NOTES TO FINANCIAL STATEMENTS
DECEMBER 31,
2015 and 2014
NOTE 1 - THE PLAN AND ITS SIGNIFICANT ACCOUNTING POLICIES
General -
The following description of the Trimble Navigation Savings and Retirement Plan (the “Plan”) provides only general information. Participants should refer to the Plan document for a more complete description of the Plan's provisions.
The Plan is a defined contribution plan that was established in 1988 by Trimble Navigation Limited (the “Company”) to provide benefits to eligible employees. The Plan administrator believes that the Plan is currently designed to be qualified under the applicable requirements of the Internal Revenue Code, as amended, and the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended.
On July 8, 2011, the Company acquired Tekla Corporation (Tekla), headquartered in Espoo, Finland, and its subsidiaries. Tekla is a leading provider of BIM software and offers model driven solutions for customers in the infrastructure and energy industries (in particular energy distribution, public administration and civil engineering and utilities). On April 23, 2014, Tekla 401(k) Profit Sharing Plan and Trust merged into the Plan and approximately $1,563,000 of assets were transferred into the Plan, which excludes approximately $56,000 in loans from other terminated plans that were transferred into the Plan during 2014.
During
2015 and 2014
, the Company acquired several companies that sponsored 401(k) plans. Each of the plans sponsored by these companies were resolved to either be terminated or merged, with assets transferring into the Plan. Each of the employees hired by the Company became eligible to participate in the Plan and were allowed to rollover existing balances from their former plan to the Plan.
Administration -
The Company has appointed an Administrative Committee (the “Committee”) to manage the operation and administration of the Plan. The Company contracted with Fidelity Management Trust Company (“Fidelity”) to act as the custodian and trustee, and with an affiliate of Fidelity to act as the third-party administrator and record keeper. Substantially all expenses incurred for administering the Plan are paid by the Company.
Estimates -
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates.
Basis of accounting -
The financial statements of the Plan are prepared on the accrual method of accounting in accordance with accounting principles generally accepted in the United States of America.
Investment valuation and income recognition
-
The Plan’s investments are stated at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. See Note 2 for discussion of fair value measurements.
Investments of the Plan are held by Fidelity and invested primarily in mutual funds, a money market fund and the Company's common stock based solely upon instructions received from participants. The Plan’s investments in mutual funds, the money market fund and the Company's common stock are valued at fair value as of the last day of the Plan year, as measured by quoted market prices.
Purchases and sales of securities are recorded on a trade date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. Net depreciation includes the Plan’s gains and losses on investments bought or sold as well as held during the year.
Notes receivable from participants -
Notes receivable from participants are measured at their unpaid principal balance plus any accrued but unpaid interest. Delinquent notes receivable from participants are reclassified as distributions upon the occurrence of a distributable event based upon the terms of the Plan document.
Income taxes -
The Plan received a favorable determination letter dated April 8, 2015. The Plan administrator believes that the Plan is operated in accordance with, and qualifies under, the applicable requirements of the Internal Revenue Code, as amended, and related state statutes, and that the trust, which forms part of the Plan, is exempt from federal income and state franchise taxes.
Accounting principles generally accepted in the United States of America require plan management to evaluate tax positions taken by the plan and recognize a tax liability (or asset) if the plan has taken an uncertain position that more likely than not would not be sustained upon examination by the Internal Revenue Service. No uncertain positions have been identified that would require recognition of a liability (or asset) or disclosure in the financial statements as of December 31,
2015 and 2014
. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress.
Risks and uncertainties -
The Plan provides for various investment options in any combination of investment securities offered by the Plan. In addition, Company common stock is included in the Plan. Investment securities are exposed to various risks, such as interest rate, market fluctuations and credit risks. Due to the risk associated with certain investment securities, it is at least reasonably possible that changes in market values, interest rates or other factors in the near term would materially affect participants' account balances and the amounts reported in the statements of net assets available for benefits and the statements of changes in net assets available for benefits.
Recent accounting pronouncements -
In May 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2015-07, Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent) (ASU 2015-07). The ASU removes the requirement to include investments in the fair value hierarchy for which fair value is measured using the net asset value per share practical expedient under ASC 820. ASU 2015-07 is effective for the Plan retrospectively for the year ending December 31, 2016 with early adoption permitted. The Committee is currently evaluating the impact of the pending adoption of ASU 2015-07 on the Plan’s financial statements.
In July 2015, the FASB issued Accounting Standards Update No. 2015-12, Plan Accounting: Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962), Health and Welfare Benefit Plans (Topic 965): (Part I) Fully Benefit-Responsive Investment Contracts, (Part II) Plan Investment Disclosures, (Part III) Measurement Date Practical Expedient (ASU 2015-12). The ASU Part I designates contract value as the only required measure for fully benefit-responsive investment contracts. The ASU Part II simplifies the investment disclosure requirements under existing U.S. GAAP, including eliminating the disclosure of (1) individual investments that represent five percent or more of net assets available for benefits and (2) the net appreciation or depreciation for investments by general type. The ASU Part III does not apply to the Plan. The amendments in ASU 2015-12 applicable to the Plan are effective retrospectively for the year ending December 31, 2016 with early adoption permitted. The Committee is currently evaluating the impact of the pending adoption of ASU 2015-12 on the Plan’s financial statements.
