8-K/A 1 0001.txt FORM 8-K/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 September 21, 2000 (July 14, 2000) Date of Report (Date of earliest event reported) TRIMBLE NAVIGATION LIMITED (Exact name of registrant as specified in its charter) California 0-18645 94-2802192 (State or other jurisdiction of (Commission File Number) (I.R.S. Employer incorporation or organization) identification No.) 645 North Mary Avenue, Sunnyvale, California 94088 (Address of Principal Executive Offices) (Zip Code) (408) 481-8000 (Registrant's telephone number, including area code) Not Applicable (Former name, former address and former fiscal year, if changed since last report) 1 This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Actual results could differ materially from those indicated in the forward-looking statements due to a number of factors including, but not limited to, as a result of the risk factors set forth below in this report as well as those set forth in the Company's Annual Report on Form 10-K, quarterly reports on Form 10-Q, and the other reports and documents that the Company files from time to time with the Securities and Exchange Commission. On July 28, 2000 the Registrant, Trimble Navigation Limited filed a Current Report on Form 8-K reporting the acquisition of Spectra Precision Group. By this amendment, the Registrant is filing the required financial statements and pro forma financial information. Item 7. FINANCIAL STATEMENTS AND EXHIBITS (a) Financial Statements of Business Acquired: 1. Audited financial statements of Spectra Precision: Audited combined financial statements of Spectra Precision as of January 1, 2000 and for the period from February 22, 1999 through January 1, 2000 (period when they were wholly-owned by Thermo Instruments Inc.), and audited combined financial statements of the Predecessor as of December 31, 1998 and for the period from January 1, 1999 through February 21, 1999 and the years ending December 31, 1998 and 1997. Notes to Spectra Precision's Financial Statements. 2. Unaudited financial statements of Spectra Precision: Unaudited condensed combined financial statements of Spectra Precision as of June 30, 2000 and for the three and six-month periods ended June 30, 2000. Notes to Spectra Precision's unaudited condensed combined financial statements. (b) Pro Forma Financial Information: 1. Unaudited pro forma condensed combined financial information of Trimble Navigation Limited. Unaudited Pro Forma condensed combined statement of operations: o Year Ended December 31, 1999 o Six Months Ended June 30, 2000 Unaudited Pro Forma condensed combined balance sheet at: o June 30, 2000 Notes to Unaudited Pro Forma condensed combined financial information. 2 (c) EXHIBITS 10.72 Stock and Asset Purchase Agreement, dated as of May 11, 2000, between Trimble Acquisition Corp., and Spectra Physics Holdings USA, Inc., Spectra Precision AB, and Spectra Precision Europe Holdings, BV. (1) 10.73 Asset Purchase Agreement dated May 11, 2000, between Trimble Acquisition Corp. and Spectra Precision AB. (1) 10.74 $200.0 million Credit Agreement, dated July 14, 2000, between Trimble Navigation Limited and ABN AMRO Bank N.V., Fleet National Bank, and The Bank of Nova Scotia. (1) 10.75 Subordinated Seller Note, dated July 14, 2000, for the principal amount of $80,000,000 issued by Trimble Navigation Limited to Spectra Precision Holdings, Inc. (1) 23.1 Consent of Arthur Andersen LLP, Independent Auditors of Spectra Precision ------------------------------------------------------- (1) Filed as an exhibit to Registrant's Report on Form 8-K dated July 14, 2000 filed on July 28, 2000, and incorporated herein by reference. 3 Report of Independent Public Accountants To the Shareholders of Spectra Precision: We have audited the accompanying combined balance sheet of Spectra Precision, which is wholly-owned by Thermo Instrument Systems Inc. as of January 1, 2000, and the related combined statements of operations, cash flows, comprehensive income, and shareholders' investment for the period from February 22, 1999, through January 1, 2000. We have also audited the accompanying combined balance sheet of the Predecessor as of December 31, 1998, and the related combined statements of operations, cash flows, comprehensive income, and shareholders' investment for the period from January 1, 1999, through February 21, 1999, and for the years ended December 31, 1998, and December 31, 1997. These combined financial statements are the responsibility of the Company's and Predecessor's management. Our responsibility is to express an opinion on these combined financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of Spectra Precision as of January 1, 2000, and the results of its operations and cash flows for the period from February 22, 1999, through January 1, 2000, and the financial position of the Predecessor as of December 31, 1998, and the results of operations and cash flows of the Predecessor for the period from January 1, 1999, through February 21, 1999, and for the years ended December 31, 1998, and December 31, 1997, in conformity with accounting principles generally accepted in the United States. /s/ Arthur Andersen LLP Boston, Massachusetts July 5, 2000 4 SPECTRA PRECISION Combined Balance Sheet

The Company Predecessor ----------------- -------------- (In thousands) 1999 1998 ------------------------------------------------------------------------------ ----------------- --------------- Assets Current Assets: Cash and cash equivalents $ 7,685 $ 10,634 Accounts receivable, less allowances of $4,488 and $3,844 40,136 37,974 Inventories 27,251 27,361 Deferred tax asset (Note 5) 8,477 3,444 Other current assets 1,412 1,352 Due from parent company and affiliated companies 13,590 53,930 --------- --------- 98,551 134,695 --------- --------- Property, Plant, and Equipment, at Cost, Net 21,150 23,218 --------- --------- Other Assets 5,081 2,424 --------- --------- Cost in Excess of Net Assets of Acquired Companies (Note 2) 99,265 8,938 --------- --------- $ 224,047 $ 169,275 ========= ========= Liabilities and Shareholders' Investment Current Liabilities: Short-term obligations and current maturities of long-term obligations (includes advance from affiliate of $1,868 in 1999) $ 11,461 $ 3,852 Accounts payable 7,332 6,057 Accrued payroll and employee benefits 10,796 9,979 Accrued income taxes 4,218 3,608 Other accrued expenses (Notes 2 and 3) 14,367 12,272 Due to parent company and affiliated companies 31,699 86,612 --------- --------- 79,873 122,380 --------- --------- Deferred Income Taxes (Note 5) 1,824 3,084 --------- --------- Accrued Pension Costs (Note 4) 3,780 3,952 --------- --------- Long-term Obligations (Note 7) 8,121 395 --------- --------- Commitments and Contingency (Notes 3 and 8) Shareholders' Investment: Net parent company investment 132,630 40,125 Accumulated other comprehensive items (2,181) (661) --------- --------- 130,449 39,464 --------- --------- $ 224,047 $ 169,275 ========= ========= The accompanying notes are an integral part of these combined financial statements.

5 SPECTRA PRECISION Combined Statement of Operations

The Company Predecessor ------------------ ------------------------------------------------------------------ February 22, 1999 January 1, 1999 through through (In thousands) January 1, 2000 February 21, 1999 1998 1997 ---------------------------------- ---------------------- ---------------------- --------------------- --------------------- Revenues $ 198,080 $ 21,664 $ 197,999 $ 197,908 ---------- ---------- --------- ---------- Costs and Operating Expenses: Cost of revenues 100,838 11,750 108,408 104,028 Selling, general, and administrative expenses (Note 6) 67,488 11,075 73,287 75,072 Research and development expenses 15,177 2,015 16,664 15,777 Other unusual costs (income), net (Note 3) (616) 5 (2,841) - ---------- ---------- --------- ---------- 182,887 24,845 195,518 194,877 ---------- ---------- --------- ---------- Operating Income (Loss) 15,193 (3,181) 2,481 3,031 Interest Income (includes $380, $448, $3,999, and $114 from related parties; Note 6) 617 728 4,278 485 Interest Expense (includes $1,321, $399, $4,388, and $1,388 to related parties; Notes 6 and 7) (2,242) (678) (5,639) (2,447) Other Income, Net 196 64 45 289 ---------- ---------- --------- ---------- Income (Loss) Before Income Taxes 13,764 (3,067) 1,165 1,358 Income Tax (Provision) Benefit (Note 5) (5,748) 1,315 (1,652) (1,436) ---------- ---------- --------- ---------- Net Income (Loss) $ 8,016 $ (1,752) $ (487) $ (78) ========== ========== ========= ========== The accompanying notes are an integral part of these combined financial statements.

6 SPECTRA PRECISION Combined Statement of Cash Flows

The Company Predecessor ------------------ ------------------------------------------------------------------ February 22, 1999 January 1, 1999 through through (In thousands) January 1, 2000 February 21, 1999 1998 1997 ------------------------------------- --------------------- ---------------------- --------------------- --------------------- Operating Activities Net income (loss) $ 8,016 $ (1,752) $ (487) $ (78) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 7,919 954 6,397 7,281 Provision for losses on accounts receivable 257 150 182 530 Gain on sale of business (Note 3) - - (2,922) - Increase (decrease) in deferred income taxes (1,070) (28) 262 2,497 Other noncash items 2,418 (235) 1,340 128 Changes in current accounts, excluding the effects of acquisitions and dispositions: Accounts receivable (6,843) 1,626 (3,611) (4,224) Inventories 1,604 850 (1,179) 528 Other current assets (5,231) (396) 781 (3,235) Accounts payable 844 1,050 1,018 375 Other current liabilities 4,689 (1,349) 6,841 4,620 Other (510) (731) (785) (2,121) --------- ---------- --------- ---------- Net cash provided by operating activities 12,093 139 7,837 6,301 --------- ---------- --------- ---------- Investing Activities Advance from affiliated company 1,868 - - - Acquisitions, net of cash acquired (Note 2) - (570) (389) (8,459) Proceeds from sale of business, net of cash sold (Note 3) - - 3,082 - Purchases of property, plant, and equipment (3,355) - (4,292) (3,653) --------- ---------- --------- ---------- Net cash used in investing activities $ (1,487) $ (570) $ (1,599) $ (12,112) --------- ---------- --------- ----------

