, ventilation and air conditioning (HVAC), mechanical construction and plumbing industries. QuickPen’s performance is reported under our Engineering and Construction business segment.

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.

 

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Callidus Precision Systems

On November 28, 2008, we acquired the assets of privately-held Callidus Precision Systems GmbH, based in Halle, Germany. Callidus is a provider of 3D laser scanning solutions for the industrial market. Callidus’s performance is reported under our Engineering and Construction business segment.

TopoSys

On November 13, 2008, we acquired TopoSys GmbH, based in Biberach an der Riss, Germany. TopoSys is a leading provider of aerial data collection systems comprised of LiDAR and metric cameras. TopoSys’ performance is reported under our Engineering and Construction business segment.

TruCount

On October 30, 2008, we acquired the assets of privately-held TruCount, Inc., based in 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, based in Braunschweig, Germany. RolleiMetric is a leading provider of metric camera systems for aerial imaging and terrestrial close range photogrammetry. RolleiMetric’s performance is reported under our Engineering and Construction business segment.

VirtualSite Solutions

On October 3, 2008, VirtualSite Solutions (VSS), a joint venture we formed with Caterpillar, 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 assets and liabilities are consolidated with ours, as are its results of operations, which are reported under our Engineering and Construction business segment.  Caterpillar’s 35% interest is included in our Condensed Consolidated Financial Statements as noncontrolling interests.

SECO

On July 29, 2008, we acquired privately-held SECO Manufacturing Company, based in 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.

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.

RESULTS OF OPERATIONS

Overview

The following table is a summary of revenue, gross margin, and operating income for the periods indicated and should be read in conjunction with the narrative descriptions below.

		Three Months Ended								Six Months Ended
		July 3, 2009				June 27, 2008				July 3, 2009				June 27, 2008
(Dollars in thousands)
Total consolidated revenue		$	290,063			$	377,767			$	579,017			$	733,063
Gross margin		$	142,800			$	187,099			$	286,758			$	361,475
Gross margin %			49.2	%			49.5	%			49.5	%			49.3	%
Total consolidated operating income		$	28,726			$	62,924			$	52,978			$	120,964
Operating income %			9.9	%			16.7	%			9.1	%			16.5	%

 

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Revenue

In the three months ended July 3, 2009, total revenue decreased by $87.7 million or 23%, as compared to the same corresponding period in fiscal 2008. Of the decrease, Engineering and Construction revenue decreased $65.8 million, Field Solutions decreased $10.3 million, Mobile Solutions decreased $3.2 million, and Advanced Devices decreased $8.4 million. The revenue decrease was primarily due to recessionary conditions in the U.S. and European markets in Engineering and Construction and lower sales in Field Solutions due to the impact in the corresponding period of the prior year of strong sales driven by an extended agricultural buying season.

In the six months ended July 3, 2009, total revenue decreased by $154.0 million or 21%, as compared to the same corresponding period in fiscal 2008. Engineering and Construction revenue decreased $132.3 million, Field Solutions increased $0.8 million, Mobile Solutions decreased $8.9 million, while Advanced Devices decreased $13.6 million, compared to the same corresponding period in fiscal 2008.  Revenue reduction within these segments was primarily due to recessionary conditions in the U.S. and European markets in Engineering and Construction.

Gross Margin

Gross margin varies due to a number of factors including product mix, pricing, distribution channel, production volumes, and foreign currency translations.

Gross margin decreased by $44.3 million and $74.7 million for the three and six months ended July 3, 2009, respectively, as compared to the corresponding periods in the prior year, primarily due to the revenue shortfall. Gross margin as a percentage of total revenue for the three months ended July 3, 2009 was 49.2%, as compared to 49.5% for the three months ended June 27, 2008.  Gross margin as a percentage of total revenue for the six months ended July 3, 2009 was 49.5%, as compared to 49.3% for the six months ended June 27, 2008.  The gross margin percentage for the three and six month periods ended July 3, 2009 was relatively consistent and was maintained by a greater percentage of higher margin product sales, in particular, software and subscription services, in spite of the revenue shortfall, offset by higher amortization of intangible assets.