7 SPECTRA PRECISION Combined Statement of Cash Flows (continued)

The Company Predecessor ------------------ ------------------------------------------------------------------- February 22, 1999 January 1, 1999 through through (In thousands) January 1, 2000 February 21, 1999 1998 1997 ------------------------------------- --------------------- ---------------------- ---------------------- --------------------- Financing Activities Decrease in due to/from parent company and affiliated companies $ (9,324) $ (3,382) $ (1,095) $ 3,635 Net increase (decrease) in short-term obligations 2,715 (898) (3,765) 1,235 Issuance (repayment) of long-term obligations (1,650) (71) (337) 750 Other (730) 235 (1,340) (1,285) --------- ---------- ---------- ---------- Net cash provided by (used in) financing activities (8,989) (4,116) (6,537) 4,335 --------- ---------- ---------- ---------- Exchange Rate Effect on Cash 521 (540) 832 2,572 --------- ---------- ---------- ---------- Increase (Decrease) in Cash and Cash Equivalents 2,138 (5,087) 533 1,096 Cash and Cash Equivalents at Beginning of Period 5,547 10,634 10,101 9,005 --------- ---------- ---------- ---------- Cash and Cash Equivalents at End of Period $ 7,685 $ 5,547 $ 10,634 $ 10,101 ========= ========== ========== ========== Cash Paid For Interest $ 2,242 $ 678 $ 5,639 $ 2,447 Income taxes $ 3,225 $ 191 $ 2,457 $ 1,597 Noncash Activities Fair value of assets of acquired companies $ 15,177 $ 570 $ 389 $ 10,254 Issuance of short- and long-term obligations for acquired company (14,852) - - - Cash paid for acquired companies - (570) (389) (9,057) --------- ---------- ---------- ---------- Liabilities assumed of acquired companies $ 325 $ - $ - $ 1,197 ========= ========== ========== ==========

The accompanying notes are an integral part of these combined financial statements. 8 SPECTRA PRECISION Combined Statement of Comprehensive Income

The Company Predecessor ------------------ ------------------------------------------------------------------ February 22, 1999 January 1, 1999 through through (In thousands) January 1, 2000 February 21, 1999 1998 1997 -------------------------------------- ---------------------- --------------------- ---------------------- --------------------- Net Income (Loss) $ 8,016 $ (1,752) $ (487) $ (78) --------- -------- --------- --------- Other Comprehensive Items: Foreign currency translation adjustment (976) (544) 133 (1,593) --------- --------- --------- --------- Comprehensive Income (Loss) $ 7,040 $ (2,296) $ (354) $ (1,671) ========= ========= ========= =========

The accompanying notes are an integral part of these combined financial statements. 9 SPECTRA PRECISION Combined Statement of Shareholders' Investment

Accumulated Net Parent Other Company Comprehensive (In thousands) Investment Items ------------------------------------------------------------------------- ---------------------- --------------------- PREDECESSOR Balance December 31, 1996 $ 40,690 $ 799 Net Loss (78) - Translation Adjustment - (1,593) ----------- ---------- Balance December 31, 1997 40,612 (794) Net Loss (487) - Translation Adjustment - 133 ----------- ---------- Balance December 31, 1998 40,125 (661) Net Loss (1,752) - Translation Adjustment - (544) ----------- ---------- Balance February 21, 1999 38,373 (1,205) THE COMPANY Net Equity Investment by Thermo Instrument in Excess of the Net Assets of the Predecessor 86,241 - Net Income 8,016 - Translation Adjustment - (976) ----------- ---------- Balance January 1, 2000 $ 132,630 $ (2,181) =========== ==========