Operating Income

Operating income decreased by $34.2 million and $68.0 million for the three and six months ended July 3, 2009, respectively, as compared to the corresponding periods in the prior year, primarily due to the revenue shortfall, partially offset by a reduction in operating expense.  Operating income as a percentage of total revenue was 9.9% for the three months ended July 3, 2009, as compared to 16.7% for the three months ended June 27, 2008.   Operating income as a percentage of total revenue was 9.1% for the six months ended July 3, 2009, as compared to 16.5% for the six months ended June 27, 2008. The decrease in operating income percentage for both the three and six month periods was primarily due to decreased operating expense leverage, primarily in Engineering and Construction due to the revenue shortfall.

Results by Segment

To achieve distribution, marketing, production, and technology advantages in our targeted markets, we manage our operations in the following four segments: Engineering and Construction, Field Solutions, Mobile Solutions, and Advanced Devices.  Operating income equals net revenue less cost of sales and operating expense, excluding general corporate expense, amortization of purchased intangibles, amortization of inventory step-up charges, non-recurring acquisition costs, restructuring charges, non-operating income, net, and income tax provision.

 

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The following table is a breakdown of revenue and operating income by segment:

		Three Months Ended								Six Months Ended
		July 3, 2009				June 27, 2008				July 3, 2009				June 27, 2008
(Dollars in thousands)
Engineering and Construction
Revenue		$	147,240			$	213,019			$	274,891			$	407,199
Segment revenue as a percent of total revenue			51	%			56	%			48	%			56	%
Operating income		$	19,160			$	45,161			$	21,669			$	82,115
Operating income as a percent of segment revenue			13	%			21	%			8	%			20	%
Field Solutions
Revenue		$	79,787			$	90,070			$	178,944			$	178,107
Segment revenue as a percent of total revenue			28	%			24	%			31	%			24	%
Operating income		$	30,148			$	34,808			$	72,351			$	69,903
Operating income as a percent of segment revenue			38	%			39	%			40	%			39	%
Mobile Solutions
Revenue		$	39,065			$	42,285			$	77,353			$	86,296
Revenue as a percent of total revenue			13	%			11	%			13	%			12	%
Operating income		$	3,648			$	1,942			$	6,796			$	4,395
Operating income as a percent of segment revenue			9	%			5	%			9	%			5	%
Advanced Devices
Revenue		$	23,971			$	32,393			$	47,829			$	61,461
Segment revenue as a percent of total revenue			8	%			9	%			8	%			8	%
Operating income		$	4,833			$	6,578			$	9,145			$	11,270
Operating income as a percent of segment revenue			20	%			20	%			19	%			18	%

Unallocated corporate expense includes general corporate expense, amortization of inventory step-up charges, in-process research and development expense, and non-recurring acquisition costs.  A reconciliation of our consolidated segment operating income to consolidated income before income taxes follows:

		Three Months Ended								Six Months Ended
		July 3,				June 27,				July 3,				June 27,
		2009				2008				2009				2008
(Dollars in thousands)
Consolidated segment operating income		$	57,789			$	88,489			$	109,961			$	167,683
Unallocated corporate expense			(12,513	)			(11,303	)			(23,647	)			(21,653	)
Amortization of purchased intangible assets			(13,050	)			(10,918	)			(25,348	)			(21,722	)
Restructuring charges			(3,500	)			(3,344	)			(7,988	)			(3,344	)
Consolidated operating income			28,726				62,924				52,978				120,964
Non-operating income, net			1,055				4,119				399				5,890
Consolidated income before taxes		$	29,781			$	67,043			$	53,377			$	126,854

Engineering and Construction

Engineering and Construction revenue decreased by $65.8 million or 31% and $132.3 million or 32% for the three and six months ended July 3, 2009, respectively, as compared to the same corresponding periods in fiscal 2008.  Segment operating income decreased $26.0 million or 58% and $60.4 million or 74% for the three and six months ended July 3, 2009, respectively, as compared to the same corresponding periods in fiscal 2008.

The revenue decline for both the three months and six month periods was primarily driven by recessionary conditions in the U.S. and European markets, as well as softness in the rest of the world, with the exception of China. Segment operating income for both the three and six month periods decreased primarily due to the revenue shortfall, partially offset by a reduction in operating expense due to restructuring and overall expense control.

Field Solutions

Field Solutions revenue decreased by $10.3 million or 11% and increased by $0.8 million or 0.5% for the three and six months ended July 3, 2009, respectively, as compared to the same corresponding periods in fiscal 2008.  Segment operating income decreased by $4.7 million or 13% and increased by $2.4 million or 4% for the three and six months ended July 3, 2009, respectively, as compared to the same corresponding periods in fiscal 2008.

 

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The revenue decrease for the three month period was primarily due to a softening in Agriculture markets due to reduced commodity prices and input costs which resulted in decreased the demand for our productivity products. The slight revenue increase for the six month period was driven by the impact of increased sales worldwide and acquisitions in the first quarter, offset by decreased demand in the second quarter.  Operating income for the three month period decreased primarily due to lower revenue. Operating income for the six month period increased primarily due to gross margin improvement, partially offset by higher operating expense due to the impact of acquisitions.

Mobile Solutions

Mobile Solutions revenue decreased by $3.2 million or 8% and $8.9 million or 10% for the three and six months ended July 3, 2009, respectively, as compared to the same corresponding period in fiscal 2008.  Segment operating income increased by $1.7 million or 88% and $2.4 million or 55% for the three and six months ended July 3, 2009, respectively, as compared to the same corresponding periods in fiscal 2008.

The revenue decline for both the three and six month periods was primarily due to the impact in the prior year of the recognition of large non-recurring revenue items. The increase in operating income for both the three and six month periods was primarily due to gross margin improvement and lower spending due to operating expense control.

Advanced Devices

Advanced Devices revenue decreased by $8.4 million or 26% and $13.6 million or 22% for the three and six months ended July 3, 2009, respectively, as compared to the same corresponding periods in fiscal 2008.  Segment operating income decreased by $1.7 million or 27% and $2.1 million or 19% for the three and six months ended July 3, 2009, respectively, as compared to the same corresponding periods in fiscal 2008.

The decrease in revenue for both the three and six month periods was driven by slower sales in Component Technologies and Applanix. Operating income was slightly down for both the three and six month periods due to the decrease in revenue, partially offset by gross margin improvement and lower spending due to operating expense control.

Research and Development, Sales and Marketing, and General and Administrative Expense

Research and development (R&D), sales and marketing (S&M), and general and administrative (G&A) expense are summarized in the following table:

		Three Months Ended								Six Months Ended
		July 3, 2009				June 27, 2008				July 3, 2009				June 27, 2008
(Dollars in thousands)
Research and development		$	33,457			$	39,405			$	67,594			$	76,750
Percentage of revenue			11	%			10	%			12	%			10	%
Sales and marketing			45,163				51,904				94,098				103,062
Percentage of revenue			16	%			14	%			16	%			14	%
General and administrative			26,622				25,289				52,664				47,979
Percentage of revenue			9	%			7	%			9	%			7	%
Total		$	105,242			$	116,598			$	214,356			$	227,791
Percentage of revenue			36	%			31	%			37	%			31	%

Overall, R&D, S&M, and G&A expense decreased by approximately $11.4 million and $13.4 million for the three and six months ended July 3, 2009, respectively, as compared to the corresponding periods in fiscal 2008.

Research and development expense decreased by $5.9 million and $9.2 million for the three and six month periods ended July 3, 2009, respectively, as compared to the same corresponding periods in fiscal 2008, primarily due to foreign currency exchange rates and decreased compensation costs, partially offset by the inclusion of expense from acquisitions not included in the prior year.  All of our R&D costs have been expensed as incurred. Costs of software developed for external sale subsequent to reaching technical feasibility were not considered material and were expensed as incurred. Spending overall was at approximately 11% and 12% of revenue in the three and six months ended July 3, 2009, as compared to 10% in the corresponding periods in fiscal 2008.

 

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* We believe that the development and introduction of new products are critical to our future success and we expect to continue active development of new products.

Sales and marketing expense decreased by $6.7 million and $9.0 million for the three and six months ended July 3, 2009, respectively, as compared to the same corresponding periods in fiscal 2008.  The decrease was primarily due to foreign currency exchange rates, decreased compensation costs, and travel and trade show expense, partially offset by the inclusion of expense from acquisitions not applicable in the prior year.   Spending overall was at approximately 16% of revenue in the three and six months ended July 3, 2009, as compared to 14% in the same corresponding periods in fiscal 2008.

* Our future growth will depend in part on the timely development and continued viability of the markets in which we currently compete, as well as our ability to continue to identify and develop new markets for our products.