The accompanying notes are an integral part of these combined financial statements. 10 SPECTRA PRECISION Notes to Combined Financial Statements 1. Nature of Operations and Summary of Significant Accounting Policies ---------------------------------------------------------------------------- Nature of Operations Spectra Precision represents certain businesses owned by Spectra-Physics AB, which develop, manufacture, and market complete positioning solutions for the construction, surveying, and agricultural markets. Products include laser alignment instruments, machine control systems, and survey instruments. Relationship with Thermo Instrument Systems Inc. and Thermo Electron Corporation On February 22, 1999, Thermo Instrument Systems Inc. acquired Spectra-Physics (Note 2). Thermo Instrument is an 88% owned subsidiary of Thermo Electron Corporation. The accompanying financial statements prior to February 22, 1999, represent the assets, liabilities, income and expenses of Spectra Precision as included in Spectra-Physics' financial statements prior to Spectra-Physics' acquisition by Thermo Instrument (the Predecessor). The accompanying financial statements subsequent to February 21, 1999, represent the assets, liabilities, income and expenses of Spectra Precision as included in Thermo Instrument's combined financial statements (the Company). The accompanying financial statements do not include Thermo Instrument's or Spectra-Physics' general corporate debt, which is used to finance the operations of these companies' respective businesses, or an allocation of Thermo Instrument's or Spectra-Physics' interest expense. Principles of Combination The accompanying financial statements include the combined accounts of the Spectra Precision businesses, which are subject to a definitive agreement in which the Company will be sold to Trimble Navigation Ltd. (Note 9). All material intercompany accounts and transactions have been eliminated. Basis of Accounting The principal difference in the basis of accounting between the Predecessor and the Company relates to the cost in excess of net assets of acquired companies, the amortization of which approximates $2,100,000 per year. The significant accounting policies of the Company described herein apply to both the Company and the Predecessor, except where stated otherwise. Fiscal Year and Periods Presented The Company has adopted a fiscal year ending the Saturday nearest December 31. The Predecessor had a fiscal year ending December 31. The accompanying financial statements include the Company's financial results for the period from February 22, 1999, the date Spectra-Physics was acquired by Thermo Instrument, through January 1, 2000, and the Predecessor's financial results for the fiscal years ended December 31, 1997, and December 31, 1998, and for the period from January 1, 1999, through February 21, 1999. References to year-end 1999 are for January 1, 2000. References to 1998 and 1997 are for the fiscal years ended December 31, 1998, and December 31, 1997, respectively. Revenue Recognition The Company generally recognizes product revenues upon shipment of its products or upon installation if required by contract. The Company provides a reserve for its estimate of warranty costs and returns at the time of shipment. In accordance with Statement of Position No. 97-2, "Software Revenue Recognition," revenue from software is recognized upon execution of the license agreement and delivery of the software when any ongoing service commitments are not critical to the functionality of the software; otherwise revenue on the service component is recognized over the life of the contract. Income Taxes In accordance with Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," the Company recognizes deferred income taxes based on the expected future tax consequences of differences between the financial statement basis and the tax basis of assets and liabilities, calculated using enacted tax rates in effect for the year in which the differences are expected to be reflected in the tax return. 11 1. Nature of Operations and Summary of Significant Accounting Policies (continued) ----------------------------------------------------------------------------- Cash and Cash Equivalents The Company, along with other European-based subsidiaries of Thermo Electron, participates in a notional pool arrangement in the U.K. with Barclays Bank. Under this arrangement, Barclays notionally combines the positive and negative cash balances held by the participants to calculate the net interest yield/expense for the group. The benefit derived from this arrangement is then allocated based on balances attributable to the respective participants. The Company has access to a $3,881,000 bank line of credit under this arrangement. Thermo Electron guarantees all of the obligations of each participant in this arrangement. At year-end 1999, the Company had borrowed $3,058,000 under this arrangement (Note 6). At year-end 1999 and 1998, the Company's and the Predecessor's cash equivalents included investments in interest-bearing accounts at the Company's foreign operations, which have an original maturity of three months or less. Cash equivalents are carried at cost, which approximates market value. Advance from Affiliate Effective June 1999, certain of the Company's European-based subsidiaries participate in a new cash management arrangement with a wholly owned subsidiary of Thermo Electron. Under the new arrangement, amounts advanced to or from Thermo Electron for cash management purposes bear interest based on Euro market rates, which was 3.95% at year-end 1999. Thermo Electron is contractually required to maintain cash, cash equivalents, and/or immediately available bank lines of credit equal to at least 50% of all funds invested under this cash management arrangement by all Thermo Electron subsidiaries other than wholly owned subsidiaries. The Company has the contractual right to withdraw its funds invested in the cash management arrangement upon 30 days' prior notice. The Company had no funds invested in this arrangement as of January 1, 2000. The Company has access to a $2,568,000 line of credit under this arrangement, of which the Company had borrowed $1,868,000 at year-end 1999. Inventories Inventories are stated at the lower of cost (on a weighted average basis) or market value and include materials, labor, and manufacturing overhead. The components of inventories are as follows: The Company Predecessor ------------- --------------- (In thousands) 1999 1998 ---------------------------------------------------------- --------------- Raw Material and Supplies $ 10,287 $ 11,742 Work in Process 4,287 4,525 Finished Goods 12,677 11,094 --------- -------- $ 27,251 $ 27,361 ========= ======== The Company periodically reviews its quantities of inventories on hand and compares these amounts to expected usage of each particular product or product line. The Company records as a charge to cost of revenues any amounts required to reduce the carrying value of inventories to net realizable value. 12 1. Nature of Operations and Summary of Significant Accounting Policies (continued) ----------------------------------------------------------------------------- Property, Plant, and Equipment The costs of additions and improvements are capitalized, while maintenance and repairs are charged to expense as incurred. The Company provides for depreciation and amortization using the straight-line method over the estimated useful lives of the property as follows: buildings, 25 to 50 years; machinery and equipment, 4 to 8 years; and leasehold improvements, the shorter of the term of the lease or the life of the asset. Property, plant, and equipment consists of the following: The Company Predecessor ----------- ---------------- (In thousands) 1999 1998 ------------------------------------------------------------- ---------------- Land $ 3,280 $ 3,488 Buildings 17,288 19,562 Machinery, Equipment, and Leasehold Improvements 32,223 32,136 --------- --------- 52,791 55,186 Less: Accumulated Depreciation and Amortization 31,641 31,968 --------- --------- $ 21,150 $ 23,218 ========= ========= Other Assets Other assets in the accompanying balance sheet at year-end 1999 and 1998 includes $1,765,000 and $1,808,000, respectively, of deposits for the purchase of a building. Other assets also includes the cost of acquired patents and trademarks that are being amortized using the straight-line method over their estimated useful life of 15 years. The acquired patents and trademarks were $1,738,000, net of accumulated amortization of $106,000 at year-end 1999. Cost in Excess of Net Assets of Acquired Companies The excess of cost over the fair value of net assets of acquired companies is amortized over periods of 5 to 40 years using the straight-line method. Accumulated amortization was $13,889,000 and $9,074,000 at year-end 1999 and 1998, respectively. The Company assesses the future useful life of this and other long-lived assets whenever events or changes in circumstances indicate that the current useful life has diminished. Such events or circumstances generally include the occurrence of operating losses or a significant decline in earnings associated with the acquired business or asset. The Company considers the future undiscounted cash flows of the acquired companies in assessing the recoverability of this asset. The Company assesses cash flows before interest charges and when impairment is indicated, writes the asset down to fair value. If quoted market values are not available, the Company estimates fair value by calculating the present value of future cash flows. If impairment has occurred, any excess of carrying value over fair value is recorded as a loss. Foreign Currency All assets and liabilities of the Company's foreign subsidiaries are translated at year-end exchange rates, and revenues and expenses are translated at average exchange rates for the year, in accordance with SFAS No. 52, "Foreign Currency Translation." Resulting translation adjustments are reflected in the "Accumulated other comprehensive items" component of shareholders' investment. Foreign currency transaction gains and losses are included in the accompanying statement of operations and are not material for the three years presented. Comprehensive Income Comprehensive income combines net income and "Other comprehensive items," which represents foreign currency translation adjustments, reported as a component of shareholders' investment in the accompanying balance sheet. At year-end 1999 and 1998, the balance of accumulated other comprehensive items represents the Company's cumulative translation adjustment. 13 1. Nature of Operations and Summary of Significant Accounting Policies (continued) ----------------------------------------------------------------------------- Forward Contracts The Company uses short-term forward foreign exchange contracts to manage certain exposures to foreign currencies. The Company enters into forward foreign exchange contracts to hedge firm purchase and sale commitments denominated in currencies other than its subsidiaries' local currencies. These contracts principally hedge transactions denominated in United States dollars and German deutsche marks. The purpose of the Company's foreign currency hedging activities is to protect the Company's local currency cash flows related to these commitments from fluctuations in foreign exchange rates. Gains and losses arising from forward foreign exchange contracts are recognized as offsets to gains and losses resulting from the transactions being hedged. The Company does not enter into speculative foreign currency agreements. The Company and the Predecessor had no foreign exchange contracts outstanding at year-end 1999 or 1998. Fair Value of Financial Instruments The Company's financial instruments consist primarily of cash and cash equivalents, accounts receivable, short-term obligations and current maturities of long-term obligation, accounts payable, due to/from parent company and affiliated companies, and long-term obligations. The carrying amounts of the Company's financial instruments, with the exception of long-term obligations, approximate fair value due to their short-term nature. The fair value of the Company's long-term obligations approximates par value. The fair value of long-term obligations was determined based on quoted market prices and on borrowing rates available to the Company at year-end 1999. Recent Accounting Pronouncements In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin (SAB) 101, "Revenue Recognition in Financial Statements." SAB 101 includes requirements for when shipments may be recorded as revenue when the terms of the sale include customer acceptance provisions or an obligation of the seller to install the product. In such instances, SAB 101 generally requires that revenue recognition occur upon customer acceptance and/or at completion of installation. SAB 101 requires that companies conform their revenue recognition practices to the requirements therein no later than the fourth quarter of calendar 2000 through recording a cumulative net of tax effect of the change in accounting as of January 2, 2000. The Company has not completed the analysis to determine the effect that SAB 101 will have on its financial statements. Effective in 2001, the Company will be required to adopt SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." The Company has not completed the analysis to assess the effect of the new pronouncement on its financial statements. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2. Acquisitions --------------------- On September 30, 1999, the Company formed a joint venture with Carl Zeiss Jena GmbH called ZSP Geodetic Systems GmbH (ZSP). ZSP manufactures and develops survey-instrumentation equipment. Carl Zeiss contributed certain assets of its Geodetic Systems Division to the joint venture and received nonvoting shares of ZSP and the right to receive $14,852,000 payable in eight quarterly installments, plus six percent interest, beginning October 4, 1999 (the Note Payable). The Note Payable is denominated in Euros. The Company contributed $1,000,000 in exchange for all of the voting common stock of ZSP and entered into an arrangement which provided both the right and obligation to acquire the nonvoting shares of ZSP for $14,852,000. Carl Zeiss entered into an arrangement, which provided for both the right and obligation to sell the nonvoting shares of ZSP for $14,852,000. Under this arrangement, the right to sell or acquire the nonvoting shares of ZSP may not be exercised earlier than 2 years or later than 3 years after September 30, 1999. The purchase price of the nonvoting shares under this 14 2. Acquisitions (continued) ---------------------------------- arrangement is subject to reduction by the amounts received by Carl Zeiss under the Note Payable through the date of the purchase. The Company has accounted for the transaction as an acquisition of the assets of ZSP and has recorded the obligation to Carl Zeiss as debt in the accompanying 1999 balance sheet. The cost of this acquisition exceeded the estimated fair value of the acquired net assets by $10,120,000 at the date of acquisition, which is being amortized over 20 years. In January 1997, the Predecessor purchased 92 percent of Plus 3 Software, Inc. for $7,772,000, net of cash acquired. In 1998 and 1999, the Predecessor purchased the remaining eight percent of Plus 3 Software, in two installments of $262,000 and $570,000, respectively. Plus 3 Software has been renamed Spectra Precision Software, Inc. Spectra Precision Software is an Atlanta, Georgia-based developer of software for civil engineering applications and also develops internal software applications for survey and machine control products. The cost of this acquisition exceeded the estimated fair value of the acquired net assets by $9,820,000, which is being amortized over five years. In June 1995, the Predecessor purchased 51 percent of Quadriga Sensortechnik GmbH, for $802,000. In December 1996, the Predecessor purchased an additional 39 percent of Quadriga for $2,905,000. The Predecessor purchased the remaining 10 percent of Quadriga in two installments in 1997 and 1998, of $687,000 and $127,000, respectively. Quadriga has been renamed Spectra Precision Kaiserslautern GmbH. Spectra Precision Kaiserslautern is a Germany-based developer and manufacturer of construction lasers for contractors and homebuilders used in leveling and measurement. The cost of this acquisition exceeded the estimated fair value of the acquired net assets by $3,965,000, which is being amortized over ten years. These acquisitions have been accounted for using the purchase method of accounting and their results have been included in the accompanying financial statements from the date of acquisition. Allocation of the purchase price was based on an estimate of the fair value of the net assets acquired. In February 1999, Thermo Instrument acquired 99% of the outstanding shares of Spectra-Physics, a Stockholm Stock Exchange-listed company, in completion of Thermo Instrument's cash tender offer to acquire all of the outstanding shares of Spectra-Physics. In March 2000, Thermo Instrument completed the acquisition of the remaining Spectra-Physics shares outstanding pursuant to the compulsory acquisition rules applicable to Swedish companies. The aggregate purchase price was $351,513,000 including related expenses. The accompanying Company financial statements include the assets and liabilities of the Company at their estimated fair values including an allocation of Thermo Instrument's total cost in excess of net assets of acquired companies arising from the acquisition of Spectra-Physics. The allocation of cost in excess of net assets of acquired companies was made based on the Company's revenues, net worth, and assets relative to the total revenues, net worth, and assets of Spectra-Physics. The Company believes this methodology is reasonable and in accordance with the guidance provided by SEC SAB 55 (Topic 1:B). The cost in excess of net assets of acquired companies totaled $84,369,000 and is being amortized over 40 years. The Company has undertaken restructuring actions in connection with its acquisition by Thermo Instrument. The Company's restructuring activities, which were accounted for in accordance with Emerging Issues Task Force Pronouncement (EITF) 95-3, have included a reduction in staffing levels across all functions, relocation of personnel, and abandonment of excess facilities. In connection with these restructuring activities, the Company established reserves, primarily for severance and excess facilities. In accordance with the requirements of EITF 95-3, the Company finalized its restructuring plans by February 2000. Accrued acquisition expenses are included in other accrued expenses in the accompanying 1999 balance sheet. 15 2. Acquisitions (continued) --------------------------------- The Company established reserves for severance for 24 employees and completed payments for severance in the first quarter of 2000. A summary of the change in accrued acquisition expenses for severance is as follows: (In thousands) The Company --------------------------------------------------------- ---------------- Reserves Established $ 829 Usage (757) -------- Balance at January 1, 2000 $ 72 ======== The Company established reserves for excess facilities, primarily for expenses related to unoccupied space in a facility in Darmstadt, Germany. The Company expects to expend costs related to the facility through February 2001. A summary of the change in accrued acquisition expenses for excess facilities is as follows: (In thousands) The Company ------------------------------------------------------------ ---------------- Reserves Established $ 737 Usage (111) Currency Translation (111) ------- Balance at January 1, 2000 $ 515 ======= The Company established reserves for other acquisition expenses, primarily for employee relocation expenses. A summary of the change in accrued acquisition expenses for other expenses is as follows: (In thousands) The Company -------------------------------------------------------------- --------------- Reserves Established $ 300 Usage (300) ------- Balance at January 1, 2000 $ - ======= Based on unaudited data, the following table presents selected financial information on a pro forma basis, assuming the Company and ZSP had been combined since the beginning of 1998. The effect of the acquisitions not included in the pro forma data, were not material to the Company's results of operations.