General and administrative expense increased by $1.3 million and $4.7 million for the three and six months ended July 3, 2009, respectively, as compared to the same corresponding periods in fiscal 2008 primarily due to the inclusion of expense from acquisitions not applicable in the prior year, settlement costs and increased bad debt expense, partially offset by foreign currency exchange rates.  Spending overall was at approximately 9% of revenue in the three and six months ended July 3, 2009, as compared to 7% in the same corresponding period in fiscal 2008.

Amortization of Purchased Intangible Assets

 

Amortization of purchased intangible assets was $13.1 million in the second quarter of fiscal 2009, as compared to $10.9 million in the second quarter of fiscal 2008.  Of the total $13.1 million in the second quarter of fiscal 2009, $7.5 million is presented as a separate line within Operating expense and $5.6 million is included within Cost of sales on our Condensed Consolidated Statements of Income.  The increase was due primarily to business acquisitions and asset purchases not included in the corresponding period of fiscal 2008. As of July 3, 2009, future amortization of intangible assets is expected to be $26.6 million during the remaining two quarters of fiscal 2009, $51.6 million during 2010, $46.4 million during 2011, $38.6 million during 2012, $34.3 million during 2013, and $26.2 million thereafter.

Restructuring Charges

Restructuring expense for the three and six months ended July 3, 2009 and June 27, 2008 was as follows:

		Three Months Ended								Six Months Ended
(Dollars in thousands)		July 3, 2009				June 27, 2008				July 3, 2009				June 27, 2008
Severance and benefits		$	3,500			$	3,344			$	7,988			$	3,344

During the three and six months ended July 3, 2009, restructuring expense of $3.5 million and $8.0 million, respectively, was related to decisions to streamline processes and reduce the cost structure of the Company, with approximately 250 positions eliminated.  As a result of the decisions made through the second quarter of 2009, we expect restructuring activities to result in additional restructuring expense totaling approximately $0.8 million through the fourth quarter of 2009. During the three and six months ended July 3, 2009, of the total restructuring expense,  $1.3 million and  $4.9 million, respectively, was shown as a separate line within Operating expense, and $2.2 million and  $3.1 million, respectively, was included within Cost of sales on the Company’s Condensed Consolidated Statements of Income.

During the three and six months ended June 27, 2008, restructuring expense of $3.3 million was related to management decisions designed to improve operational efficiency and financial results.  The restructuring expense, included in cost of sales and operating expense, was related to a decision to streamline processes and reduce the cost structure of the Company, with approximately 90 positions eliminated. During the three and six months ended June 27, 2008, of the total restructuring expense,  $2.4 million was shown as a separate line within Operating expense, and $0.9 million was included within Cost of sales on the Company’s Condensed Consolidated Statements of Income.

Restructuring liability:

The following table summarizes the restructuring activity for the six months ended July 3, 2009:

(Dollars in thousands)
Balance as of January 2, 2009		$	1,917
Charges			7,988
Payments			(4,476	)
Adjustments			90
Balance as of July 3, 2009		$	5,519

 

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The $5.5 million restructuring accrual consisted of severance and benefits and was included in Other current liabilities. It is expected to be paid through the first quarter of fiscal 2010.

Non-operating Income, Net

The components of non-operating income, net, were as follows:

		Three Months Ended								Six Months Ended
		July 3, 2009				June 27, 2008				July 3, 2009				June 27, 2008
(Dollars in thousands)
Interest income		$	223			$	508			$	422			$	965
Interest expense			(465	)			(413	)			(958	)			(1,175	)
Foreign currency transaction gain (loss), net			(216	)			1,253				(32	)			2,221
Income from joint ventures			352				2,618				520				4,633
Other income (expense), net			1,161				153				447				(754	)
Total non-operating income, net		$	1,055			$	4,119			$	399			$	5,890

 

Non-operating income, net decreased $3.1 million and $5.5 million for the second quarter and the first six months of fiscal 2009, respectively, as compared to the same corresponding period in fiscal 2008. The decrease for both the three and six month periods was primarily due to lower income from joint ventures and a decrease in foreign exchange gains.

Income Tax Provision

Our effective income tax rate for the three and six months ended July 3, 2009 was 29.0% and 27.2%, respectively, as compared to 27.5% and 30.1% for the three months and six months ended June 27, 2008.  The 2009 and 2008 second quarter fiscal rate is lower than the statutory federal income tax rate of 35% primarily due to the geographical mix of our pre-tax income.