The Company Predecessor ------------------ ------------------------------------------- February 22, 1999 January 1, 1999 through through (In thousands) January 1, 2000 February 21, 1999 1998 -------------------------------------------------- ---------------------- --------------------- --------------------- Revenues $ 219,391 $ 27,753 $ 236,899 Net Income (Loss) 6,351 (2,228) (2,479)

The pro forma results are not necessarily indicative of future operations or the actual results that would have occurred had the acquisition of ZSP been made at the beginning of 1998. 16 3. Dispositions ----------------------- In June 1998, the Predecessor sold the assets and certain liabilities of its Spectra-Physics Credit Corp. (SPCC) subsidiary for proceeds of $3,082,000, net of cash disposed of $3,858,000. The Predecessor realized a gain of $2,922,000 on the transaction. In connection with the sale of SPCC in 1998, the Predecessor entered into an arrangement which resulted in the receipt of a payment based on business provided to SPCC in excess of $25 million and up to $50 million. In the third quarter of 1999, the Company reached the $25 million threshold and began to receive payments under this arrangement. The Company received payments from the buyer of $632,000 in the period ending January 1, 2000, and $599,000 in the first quarter of 2000. The gain on the sale of SPCC and the 1999 payment were recorded in other unusual costs (income), net, in the accompanying statement of operations. SPCC provided capital leasing services to the Predecessor's customers. The Predecessor retained recourse to the buyer for certain leases provided by SPCC in the event of default by SPCC customers. At the time of the sale of SPCC, the Predecessor had recourse for outstanding leases of approximately $5,000,000. At year-end 1999 and 1998, the Company/Predecessor had recourse for outstanding loans of approximately $2,300,000 and $3,900,000, respectively. The Company/Predecessor has established reserves for this contingent liability. In October 1999, the Company sold the assets of its Spectra Precision SRL subsidiary in Italy for book value. The Company received a note receivable denominated in Italian lira for $2,241,000 at the date of sale, payable in eight quarterly installments. The note bears interest at an annual rate of 6.5%. Spectra Precision SRL was a sales office which sold products produced primarily in the U.S. and Germany. 4. Employee Benefit Plans -------------------------------- Employee Stock Purchase Program Beginning November 1, 1999, substantially all of the Company's full-time U.S. employees are eligible to participate in an employee stock purchase program sponsored by Thermo Instrument and Thermo Electron. Under this program, shares of Thermo Instrument's and Thermo Electron's common stock may be purchased at 85% of the lower of the fair market value at the beginning or end of the period, and the shares purchased are subject to a one-year resale restriction. Shares are purchased through payroll deductions of up to 10% of each participating employee's gross wages. 401(k) Savings Plan Certain of the Predecessor's and the Company's full-time U.S. employees are eligible to participate in 401(k) savings plans. Contributions to the plans are made by both the employee and the employer. Company contributions are based upon the level of employee contributions. The Company/Predecessor contributed and charged to expense for these plans $492,000 from February 22, 1999, through January 1, 2000; $112,000 from January 1, 1999, through February 21, 1999; and $593,000 and $547,000 in 1998 and 1997, respectively. Defined Contribution Pension Plans In addition, certain of the Company's subsidiaries participate in European state sponsored pension plans. Contributions are based on specified percentages of employee salaries. For these plans, the Company/Predecessor contributed and charged to expense $1,046,000 from February 22, 1999, through January 1, 2000; $150,000 from January 1, 1999, through February 21, 1999; and $862,000 and $849,000 in 1998 and 1997, respectively. Defined Benefit Pension Plan The Company's Swedish subsidiary has an unfunded defined benefit pension plan that covered substantially all of its full-time employees through 1993. Benefits are based on a percentage of eligible earnings. The employee 17 4. Employee Benefit Plans (continued) -------------------------------------------- must have had a projected period of pensionable service of at least 30 years as of 1993. If the period was shorter, the pension benefits are reduced accordingly. Active employees do not accrue any future benefits, therefore there is no service cost and the liability will only increase with interest cost. Net periodic benefit costs included the following components:

The Company Predecessor ------------------ ----------------------------------------------------------------- February 22, 1999 January 1, 1999 through through (In thousands) January 1, 2000 February 21, 1999 1998 1997 ----------------------------- ---------------------- ----------------------- ------------------- ---------------------- Interest Cost $ 165 $ 27 $ 208 $ 251 Amortization of Prior Service Cost (49) (8) (62) (64) ------ ------ ---- ------ $ 116 $ 19 $ 146 $ 187 ====== ====== ===== =======

The Company's defined benefit plan activity was as follows: The Company Predecessor (In thousands) 1999 1998 ----------------------------------------------------------- ------------------- Change in Benefit Obligation: Benefit obligation at beginning of year $ 3,850 $ 3,525 Interest cost 192 208 Translation adjustment (173) (79) Actuarial (gain) loss (117) 84 Benefits paid (115) (119) ------- -------- Benefit obligation at end of year 3,637 3,619 Unrecognized Prior Service Cost - 302 Unrecognized Net Actuarial Gain 143 31 ------- -------- Accrued Pension Costs $ 3,780 $ 3,952 ======= ======== Actuarial assumptions used to determine the net periodic pension costs were as follows:

The Company Predecessor ------------------ ------------------------------------------------------------------- February 22, 1999 January 1, 1999 through through (In thousands) January 1, 2000 February 21, 1999 1998 1997 --------------------------- ---------------------- --------------------- ---------------------- ---------------------- Discount Rate 5.5% 5.5% 6.0% 7.0%

18 5. Income Taxes ------------------------- The components of income (loss) before income taxes are as follows:

The Company Predecessor ------------------ ------------------------------------------------------------------ February 22, 1999 January 1, 1999 through through (In thousands) January 1, 2000 February 21, 1999 1998 1997 ----------------------------- ---------------------- ---------------------- --------------------- --------------------- Domestic $ (197) $ 683 $ (1,417) $ 333 Foreign 13,961 (3,750) 2,582 1,025 --------- --------- -------- --------- $ 13,764 $ (3,067) $ 1,165 $ 1,358 ========= ========= ======== =========

The components of the income tax (provision) benefit are as follows:

The Company Predecessor ------------------ ------------------------------------------------------------------ February 22, 1999 January 1, 1999 through through (In thousands) January 1, 2000 February 21, 1999 1998 1997 --------------------------- ---------------------- --------------------- ---------------------- --------------------- Currently Payable: Federal $ (1,774) $ (660) $ 234 $ (1,082) State (465) (71) 103 (250) Foreign (5,792) 1,502 (1,986) (1,041) --------- -------- --------- --------- (8,031) 771 (1,649) (2,373) --------- -------- --------- --------- Net Deferred (Prepaid): Federal 1,689 426 (2) 750 State 441 88 (1) 187 Foreign 153 30 - - --------- -------- --------- --------- 2,283 544 (3) 937 --------- -------- --------- --------- $ (5,748) $ 1,315 $ (1,652) $ (1,436) ========= ======== ========= =========

19 5. Income Taxes (continued) ---------------------------------- The income tax (provision) benefit in the accompanying statement of operations differs from the provision calculated by applying the statutory federal income tax rate of 35% to income (loss) before income taxes due to the following:

The Company Predecessor ------------------ ------------------------------------------------------------------ February 22, 1999 January 1, 1999 through through (In thousands) January 1, 2000 February 21, 1999 1998 1997 ------------------------------ ---------------------- ---------------------- ---------------------- -------------------- (Provision) Benefit for Income Taxes at Statutory Rate $ (4,817) $ 1,074 $ (408) $ (475) Differences Resulting From: Foreign losses not benefited (691) 115 (571) (307) Foreign tax rate and tax law differential (62) 103 (511) (375) Amortization of cost in excess of net assets of acquired companies (217) (43) (565) (375) Tax benefit of foreign sales corporation 116 23 337 137 State income taxes, net of federal tax (16) 11 66 (41) Other (61) 32 - - --------- --------- --------- -------- $ (5,748) $ 1,315 $ (1,652) $ (1,436) ========= ========= ========= ========

Deferred tax asset and liability in the accompanying balance sheet consist of the following: The Company Predecessor (In thousands) 1999 1998 ------------------------------------------------------- -------------------- Deferred Tax Asset: Reserves and accruals $ 5,462 $ 1,883 Inventory basis difference 313 698 Accrued compensation 2,702 863 Foreign tax loss carryforwards 2,134 1,197 --------- --------- 10,611 4,641 Less: Valuation allowance (2,134) (1,197) --------- --------- $ 8,477 $ 3,444 ========= ========= Deferred Income Taxes: Depreciation and amortization $ 1,824 $ 3,084 ========= ========= The valuation allowance relates to uncertainties surrounding the realization of foreign net operating losses, which is dependent on the future income of certain subsidiaries of the Company. The Company believes that it is 20 5. Income Taxes (continued) ---------------------------------- more likely than not that these deferred tax assets will not be realized. Any tax benefit resulting from use of acquired foreign net operating loss carryforwards will be recorded as a reduction of cost in excess of net assets of acquired companies. As of January 1, 2000, the Company had $4,800,000 of foreign tax loss carryforwards of which $3,600,000 expire in various amounts through 2004 and $1,200,000 does not expire. 6. Related-party Transactions ------------------------------------- Corporate Services Agreement The Company and Thermo Electron have a corporate services agreement under which Thermo Electron's corporate staff provides certain administrative services, including certain legal advice and services, risk management, certain employee benefit administration, tax advice and preparation of tax returns, centralized cash management, and certain financial and other services, for which the Company pays Thermo Electron annually an amount equal to 0.8% of the Company's revenues. For these services, the Company was charged $1,585,000 for the period from February 22, 1999, through January 1, 2000. The fee is reviewed and adjusted annually by mutual agreement of the parties. The corporate services agreement is renewed annually but can be terminated upon 30 days' prior notice by the Company or upon the Company's withdrawal from the Thermo Electron Corporate Charter (the Thermo Electron Corporate Charter defines the relationships among Thermo Electron and its majority-owned subsidiaries). Management believes that the service fee charged by Thermo Electron is reasonable and that such fees are representative of the expenses the Company would have incurred on a stand-alone basis. For additional items such as employee benefit plans, insurance coverage, and other identifiable costs, Thermo Electron charges the Company based upon costs attributable to the Company. Related-party Lease The Company leases office space in Ohio from an association of three individuals, two of which are vice presidents of one of the Company's U.S. operating units, under a noncancellable operating lease arrangement expiring in 2011. The annual rent is $345,000, and is subject to adjustment based on the terms of the lease. The accompanying statement of operations includes expenses from this operating lease of $290,000 from February 22, 1999, through January 1, 2000, $55,000 from January 1, 1999, through February 21, 1999, and $345,000 and $210,000 in 1998 and 1997, respectively. Cash Management The Company invests excess cash and borrows short-term funds under arrangements with Thermo Electron as discussed in Note 1. The Predecessor and the Company borrowed and lent funds from/to other subsidiaries of Spectra Physics. Such borrowings and advances were at variable market rates and were classified as due to/from parent company and affiliated companies in the accompanying balance sheet. 7. Short- and Long-term Obligations ------------------------------------------- Short-term Obligations Short-term obligations and current maturities of long-term obligation in the accompanying balance sheet includes $1,238,000 and $1,412,000 at year-end 1999 and 1998, respectively, of amounts borrowed under lines of credit. The weighted average interest rate for these borrowings at year-end 1999 and 1998 was 6.5%. The Company had no unused lines of credit with unrelated parties at January 1, 2000. In addition, at year-end 1999, the Company has borrowings of $4,926,000 under arrangements discussed in Note 1. The weighted average interest rate for these borrowings was 5.1% at year-end 1999. Long-term Obligations In September 1999, the Company obtained a controlling interest in the assets of ZSP, which issued Euro-denominated debt (Note 2). At year-end 1999, $13,141,000 of this obligation was outstanding, of which $5,020,000 was current. This debt is payable in eight quarterly installments, and bears interest at six percent. The Company/Predecessor also had a long-term capital lease obligation of $277,000 and $395,000 outstanding at year-end 1999 and 1998, respectively. This obligation bears interest at 7.5% and is payable in 2000. 21 8. Commitments ----------------------- The Company leases portions of its office and operating facilities under various operating lease arrangements. The accompanying statement of operations includes expenses from operating leases with unrelated parties of $3,189,000 from February 22, 1999, through January 1, 2000, $456,000 from January 1, 1999 through February 21, 1999, and $3,675,000, and $2,742,000 in 1998 and 1997, respectively. Future minimum payments due under noncancelable operating leases at January 1, 2000, are $2,754,000 in 2000, $2,371,000 in 2001, $1,752,000 in 2002, $1,394,000 in 2003, $1,368,000 in 2004, and $1,039,000 in 2005 and thereafter. Total future minimum lease payments are $10,678,000. 9. Subsequent Event ---------------------------- On May 11, 2000, Thermo Instrument entered into a definitive agreement to sell the Company to Trimble Navigation Ltd. 22 UNAUDITED FINANCIAL STATEMENTS OF SPECTRA PRECISION SPECTRA PRECISION CONDENSED COMBINED BALANCE SHEET