 

OFF-BALANCE SHEET FINANCINGS AND LIABILITIES

Other than lease commitments incurred in the normal course of business, we do not have any off-balance sheet financing arrangements or liabilities, guarantee contracts, retained or contingent interests in transferred assets, or any obligation arising out of a material variable interest in an unconsolidated entity. We do not have any majority-owned subsidiaries that are not included in the condensed consolidated financial statements. Additionally, we do not have any interest in, or relationship with, any special purpose entities.

In the normal course of business to facilitate sales of its products, we indemnify other parties, including customers, lessors, and parties to other transactions with us, with respect to certain matters. We have agreed to hold the other party harmless against losses arising from a breach of representations or covenants, or out of intellectual property infringement or other claims made against certain parties. These agreements may limit the time within which an indemnification claim can be made and the amount of the claim. In addition, we have entered into indemnification agreements with our officers and directors, and our bylaws contain similar indemnification obligations to our agents.

It is not possible to determine the maximum potential amount under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. Historically, payments made by us under these agreements were not material and no liabilities have been recorded for these obligations on the Condensed Consolidated Balance Sheets as of July 3, 2009 and January 2, 2009.

 

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LIQUIDITY AND CAPITAL RESOURCES

As of		July 3, 2009				January 2, 2009
(Dollars in thousands)
Cash and cash equivalents		$	190,154			$	147,531
Total debt			151,508				151,588
Three Months Ended		July 3, 2009				June 27, 2008
(Dollars in thousands)
Cash provided by operating activities		$	108,674			$	100,363
Cash used in investing activities			(73,796	)			(52,877	)
Cash provided by (used in) financing activities			5,930				(75,933	)
Effect of exchange rate changes on cash and cash equivalents			1,815				5,068
Net increase (decrease) in cash and cash equivalents		$	42,623			$	(23,379	)

Cash and Cash Equivalents

As of July 3, 2009, cash and cash equivalents totaled $190.2 million as compared to $147.5 million at January 2, 2009. Debt was $151.5 million as of July 3, 2009, as compared to $151.6 million at January 2, 2009.

* Our ability to continue to generate cash from operations will depend in large part on profitability, the rate of collections of accounts receivable, our inventory turns, and our ability to manage other areas of working capital.

* We believe that our cash and cash equivalents, together with our revolving credit facilities will be sufficient to meet our anticipated operating cash needs and stock purchases under the stock repurchase program for at least the next twelve months.

* We anticipate that planned capital expenditures primarily for computer equipment, software, manufacturing tools and test equipment, and leasehold improvements associated with business expansion, will constitute a partial use of our cash resources.  Decisions related to how much cash is used for investing are influenced by the expected amount of cash to be provided by operations.

Operating Activities

Cash provided by operating activities was $108.7 million for the six months ended July 3, 2009, as compared to $100.4 million for the six months ended June 27, 2008.  This increase of $8.3 million was primarily driven by a decrease in accounts receivable days sales outstanding (63 days versus 69 days in the second quarter of 2008), partially offset by a decrease in net income before non-cash depreciation and amortization and income taxes due.

Investing Activities

Cash used in investing activities was $73.8 million for the six months ended July 3, 2009, as compared to $52.9 million for the six months ended June 27, 2008.  The increase of $20.9 million was due to increased cash used for business and intangible asset acquisitions.

Financing Activities

Cash provided by financing activities was $5.9 million for the six months ended July 3, 2009, as compared to cash used of $75.9 million for the six months ended June 27, 2008. The increase of $81.8 million was primarily due to the stock repurchase and pay down of debt in the first six months of fiscal 2008.

Accounts Receivable and Inventory Metrics

As of		July 3, 2009				January 2, 2009
Accounts receivable days sales outstanding			63				69
Inventory turns per year			3.5				4.2

Accounts receivable days sales outstanding were 63 days as of July 3, 2009, as compared to 69 days as January 2, 2009 due to increased revenue linearity.  Our accounts receivable days sales outstanding is calculated based on ending accounts receivable, net, divided by revenue for the corresponding fiscal quarter, times a quarterly average of 91 days. Our inventory turns were 3.5 as of July 3, 2009, as compared to 4.2 as of January 2, 2009. The decrease in turns is primarily due to slower sales.  Our inventory turnover is based on the total cost of sales for the fiscal period over the average inventory for the corresponding fiscal period.

 

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Debt

As of July 3, 2009, our total debt was comprised primarily of our revolving credit line in the amount of $151.0 million, which was drawn down in the third and the fourth quarters of fiscal 2008. As of July 3, 2009 and January 2, 2009, there were also notes payable totaling approximately $508,000 and $588,000, respectively, primarily consisting of government loans to foreign subsidiaries.

On July 28, 2005, we entered into a $200 million unsecured revolving credit agreement (the 2005 Credit Facility) with a syndicate of 10 banks with The Bank of Nova Scotia as the administrative agent.  On February 16, 2007, we amended our existing $200 million unsecured revolving credit agreement with a syndicate of 11 banks with The Bank of Nova Scotia as the administrative agent (the 2007 Credit Facility). Under the 2007 Credit Facility, we exercised the option in the existing credit agreement to increase the availability under the revolving credit line by $100 million, for an aggregate availability of up to $300 million, and extended the maturity date of the revolving credit line by 18 months, from July 2010 to February 2012.  Up to $25 million of the availability under the revolving credit line may be used to issue letters of credit, and up to $20 million may be used for paying off other debts or loans.  The maximum leverage ratio under the 2007 Credit Facility is 3.00:1.00.   The funds available under the 2007 Credit Facility may be used by us for acquisitions, stock repurchases, and general corporate purposes. As of August 20, 2008, we amended the 2007 Credit Facility to allow us to redeem, retire or purchase Trimble common stock without limitation so long as no default or unmatured default then existed, and leverage ratio for the two most recently completed periods was less than 2.00:1.00. In addition, the definition of the fixed charge was amended to exclude the impact of redemptions, retirements, or purchases of Trimble common stock from the fixed charges coverage ratio. For additional discussion of our debt, see Note 8 of Notes to the Condensed Consolidated Financial Statements.

In addition, during the first quarter of fiscal 2007 we incurred a five-year term loan under the 2007 Credit Facility in an aggregate principal amount of $100 million, which was repaid in full during fiscal 2008. 

We may borrow funds under the 2007 Credit Facility in U.S. Dollars or in certain other currencies, and borrowings will bear interest, at our option, at either: (i) a base rate, based on the administrative agent's prime rate, plus a margin of between 0% and 0.125%, depending on our leverage ratio as of our most recently ended fiscal quarter, or (ii) a reserve-adjusted rate based on the London Interbank Offered Rate (LIBOR), Euro Interbank Offered Rate (EURIBOR), Stockholm Interbank Offered Rate (STIBOR), or other agreed-upon rate, depending on the currency borrowed, plus a margin of between 0.625% and 1.125%, depending on our leverage ratio as of the most recently ended fiscal quarter. Our obligations under the 2007 Credit Facility are guaranteed by certain of our domestic subsidiaries.

The 2007 Credit Facility contains customary affirmative, negative and financial covenants including, among other requirements, negative covenants that restrict our ability to dispose of assets, create liens, incur indebtedness, repurchase stock, pay dividends, make acquisitions, make investments, enter into mergers and consolidations and make capital expenditures, within certain limitations, and financial covenants that require the maintenance of leverage and fixed charge coverage ratios. The 2007 Credit Facility contains events of default that include, among others, non-payment of principal, interest or fees, breach of covenants, inaccuracy of representations and warranties, cross defaults to certain other indebtedness, bankruptcy and insolvency events, material judgments, and events constituting a change of control. Upon the occurrence and during the continuance of an event of default, interest on the obligations will accrue at an increased rate and the lenders may accelerate our obligations under the 2007 Credit Facility, however that acceleration will be automatic in the case of bankruptcy and insolvency events of default.  As of July 3, 2009 we were in compliance with all financial debt covenants.

IT EM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

We are exposed to market risk related to changes in interest rates and foreign currency exchange rates. We use certain derivative financial instruments to manage these risks. We do not use derivative financial instruments for speculative purposes. All financial instruments are used in accordance with policies approved by our Board of Directors.

Market Interest Rate Risk

There have been no significant changes to our market interest rate risk assessment.  Refer to our 2008 Annual Report on Form 10-K.