June 30, (In thousands) 2000 -------------------------------------------------------------------------------------- (Unaudited) Assets Current Assets: Cash and cash equivalents $ 7,552 Accounts receivable, less allowance of $5,659 54,316 Inventories 27,770 Deferred tax asset 613 Other current assets 1,689 Due from parent company and affiliated companies 8,862 --------------- 100,802 --------------- Property, Plant, and Equipment, at Cost, Net 19,367 --------------- Other Assets 7,091 --------------- Cost in Excess of Net Assets of Acquired Companies (Note 2) 95,855 --------------- --------------- $ 223,115 =============== Liabilities and Shareholders' Investment Current Liabilities: Short-term obligations and current maturities of long-term obligations (includes advance from affiliate of $1,338 in 2000) $ 11,884 Accounts payable 7,317 Accrued payroll and employee benefits 9,819 Accrued income taxes 3,954 Other accrued expenses 14,484 Due to parent company and affiliated companies 18,330 --------------- 65,788 --------------- Deferred Income Taxes 1,991 --------------- Accrued Pension Costs 4,397 --------------- Long-term Obligations - --------------- Commitments and Contingency Shareholders' Investment: Net parent company investment 152,138 Accumulated other comprehensive items (1,199) --------------- 150,938 --------------- --------------- $ 223,115 ===============

The accompanying notes are an integral part of these condensed combined financial statements. 23 SPECTRA PRECISION CONDENSED COMBINED STATEMENTS OF OPERATIONS (Unaudited) Three Six Months Months Ended Ended June 30, June 30, (In thousands) 2000 2000 ------------------------------------------------------------ ------------------- Revenues $ 63,167 $ 116,788 --------------- ------------------- Cost and Operating Expenses: Cost of revenues 30,496 56,589 Selling, general, and administrative expenses 18,793 39,054 Research and development expenses 5,342 10,865 --------------- ------------------- 54,631 106,508 --------------- ------------------- Operating Income 8,536 10,280 --------------- ------------------- Interest Income 59 476 Interest Expense (782) (1,639) Other Income, net 1,098 951 --------------- ------------------- Income Before Income Taxes 8,911 10,068 Income Tax Provision 1,212 1,887 --------------- ------------------- Net Income $ 7,699 $ 8,181 =============== =================== The accompanying notes are an integral part of these condensed combined financial statements. 24 UNAUDITED FINANCIAL STATEMENTS OF SPECTRA PRECISION SPECTRA PRECISION CONDENSED COMBINED STATEMENT OF CASHFLOWS

June 30, (In thousands) 2000 ------------------------------------------------------------------------------------------------------------------------------- (Unaudited) Operating Activities: Net income (loss) $ 8,181 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 5,715 Provision for losses on accounts receivable 1,171 Gain on disposal of fixed assets 1,846 Increase (decrease) in deferred income taxes 8,031 Other noncash items - Changes in current accounts, excluding the effects of acquisitions and dispositions: Accounts receivable (15,351) Inventories (519) Other current assets (277) Accounts payable (15) Other current liabilities (1,124) Other (1,393) ------------ Net cash provided by operating activities 6,265 Investing Activities: Advance from affiliated company 1,338 Purchases of property, plant, and equipment (2,884) ------------ Net cash used in investing activities (1,546) Financing Activities: Decrease in due to/from parent company and affiliated companies (8,641) Net increase (decrease) in short-term obligations (915) Issuance (repayment) of long-term obligations (8,121) Increase in Net parent company investment 11,327 Other - ------------ Net cash provided by (used in) financing activities (6,350) Exchange Rate Effect on Cash 1,498 ------------ Increase (Decrease) in Cash and Cash Equivalents (133) Cash and Cash Equivalents at Beginning of Period 7,685 ------------ Cash and Cash Equivalents at End of Period $ 7,552 ============