Foreign Currency Exchange Rate Risk

There have been no significant changes to our foreign currency exchange rate risk assessment.  Refer to our 2008 Annual Report on Form 10-K.

 

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IT EM 4.  CONTROLS AND PROCEDURES

(a) Disclosure Controls and Procedures.

The management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report.  Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures are effective.

(b) Internal Control Over Financial Reporting.

There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II.  OTHER INFORMATION

ITEM 1.   LE GAL PROCEEDINGS

From time to time, we are involved in litigation arising out of the ordinary course of our business. There are no known claims or pending litigation expected to have a material effect on our overall financial position, results of operations, or liquidity.

ITEM 1A.   RI SK FACTORS

A description of factors that could materially affect our business, financial condition, or operating results is included under “Risk and Uncertainties” in Item 1A of Part I of our 2008 Annual Report on Form 10-K and is incorporated herein by reference.  There have been no material changes to the risk factor disclosure since our 2008 Annual Report on Form 10-K.  The risk factors described in our Form 10-K are not the only risks facing our Company.  Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial conditions and/or operating results.

ITEM 4. SUB MISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

(a)	The Company’s annual meeting of shareholders, (the “Annual Meeting”), was held at the Heritage Theater, located at the Campbell Community Center, 1 W. Campbell Ave., Campbell, California, 95008, on May 19, 2009.

(b)	An election of directors was held at the Annual Meeting, with the following individuals being elected to the Company’s Board of Directors.

DIRECTOR	VOTE FOR	WITHHELD
Steven W. Berglund	109,553,018	953,121
John B. Goodrich	108,596,462	1,909,677
William Hart	108,482,878	2,023,261
Merit E. Janow	109,850,932	655,207
Ulf J. Johansson	109,847,192	658,947
Bradford W. Parkinson	109,489,680	1,016,459
Nickolas W. Vande Steeg	108,919,250	1,586,889

(c) Other matters voted upon at the Annual Meeting and the results of the voting with respect to each such matter were as follows:

To approve an amendment to the Company’s Amended and Restated Employee Stock Purchase Plan to increase the number of shares of common stock reserved for purchase thereunder from 11,550,000 to 15,550,000.

FOR	AGAINST	ABSTAIN	BROKER NON-VOTE
95,267,278	2,432,780	1,179,503	11,626,578

 

 

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To approve amendments to the Company’s Amended and Restated 2002 Stock Plan to (i) increase the number of shares of Company common stock reserved for grant and award thereunder from 12,000,000 to 20,000,000 and (ii) approve the material terms of stock awards that are intended to qualify as performance-based compensation for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended.

FOR	AGAINST	ABSTAIN	BROKER NON-VOTE
88,249,780	9,315,923	1,313,858	11,626,578

To ratify the appointment of Ernst & Young, LLP as the independent auditor of the Company for the current fiscal year ending January 1, 2010.

FOR	AGAINST	ABSTAIN
109,078,201	1,304,074	123,863

 

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IT EM 6.  EXHIBITS

3.1	Restated Articles of Incorporation of the Company filed June 25, 1986. (2)

3.2	Certificate of Amendment of Articles of Incorporation of the Company filed October 6, 1988. (2)

3.3	Certificate of Amendment of Articles of Incorporation of the Company filed July 18, 1990. (2)

3.4	Certificate of Amendment of Articles of Incorporation of the Company filed May 29, 2003. (3)

3.5	Certificate of Amendment of Articles of Incorporation of the Company filed March 4, 2004. (4)

3.6	Certificate of Amendment of Articles of Incorporation of the Company filed February 21, 2007. (6)

3.7	Bylaws of the Company, amended and restated through July 20, 2006. (5)

4.1	Specimen copy of certificate for shares of Common Stock of the Company. (1)

10.1+

Amended and Restated Employee Stock Purchase Plan, with forms of subscription agreements. (7)

10.2+

Amended and Restated 2002 Stock Plan, with forms of option and restricted stock unit agreements. (7)

10.3+

Trimble Navigation Limited Board of Directors Compensation Policy, effective April 24, 2009. (7)

10.4+

Trimble Navigation Limited Annual Management Incentive Plan. (7)

10.5+

Australian Addendum to the Amended and Restated Employee Stock Purchase Plan. (7)