The accompanying notes are an integral part of these condensed combined financial statements. 25 SPECTRA PRECISION NOTES TO CONDENSED COMBINDED FINANCIAL STATEMENTS (UNAUDITED) 1. Nature of Operations and Summary of Significant Accounting Policies ----------------------------------------------------------------------------- Nature of Operations Spectra Precision represents certain businesses owned by Spectra-Physics AB, which develop, manufacture, and market complete positioning solutions for the construction, surveying, and agricultural markets. Products include laser alignment instruments, machine control systems, and survey instruments. Relationship with Thermo Instrument Systems Inc. and Thermo Electron Corporation On February 22, 1999, Thermo Instrument Systems Inc. acquired Spectra-Physics (Note 2). Thermo Instrument is an 88% owned subsidiary of Thermo Electron Corporation. The accompanying financial statements prior to February 22, 1999 represent the assets, liabilities, income and expenses of Spectra Precision as included in Spectra-Physics' financial statements prior to Spectra-Physics' acquisition by Thermo Instrument (the Predecessor). The accompanying financial statements subsequent to February 21, 1999, represent the assets, liabilities, income and expenses of Spectra Precision as included in Thermo Instrument's combined financial statements (the Company). The accompanying financial statements do not include Thermo Instrument's or Spectra-Physics' general corporate debt, which is used to finance the operations of these companies' respective businesses, or an allocation of Thermo Instrument's or Spectra-Physics' interest expense. Principles of Combination The accompanying financial statements include the combined accounts of the Spectra Precision businesses, which are subject to a definitive agreement in which the Company will be sold to Trimble Navigation Ltd. (Note 5). All material intercompany accounts and transactions have been eliminated. Basis of Accounting The principal difference in the basis of accounting between the Predecessor and the Company relates to the cost in excess of net assets of acquired companies, the amortization of which approximates $2,100,000 per year. The significant accounting policies of the Company described herein apply to both the Company and the Predecessor, except where stated otherwise. Fiscal Year and Periods Presented Spectra Precision has a 52-53 week fiscal year, which ends on the Saturday nearest to December 31, which for fiscal 2000 will be December 30, 2000. The Company's fiscal year normally consists of 52 weeks split into four equal quarters of 13 weeks each; however, due to the fact that there are not exactly 52 weeks in a calendar year and that there is at least slightly more than one additional day per calendar year, as compared to a 52-week fiscal year, the Company will have a fiscal year composed of 53 weeks in certain fiscal years. In those resulting fiscal years that have 53 weeks, one quarter of the fiscal year will have 14 weeks and the Company will record an extra week of revenues, costs and related financial activity. Therefore, the financial results of those fiscal years, and the associated quarter, having the extra week, will not be exactly comparable to the prior and subsequent 52-week fiscal years, and the associated quarters having only 13 weeks. Thus, due to the inherent nature of a 52-53 week fiscal year, the Company, analysts, shareholders, investors and others will have to make appropriate adjustments to any analysis performed when comparing the Company's activities and results in fiscal years that contain 53 weeks, to those that contain only the standard 52 weeks. The next 53-week year will be fiscal year 2002. The results of operations for the three and six months ended June 30, 2000 are not necessarily indicative of the results that may be expected for the year ending December 30, 2000. 26 Revenue Recognition The Company generally recognizes product revenues upon shipment of its products or upon installation if required by contract. The Company provides a reserve for its estimate of warranty costs and returns at the time of shipment. In accordance with Statement of Position No. 97-2, "Software Revenue Recognition," revenue from software is recognized upon execution of the license agreement and delivery of the software when any ongoing service commitments are not critical to the functionality of the software; otherwise revenue on the service component is recognized over the life of the contract. Cash and Cash Equivalents The Company, along with other European-based subsidiaries of Thermo Electron, participates in a notional pool arrangement in the U.K. with Barclays Bank. Under this arrangement, Barclays notionally combines the positive and negative cash balances held by the participants to calculate the net interest yield/expense for the group. The benefit derived from this arrangement is then allocated based on balances attributable to the respective participants. The Company has access to a $3,881,000 bank line of credit under this arrangement. Thermo Electron guarantees all of the obligations of each participant in this arrangement. At June 30, 2000, the Company had borrowed $3,085,226 under this arrangement. At June 30, 2000 and January 1, 2000, the Company's and the Predecessor's cash equivalents included investments in interest-bearing accounts at the Company's foreign operations, which have an original maturity of three months or less. Cash equivalents are carried at cost, which approximates market value. Advance from Affiliate Effective June 1999, certain of the Company's European-based subsidiaries participate in a new cash management arrangement with a wholly owned subsidiary of Thermo Electron. Under the new arrangement, amounts advanced to or from Thermo Electron for cash management purposes bear interest based on Euro market rates, which were .9525% % at June 30, 2000. Thermo Electron is contractually required to maintain cash, cash equivalents, and/or immediately available bank lines of credit equal to at least 50% of all funds invested under this cash management arrangement by all Thermo Electron subsidiaries other than wholly owned subsidiaries. The Company has the contractual right to withdraw its funds invested in the cash management arrangement upon 30 days' prior notice. The Company had no funds invested in this arrangement as of June 30, 2000. The Company has access to a $2,568,000 line of credit under this arrangement, of which the Company had borrowed $1,338,276 at June 30, 2000. Inventories Inventories are stated at the lower of cost (on a weighted average basis) or market value and include materials, labor, and manufacturing overhead. The components of inventories are as follows: June 30, (In thousands) 2000 ----------------------------------------------------- Raw Material and Supplies $ 10,239 Work in Process 4,419 Finished Goods 13,112 ------------- $ 27,770 ============= The Company periodically reviews its quantities of inventories on hand and compares these amounts to expected usage of each particular product or product line. The Company records, as a charge to cost of revenues any amounts required to reduce the carrying value of inventories to net realizable value. 27 Property, Plant, and Equipment The costs of additions and improvements are capitalized, while maintenance and repairs are charged to expense as incurred. The Company provides for depreciation and amortization using the straight-line method over the estimated useful lives of the property as follows: buildings, 25 to 50 years; machinery and equipment, 4 to 8 years; and leasehold improvements, the shorter of the term of the lease or the life of the asset. Property, plant, and equipment consists of the following: June 30, (In thousands) 2000 -------------------------------------------------------------------------------- Land $ 2,089 Buildings 13,550 Machinery, Equipment, and Leasehold Improvments 29,298 ------------- 44,937 Less: Accumulated Depreciation and Amortization 25,570 ------------- $ 19,367 ============= Other Assets Other assets in the accompanying balance sheet at June 30, 2000 include $1,777,000 of deposits for the purchase of a building. Other assets also includes the cost of acquired patents and trademarks that are being amortized using the straight-line method over their estimated useful life of 15 years. The acquired patents and trademarks were $1,677,000, net of accumulated amortization of $167,000 at June 30, 2000. Cost in Excess of Net Assets of Acquired Companies The excess of cost over the fair value of net assets of acquired companies is amortized over periods of 5 to 40 years using the straight-line method. Accumulated amortization was $16,994,000 at June 30, 2000. The Company assesses the future useful life of this and other long-lived assets whenever events or changes in circumstances indicate that the current useful life has diminished. Such events or circumstances generally include the occurrence of operating losses or a significant decline in earnings associated with the acquired business or asset. The Company considers the future undiscounted cash flows of the acquired companies in assessing the recoverability of this asset. The Company assesses cash flows before interest charges and when impairment is indicated, writes the asset down to fair value. If quoted market values are not available, the Company estimates fair value by calculating the present value of future cash flows. If impairment has occurred, any excess of carrying value over fair value is recorded as a loss. Comprehensive Income Comprehensive income combines net income and "Other comprehensive items," which represents foreign currency translation adjustments, reported as a component of shareholders' investment in the accompanying balance sheet. At June 30, 2000, the balance of accumulated other comprehensive items represents the Company's cumulative translation adjustment. Recent Accounting Pronouncements In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin (SAB) 101, "Revenue Recognition in Financial Statements." SAB 101 includes requirements for when shipments may be recorded as revenue when the terms of the sale include customer acceptance provisions or an obligation of the seller to install the product. In such instances, SAB 101 generally requires that revenue recognition occur upon customer acceptance and/or at completion of installation. SAB 101 requires that companies conform their revenue recognition practices to the requirements therein no later than the fourth quarter of calendar 2000 through recording a cumulative net of tax effect of the change in accounting as of January 2, 2000. The Company has not completed the analysis to determine the effect that SAB 101 will have on its financial statements. Effective in 2001, the Company will be required to adopt SFAS No. 133, "Accounting for Derivative 28 Instruments and Hedging Activities." The Company has not completed the analysis to assess the effect of the new pronouncement on its financial statements. 2. Acquisitions ----------------------- In February 1999, Thermo Instrument acquired 99% of the outstanding shares of Spectra-Physics, a Stockholm Stock Exchange-listed company, in completion of Thermo Instrument's cash tender offer to acquire all of the outstanding shares of Spectra-Physics. In March 2000, Thermo Instrument completed the acquisition of the remaining Spectra-Physics shares outstanding pursuant to the compulsory acquisition rules applicable to Swedish companies. The aggregate purchase price was $351,513,000 including related expenses. The accompanying Company financial statements include the assets and liabilities of the Company at their estimated fair values including an allocation of Thermo Instrument's total cost in excess of net assets of acquired companies arising from the acquisition of Spectra-Physics. The allocation of cost in excess of net assets of acquired companies was made based on the Company's revenues, net worth, and assets relative to the total revenues, net worth, and assets of Spectra-Physics. The Company believes this methodology is reasonable and in accordance with the guidance provided by SEC SAB 55 (Topic 1:B). The cost in excess of net assets of acquired companies totaled $84,369,000 and is being amortized over 40 years. The Company has undertaken restructuring actions in connection with its acquisition by Thermo Instrument. The Company's restructuring activities, which were accounted for in accordance with Emerging Issues Task Force Pronouncement (EITF) 95-3, have included a reduction in staffing levels across all functions, relocation of personnel, and abandonment of excess facilities. In connection with these restructuring activities, the Company established reserves, primarily for severance and excess facilities. In accordance with the requirements of EITF 95-3, the Company finalized its restructuring plans by February 2000. Accrued acquisition expenses are included in other accrued expenses in the accompanying June 30, 2000 balance sheet. The Company established reserves for severance for 24 employees and completed payments for severance in the first quarter of 2000. A summary of the change in accrued acquisition expenses for severance is as follows: (In thousands) The Company ----------------------------------------------------- Reserves Established $ 829 Usage (757) ----------------- Balance at June 30, 2000 $ 72 ================= The Company established reserves for excess facilities, primarily for expenses related to unoccupied space in a facility in Darmstadt, Germany. The Company expects to expend costs related to the facility through February 2001. A summary of the change in accrued acquisition expenses for excess facilities is as follows: (In thousands) The Company ----------------------------------------------------- Reserves Established $ 737 Usage (228) Currency Translation (111) ----------------- Balance at June 30, 2000 $ 398 ================= 29 3. Dispositions ---------------------- In June 1998, the Predecessor sold the assets and certain liabilities of its Spectra-Physics Credit Corp. (SPCC) subsidiary for proceeds of $3,082,000, net of cash disposed of $3,858,000. The Predecessor realized a gain of $2,922,000 on the transaction. In connection with the sale of SPCC in 1998, the Predecessor entered into an arrangement that resulted in the receipt of a payment based on business provided to SPCC in excess of $25 million and up to $50 million. In the third quarter of 1999, the Company reached the $25 million threshold and began to receive payments under this arrangement. The Company received payments from the buyer of $600,000 and $600,000 in the first three and six months of 2000, respectively. The gain on the sale of SPCC and the 1999 payment were recorded in other costs (income), net, in the accompanying statement of operations. SPCC provided capital leasing services to the Predecessor's customers. The Predecessor retained recourse to the buyer for certain leases provided by SPCC in the event of default by SPCC customers. At the time of the sale of SPCC, the Predecessor had recourse for outstanding leases of approximately $5,000,000. At June 30, 2000, the Company had recourse for outstanding loans of approximately $2,000,000. The Company has established reserves for this contingent liability. In October 1999, the Company sold the assets of its Spectra Precision SRL subsidiary in Italy for book value. The Company received a note receivable denominated in Italian lira for $2,241,000 at the date of sale, payable in eight quarterly installments. The note bears interest at an annual rate of 6.5%. Spectra Precision SRL was a sales office that sold products produced primarily in the U.S. and Germany. 4. Related-party Transactions ------------------------------------ Corporate Services Agreement The Company and Thermo Electron have a corporate services agreement under which Thermo Electron's corporate staff provides certain administrative services, including certain legal advice and services, risk management, certain employee benefit administration, tax advice and preparation of tax returns, centralized cash management, and certain financial and other services, for which the Company pays Thermo Electron annually an amount equal to 0.8% of the Company's revenues. For these services, the Company was charged $0 and $434,944 for the three and six month periods ended June 30, 2000, respectively. The fee is reviewed and adjusted annually by mutual agreement of the parties. The corporate services agreement is renewed annually but can be terminated upon 30 days' prior notice by the Company or upon the Company's withdrawal from the Thermo Electron Corporate Charter (the Thermo Electron Corporate Charter defines the relationships among Thermo Electron and its majority-owned subsidiaries). Management believes that the service fee charged by Thermo Electron is reasonable and that such fees are representative of the expenses the Company would have incurred on a stand-alone basis. For additional items such as employee benefit plans, insurance coverage, and other identifiable costs, Thermo Electron charges the Company based upon costs attributable to the Company. Related-party Lease The Company leases office space in Ohio from an association of three individuals, two of which are vice presidents of one of the Company's U.S. operating units, under a noncancellable operating lease arrangement expiring in 2011. The annual rent is $345,000, and is subject to adjustment based on the terms of the lease. The accompanying statement of operations includes expenses from this operating lease of $86,347 and $172,700 for the three and six month periods ended June 30, 2000, respectively. Cash Management The Company invests excess cash and borrows short-term funds under arrangements with Thermo Electron as discussed in Note 1. The Predecessor and the Company borrowed and lent funds from/to other subsidiaries of Spectra Physics. Such borrowings and advances were at variable market rates and were classified as due to/from parent company and affiliated companies in the accompanying balance sheet. 30 5. Subsequent Event ---------------------------- On July 14, 2000, Thermo Instrument completed the sell of the Company to Trimble Navigation Ltd., pursuant to the definitive agreement entered into on May 11, 2000 between Thermo Instrument and Trimble Navigation Ltd. 31 TRIMBLE NAVIGATION LIMITED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION Introduction to Pro Forma Financial Information Effective as of July 14, 2000, Trimble Navigation Limited, a California Corporation ("Trimble" or the "Company") completed the acquisition of the Spectra Precision wholly owned businesses formerly owned by Thermo Electron Corporation ("Thermo Electron"), collectively known as the "Spectra Precision Group" for an aggregate purchase price of approximately $294 million, which is subject to a final adjustment in the purchase price as provided for in the acquisition agreements. The acquisition includes 100% of the stock of Spectra Precision Inc., a Delaware corporation, Spectra Precision SRL, an Italian corporation, Spectra Physics Holdings GmbH, a German corporation, and Spectra Precision BV, a Netherlands corporation. The acquisition also consists of certain assets and liabilities of Spectra Precision AB, a Swedish corporation, including 100% of the shares of Spectra Precision SA, a French corporation, Spectra Precision Scandinavia AB, a Swedish corporation, Spectra Precision of Canada Ltd., a Canadian corporation, and Spectra Precision Handelsges mbH, an Austrian corporation. The acquisition will be treated as a purchase for accounting purposes; accordingly, Trimble's consolidated results of operations will include the operating results of the Spectra Precision Group subsequent to the effective acquisition date. The acquisition was financed with $80 million in seller subordinated debt, $140 million of cash provided through a syndicate of banks, and $74 million of the Company's available cash on hand. The Company acquired approximately $133 million of identifiable intangible assets as part of the acquisition which the Company expects to amortize over various time periods ranging from 5 to 10 years and expects to record approximately $121 million of goodwill due to the acquisition which will be amortized over 20 years. The Company also expects to incur $7 to $8 million of costs and expenses in connection with the acquisition. The following unaudited pro forma condensed consolidated financial data present the effect of Trimble`s acquisition of Spectra Precision Group. The unaudited pro forma condensed consolidated balance sheet presents the consolidated financial position of Trimble as of June 30, 2000, assuming that the acquisition had occurred as of that date. Such pro forma information is based upon the historical balance sheet data of Trimble as of June 30, 2000 and Spectra Precision Group as of June 30, 2000. The historical balance sheet of the Spectra Precision Group at June 30, 2000 and the historical statements of operations for the year ended January 1, 2000 (which includes Spectra Precision Group results for the period from February 22, 1999 through January 1, 2000 and its predecessor for the period from January 1, 1999 through February 21, 1999) and the six months ended June 30, 2000 do not agree with the financial statements included in Item 7(a) of this Form 8-K/A because certain insignificant net assets and operations of the Spectra Precision Group were not purchased by Trimble. The unaudited pro forma condensed consolidated statements of income for the year ended December 31, 1999 and for the six months ended June 30, 2000 give effect to earnings as if the acquisition had occurred on January 2, 1999. The unaudited pro forma condensed consolidated financial data are prepared using the purchase method of accounting. The unaudited pro forma condensed consolidated financial data are based on the estimates and assumptions set forth in the notes to such statements, which are preliminary and have been made solely for purposes of developing such pro forma information. The unaudited pro forma condensed consolidated financial data are not necessarily an indication of the results that would have been achieved had the transaction been consummated as of the dates indicated. The unaudited pro forma condensed consolidated financial data should be read in conjunction with the historical financial statements and notes thereto of Trimble, including the Annual Report on Form 10-K for the year ended December 31, 1999 and the Quarterly Report on Form 10-Q for the quarter ended June 30, 2000, and the historical financial statements of the Spectra Precision Group at December 31, 1999 and for the three years then ended and at June 30, 2000 and for the three and six months then ended included herein. 32 TRIMBLE NAVIGATION LIMITED UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS

Historical ---------------------------------- Trimble Navigation Spectra Precision Limited Group ---------------------------------- Pro Forma June 30, June 30, Pro Forma June 30, 2000 2000 Adjustments Notes 2000 --------------------------------------------------------------- --------------- -------------------------------- (In thousands) ASSETS Current assets: Cash and cash equivalents $ 94,438 $ 7,552 $ (73,757) (A) $ 37,702 (31,069) (B) 30,000 (B) (4,778) (D) 15,316 (A) Short term investments 24,900 - (15,316) (A) 9,584 Accounts and other receivable, net 45,651 54,929 100,580 Inventories 19,042 27,770 3,957 (E) 50,769 Other current assets 3,881 1,689 5,570 ----------------- --------------- ----------- -------------- Total current assets 187,912 91,939 (75,647) 204,204 Net property and equipment 11,660 8,976 4,995 (E) 25,631 Net Buildings and Land - 7,094 231 (E) 7,325 Goodwill and Intangible assets 1,135 - 1,135 Goodwill on purchase 121,301 (F) 121,301 Inatangible assets on purchase 132,900 (G) 132,900 Deferred income taxes 350 (350) (K) - Other assets 8,541 107 4,778 (D) 13,426 ----------------- --------------- ----------- -------------- Total assets $ 209,598 $ 108,117 $ 188,208 $ 505,923 ================= =============== =========== ============== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ - $ 11,674 $ 8,000 (C) $ 19,674 Revolving credit facility 40,000 (C) 40,000 Accounts payable 12,438 7,317 19,755 Accrued compensation and benefits 8,295 9,819 18,114 Accrued liabilities 14,520 13,070 8,000 (H) 44,857 9,450 (I) (183) (B) Accrued liabilities related to disposal of General Aviation 1,389 - 1,389 Accrued warranty expense 5,989 1,415 7,404 Income taxes payable 2,343 3,954 6,297 Deferred gain on sale of assets 1,953 - 1,953 ----------------- --------------- ----------- -------------- Total current liabilities 46,927 47,248 65,267 159,442 ----------------- --------------- ----------- -------------- Noncurrent portion of long-term debt and other liabilities 30,724 - (30,000) (B) 202,724 30,000 (B) 92,000 (C) 80,000 (C) Pensions - 4,397 4,397 Noncurrent portion of gain on sale of assets 2,279 - 2,279 Deferred income taxes - 792 7,508 (K) 8,300 ----------------- --------------- ----------- -------------- Total liabilities 79,930 52,437 244,775 377,142 ----------------- --------------- ----------- -------------- Shareholders' equity: Common stock 135,419 57,300 (57,300) (J) 135,419 Accumulated deficit (4,056) (420) 420 (J) (4,942) (886) (B) Accumulated other comprehensive loss (1,695) (1,199) 1,199 (J) (1,695) ----------------- --------------- ----------- -------------- Total shareholders' equity 129,668 55,680 (56,567) 128,781 ----------------- --------------- ----------- -------------- Total liabilities and shareholders' equity $ 209,598 $ 108,117 $ 188,208 $ 505,923 ================= =============== =========== ==============

See accompanying notes to condensed consolidated financial statements. 33 TRIMBLE NAVIGATION LIMITED UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Historical ----------------------------------------- Trimble Navigation Spectra Precision Limited Group ----------------------------------------- ----------------------------------------- Six Months Ended Six Months Ended ----------------------------------------- Pro Forma June 30, June 30, Pro Forma June 30, 2000 2000 Adjustments Notes 2000 ----------------------------------------------- ----------------------------------------- ----------------------------------------- (In thousands, except per share data) Total revenue $ 136,404 $ 116,788 $ (189) (L) $ 253,003 ------------------ -------------------- --------------- --------------- Operating expenses: Cost of sales 57,474 56,589 (61) (L) 114,002 Research and development 18,059 11,030 29,089 Sales and marketing 26,679 30,780 57,459 General and administrative 12,947 5,167 18,114 Depreciation on Personal Property on purchase - - 1,249 (M) 1,249 Amortization of goodwill on purchase 3,033 (M) 3,033 Amortization of intangible assets on purchase 9,821 (M) 9,821 ------------------ -------------------- --------------- --------------- Total operating expenses 115,159 103,567 14,041 232,767 ------------------ -------------------- --------------- --------------- Operating income 21,245 13,222 (14,230) 20,237 ------------------ -------------------- --------------- --------------- Nonoperating income (expense): Interest income 3,206 476 (2,264) (O) 1,418 Interest and other expenses (1,107) (313) (12,022) (N)(1) (12,224) (478) (N)(3) 1,696 (N)(2) Foreign exchange gain (loss) , net 66 (210) (144) ------------------ -------------------- --------------- -------------- Total nonoperating income (expenses) 2,165 (47) (13,068) (10,950) ------------------ -------------------- --------------- -------------- Income before income taxes 23,410 13,175 (27,298) 9,287 Income tax provision 2,341 1,887 (3,299) (P) 929 ------------------ -------------------- --------------- -------------- Net income $ 21,069 $ 11,288 $ (23,999) $ 8,358 ================== ==================== =============== ============== ------------------ -------------- Basic net income per share $ 0.92 $ 0.36 ================== ============== Shares used in calculating basic income per share 23,003 23,003 ================== ============== ------------------ -------------- Diluted net income per share $ 0.83 $ 0.33 ================== ============== Shares used in calculating diluted income per share 25,491 25,491 ================== ==============