10.6*

Master Manufacturing Services Agreement by and between the Company and Flextronics Corporation (formerly Solectron Corporation) dated March 12, 2004, as amended on January 19, 2005, October 25, 2005 and June 20, 2007.* (7)

10.7+

Australian Addendum to the Trimble Navigation Limited Amended and Restated 2002 Stock Plan. (7)

31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 dated August 10, 2009. (7)

31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 dated August 10, 2009.(7)

32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 dated August 10, 2009. (7)

32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 dated August 10, 2009. (7)

(1)	Incorporated by reference to exhibit number 4.1 to the registrant's Registration Statement on Form S-1, as amended  (File No. 33-35333), which became effective July 19, 1990.

(2)	Incorporated by reference to identically numbered exhibits to the registrant's Annual Report on Form 10-K for the fiscal year ended January 1, 1999.

(3)	Incorporated by reference to exhibit number 3.5 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended July 4, 2003.

(4)	Incorporated by reference to exhibit number 3.6 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended April 2, 2004.

(5)	Incorporated by reference to exhibit number 3.7 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 29, 2006.

(6)	Incorporated by reference to exhibit number 3.7 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 30, 2007.

(7)	Filed herewith.

+             Indicates management contract or compensatory plan or arrangement required to be filed as an exhibit to this Quarterly Report on Form 10Q.

*             Portions of this document have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment under Rule 24b-2.

 

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Table of Contents

SIG NATURES

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/ Rajat Bahri
	Rajat Bahri
	Chief Financial Officer
	(Authorized Officer and Principal
	Financial Officer)

DATE: August 10, 2009

 

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Table of Contents

EXHIBIT INDEX

3.1	Restated Articles of Incorporation of the Company filed June 25, 1986. (2)

3.2	Certificate of Amendment of Articles of Incorporation of the Company filed October 6, 1988. (2)

3.3	Certificate of Amendment of Articles of Incorporation of the Company filed July 18, 1990. (2)

3.4	Certificate of Amendment of Articles of Incorporation of the Company filed May 29, 2003. (3)

3.5	Certificate of Amendment of Articles of Incorporation of the Company filed March 4, 2004. (4)

3.6	Certificate of Amendment of Articles of Incorporation of the Company filed February 21, 2007. (6)

3.7	Bylaws of the Company, amended and restated through July 20, 2006. (5)

4.1	Specimen copy of certificate for shares of Common Stock of the Company. (1)

10.1+

Amended and Restated Employee Stock Purchase Plan, with forms of subscription agreements. (7)

10.2+

Amended and Restated 2002 Stock Plan, with forms of option and restricted stock unit agreements. (7)

10.3+

Trimble Navigation Limited Board of Directors Compensation Policy, effective April 24, 2009. (7)

10.4+

Trimble Navigation Limited Annual Management Incentive Plan. (7)

10.5+

Australian Addendum to the Amended and Restated Employee Stock Purchase Plan. (7)

10.6*

Master Manufacturing Services Agreement by and between the Company and Flextronics Corporation (formerly Solectron Corporation) dated March 12, 2004, as amended on January 19, 2005, October 25, 2005 and June 20, 2007.* (7)

10.7+

Australian Addendum to the Trimble Navigation Limited Amended and Restated 2002 Stock Plan. (7)

31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 dated August 10, 2009. (7)

31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 dated August 10, 2009.(7)

32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 dated August 10, 2009. (7)

32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 dated August 10, 2009. (7)

(1)	Incorporated by reference to exhibit number 4.1 to the registrant's Registration Statement on Form S-1, as amended  (File No. 33-35333), which became effective July 19, 1990.

(2)	Incorporated by reference to identically numbered exhibits to the registrant's Annual Report on Form 10-K for the fiscal year ended January 1, 1999.

(3)	Incorporated by reference to exhibit number 3.5 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended July 4, 2003.

(4)	Incorporated by reference to exhibit number 3.6 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended April 2, 2004.

(5)	Incorporated by reference to exhibit number 3.7 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 29, 2006.

(6)	Incorporated by reference to exhibit number 3.7 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 30, 2007.

(7)	Filed herewith.

+              Indicates management contract or compensatory plan or arrangement required to be filed as an exhibit to this Quarterly Report on Form 10Q.

*              Portions of this document have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment under Rule 24b-2.

36