See accompanying notes to condensed consolidated financial statements. 34 TRIMBLE NAVIGATION LIMITED UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Historical ------------------------------------ Trimble Navigation Spectra Precision Limited Group ------------------------------------ ------------------------------------ Twelve Months Ended Twelve Months Ended ------------------------------------ Pro Forma December 31, January 1, Pro Forma December 31, 1999 2000 Adjustments Notes 1999 ---------------------------------------------------------------------- ------------------ --------------------------------------- (In thousands, except per share data) Total revenue $ 271,364 $ 217,468 $ (104) (L) $ 488,728 ----------- ------------------ ------------- -------------- Operating expenses: Cost of sales 127,117 111,129 (28) (L) 238,218 Research and development 36,493 17,192 53,685 Sales, marketing, and general an administrative 87,293 72,839 160,132 Depreciation on Personal Property - - 2,498 (M) 2,498 Amortization of goodwill on purchase - - 6,065 (M) 6,065 Amortization of intangible assets on purchase 19,641 (M) 19,641 ----------- ------------------ ------------- -------------- Total operating expenses 250,903 201,160 28,176 480,239 ----------- ------------------ ------------- -------------- Operating income from continuing operations 20,461 16,308 (28,280) 8,489 ----------- ------------------ ------------- -------------- Nonoperating income (expense): Interest income 3,857 1,345 (2,813) (O) 2,389 Interest and other expenses (3,611) (496) (24,133) (N)(1) (25,822) (956) (N)(3) 3,374 (N)(2) Foreign exchange gain (loss) , net 28 (1,520) (1,492) ----------- ------------------ ------------- --------------- Total nonoperating expenses 274 (671) (24,528) (24,925) ----------- ------------------ ------------- --------------- Income (loss) before income taxes from continuing operations 20,735 15,637 (52,808) (16,436) Income tax provision 2,073 4,433 (5,281) (P) 1,225 ------------ ------------------ ------------- --------------- Net income (loss) from continuing operations $ 18,662 $ 11,204 $ (47,527) $ (17,661) ------------ ------------------ ------------- --------------- Discontinued Operations: Estimated gain (loss) on disposal of discontinued operations (net of tax) $ 2,931 $ - $ - $ 2,931 ------------ ------------------ ------------- --------------- Net income (loss) $ 21,593 $ 11,204 $ (47,527) $ (14,730) ============ ================== ============= =============== Basic net income (loss) per share from continuing operations $ 0.83 $ (0.79) Basic net income (loss) per share from discontinued operations $ 0.13 $ 0.13 ------------ --------------- Basic net income (loss) per share $ 0.96 $ (0.66) ============ =============== Shares used in calculating basic net income (loss) per share 22,424 22,424 ============ =============== Diluted net income (loss) per share from continuing operations $ 0.82 $ (0.79) Diluted net income (loss) per share from discontinued operations $ 0.13 $ 0.13 ------------ --------------- Diluted net income (loss) per share $ 0.95 $ (0.66) ============ =============== Shares used in calculating diluted net income (loss) per share 22,852 22,424 ============ ===============

See accompanying notes to condensed consolidated financial statements. 35 TRIMBLE NAVIGATION LIMITED NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION Note 1 - Basis of Presentation On July 14, 200, the Closing Date, Trimble Navigation Limited, ("Trimble" or the "Company") completed the acquisition of the Spectra Precision wholly owned businesses formerly owned by Thermo Electron Corporation ("Thermo Electron"), collectively known as the "Spectra Precision Group" (see "Item 2. Acquisition") in a transaction accounted for as a purchase. The purchase consideration of the Spectra Precision Group acquisition is estimated to be approximately $294 million, which is subject to a final adjustment in the purchase price as provided for in the acquisition agreements. The Company also expects to incur and estimated $7 to $8 million of costs and expenses in connection with the acquisition. The total purchase price including cost and expenses is expected to be approximately $302 million. The preliminary allocation of the purchase price using balances at June 30, 2000 is summarized below (in thousands): Historical value of net assets acquired $ 55,680 Step up in Assets acquired 9,183 Distribution Channels 78,600 Existing Technology 25,200 Assembled Workforce 18,300 Trade Name/Trademarks 10,800 Goodwill 121,301 Restructuring charges accrued in opening Balance Sheet (9,450) Increase in Deferred tax liability for non-goodwill intangibles (7,858) ----------------- Total Purchase Price $ 301,756 ================= The preliminary purchase price allocation is based on the estimated fair values of the acquired assets and assumed liabilities and an independent appraisal of intangible assets and certain tangible assets. The Company expects to finalize the purchase price allocation within six months and does not anticipate material adjustments to the preliminary purchase price allocation presented. This preliminary allocation has resulted in acquired goodwill of approximately $121 million, which is being amortized on a straight-line basis over 20 years and other acquired intangible assets of $133 million which are being are being amortized over expected useful lives ranging from 5 to 10 years. Note 2 - Pro Forma Adjustments (A) Net cash used to acquire Spectra Precision Group and to pay transaction fees and expenses (includes sale of short-term investments to provide cash for purchase). (B) Reflects prepayment of an existing outstanding subordinated promissory note of $30 million in principal, $183,000 in accrued interest and $886,000 as a prepayment penalty. Prepayment of the subordinated promissory note was done in order to effect the acquisition of the Spectra Precision Group and as part of obtaining the New Credit Facilities. (Trimble immediately used approximately $170 million available under the New Credit Facilities to fund the acquisition of the Spectra Precision Group. $30 million was used to pay off the principal portion of Company's existing subordinated notes to John Hancock and $140 million was paid in cash to the seller. See note (C) below for discussion of $140 million.) 36 (C) Represents an increase in short-term and long-term debt as the result of financing of the transaction with $140 million of new secured bank debt and $80 million in a seller subordinated note. The following table represents break out between short-term and long-term (in thousands): Short Term Debt Senior secured revolving credit facility $ 40,000 Current Portion $100 million Senior secured term loan 8,000 -------------- Total short term-debt $ 48,000 -------------- Long Term Debt Long Term Portion $100 million Senior secured term loan $ 92,000 Seller Subordinated Debt 80,000 -------------- Total long term-debt $ 172,000 -------------- -------------- Total Debt as result of financing for acquistion $ 220,000 ============== (D) Debt related transaction fees and expenses, which have been recorded as prepaid financing costs and will be amortized over the terms of the debt financing. (E) Represents the net increase in inventory and value of fixed assets based on the preliminary independent appraisal. (F) Reflects goodwill resulting from the acquisition based on the preliminary purchase price allocation described in Note 1 as if the acquisition had occurred on June 30, 2000. (G) Reflects other intangible assets resulting from the acquisition based on the preliminary purchase price allocation described in Note 1 as if the acquisition had occurred on June 30, 2000. (H) Reflects an increase in accrued expenses for acquisition-related expenses such as legal, accounting, registration and miscellaneous fees incurred by Trimble. (I) Reflects an increase in accrued expenses for restructuring costs accrued on the opening balance sheet in accordance with EITF 95-3. (J) Reflects the elimination of Spectra Precision Group's equity. (K) Represents adjustment to deferred tax liability for non-goodwill intangibles in jurisdictions with a lower tax basis in assets and an adjustment to net deferred income taxes. (L) We have eliminated the intercompany sales and cost of sales on products that we have purchased from the Spectra Precision Group, because the net revenue from the sale of these products to our customers is already reflected in our historical net revenues and cost of sales. No intercompany inventory was on hand at June 30, 2000. (M) Represents amortization of goodwill, intangible assets and depreciation expense based on the preliminary allocation of the purchase price and other costs over their estimated useful lives as if the acquisition had occurred as of the beginning of the periods presented. The fair value for fixed assets represents the net increase in value of fixed assets based on a preliminary valuation. 37 (in thousands)

Pro Forma Pro Forma Expense Expense Estimated Remaining Six Months Twelve Months Fair Asset Ended Ended Value Life June 30, 2000 December 31, 1999 ----------------------------------------------------------------------- Identifiable Intangibles: Distribution Channels $ 78,600 7 $ 5,614 $ 11,229 Existing Technology 25,200 5 2,520 5,040 Assembled Workforce 18,300 10 915 1,830 Trade Name/Trademarks 10,800 7 771 1,543 ----------------- ----------------------------------------- Total Identifiable Intangibles 132,900 9,821 19,641 Goodwill 121,301 20 3,033 6,065 ----------------- ----------------------------------------- Total Intangible and goodwill 254,201 12,853 25,706 ----------------- ----------------------------------------- Fixed Asset Valuation Adjustment 4,995 2 1,249 2,498 ----------------------------------------- Total Proforma Expense $ 14,102 $ 28,204 =========================================

(N) Represents: (1) increase in interest expense resulting from interest on $140 million of new secured bank debt and $80 million of subordinated seller note: (dollars in thousands)

Pro Forma Pro Forma Expense Expense Six Months Twelve Months Principal Interest Ended Ended Amount Rate June 30, 2000 December 31, 1999 -------------------------------------------------------------------------- Seller subordinated note $ 80,000 10% $ 4,000 $ 8,000 Senior secured revolving credit facility 70,000 9.49% 3,303 6,643 Senior secured term loan 100,000 9.49% 4,719 9,490 ---------------------------------------- Total $ 12,022 $ 24,133

(2) decrease of prior interest expense recorded on terminated $50 million unsecured credit facility and prepayment of existing $30 million subordinated notes (in thousands) Termination of $50 million Unsecured Credit Facility $ (75) $ (150) Prepayment of existing $30 million Subordinated notes (1,621) (3,224) ----------------------------------- Total $ (1,696) $ (3,374) =================================== 38 (3) amortization on $4.8 million of debt financing costs, which are amortized over the life of the respective debt. (dollars in thousands)

Pro Forma Pro Forma Expense Expense Six Months Twelve Months Life of Ended Ended Amount the Debt June 30, 2000 December 31, 1999 -------------------------------------------------------------------------- Debt financing Cost $ 4,778 5 $ 478 $ 956

(O) To eliminate interest income which would not have been earned on the cash, cash equivalents, and short term investments expended for the transaction. (P) Income taxes in the Pro Forma Condensed Consolidated Statements of Operations have been adjusted to reflect the tax effect of the pro forma adjustments using an effective tax rate of 10%. 39 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized. TRIMBLE NAVIGATION LIMITED (Registrant) By: /s/ Mary Ellen Genovese ------------------------------------------------------------ Mary Ellen Genovese (Vice President Finance, Chief Financial Officer, and Corporate Controller) Dated: September 22, 2000 40