NOTE 2 - FAIR VALUE DISCLOSURES
The fair value measurements standard clarifies the definition of fair value, establishes a framework for measuring fair value, and expands the disclosures for fair value measurements. The standard applies under other accounting pronouncements that require or permit fair value measurements and does not require any new fair value measurements.
The fair value measurements standard provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. In general, fair values determined by Level 1 inputs use quoted prices in active markets for identical assets or liabilities that the Plan has the ability to access. Fair values determined by Level 2 inputs use other inputs that are observable, either directly or indirectly. These Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs, including inputs that are available in situations where there is little, if any, market activity for the related asset or liability. In instances where inputs used to measure fair value fall into different levels of the fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation. The Plan’s assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset or liability.
Following are the major categories of assets measured at fair value on a recurring basis at December 31, 2015 and 2014:
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Investment Assets at Fair Value as of December 31, 2015
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Level 1
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Level 2
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Level 3
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Total
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Investments:
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Money market fund (1)
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$
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29,232,056
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$
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—
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|
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$
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—
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|
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$
|
29,232,056
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|
|
Employer securities (1)
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21,134,303
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—
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—
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21,134,303
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|
Common stocks (1)
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4,914,272
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—
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—
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4,914,272
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|
Mutual funds: (1)
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Bond funds
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20,856,684
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—
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—
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20,856,684
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Growth funds
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108,792,472
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—
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—
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108,792,472
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Value funds
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17,482,438
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—
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—
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17,482,438
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Blend funds
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98,521,591
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—
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—
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98,521,591
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Target date funds
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89,669,687
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—
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—
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89,669,687
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Other funds
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2,210,090
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—
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—
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2,210,090
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Total mutual funds
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337,532,962
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—
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—
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337,532,962
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Other (2)
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115,207
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217,548
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—
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332,755
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Total investments
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$
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392,928,800
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$
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217,548
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$
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—
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$
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393,146,348
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Investment Assets at Fair Value as of December 31, 2014
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Level 1
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Level 2
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Level 3
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Total
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Investments:
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Money market fund (1)
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$
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29,138,593
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$
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—
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$
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—
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$
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29,138,593
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Employer securities (1)
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25,186,034
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—
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—
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25,186,034
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Common stocks (1)
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3,919,922
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—
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—
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3,919,922
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Mutual funds: (1)
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Bond funds
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19,580,026
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—
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—
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|
19,580,026
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Growth funds
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105,528,607
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—
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—
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105,528,607
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Value funds
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20,204,882
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—
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—
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20,204,882
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Blend funds
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98,686,626
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—
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—
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98,686,626
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Target date funds
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76,218,482
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—
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—
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76,218,482
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Other funds
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1,401,700
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—
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—
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1,401,700
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Total mutual funds
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321,620,323
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—
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—
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321,620,323
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Other (2)
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89,246
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127,640
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—
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216,886
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Total investments
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$
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379,954,118
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$
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127,640
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$
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—
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$
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380,081,758
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(1) The fair values are determined using the closing price reported on the active market on which the individual securities are traded.
(2) The fair values are valued at the net asset value (NAV) of shares held by the Plan at year end.
NOTE 3 - RELATED PARTY AND PARTY IN INTEREST TRANSACTIONS
Certain Plan investments are managed by an affiliate of Fidelity, the trustee of the Plan. Any purchases and sales of these funds are performed in the open market at fair value. Such transactions, while considered party-in-interest transactions under ERISA regulations, are permitted under the provisions of the Plan and are specifically exempt from the prohibition of party-in-interest transactions under ERISA.
As allowed by the Plan, participants may elect to invest a portion of their accounts in the common stock of the Company. Aggregate investment in Company common stock at December 31,
2015 and 2014
was as follows:
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Date
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Number of shares
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Fair value
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Cost
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2015
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985,229
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$21,134,303
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$12,798,589
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2014
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948,940
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$25,186,034
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$11,584,981
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NOTE 4 - PARTICIPATION AND BENEFITS
Participant contributions
-
Participants may elect to have the Company contribute from 1% to 50% of their eligible pre-tax or Roth after-tax compensation up to the amount allowable under current income tax regulations. The Plan permits the automatic enrollment of eligible employees in the Plan with a contribution of 2% of eligible compensation, unless the employee affirmatively elects otherwise. Participants who have the Company contribute a portion of their compensation to the Plan agree to accept an equivalent reduction in taxable or taxed compensation. Contributions withheld are invested in accordance with the participant’s direction.
Participants are also allowed to make rollover contributions of amounts received from other tax-qualified employer-sponsored retirement plans. Such contributions are deposited in the appropriate investment funds in accordance with the participant’s direction and the Plan’s provisions.
Employer contributions -
The Company is allowed to make matching contributions as defined in the Plan and as approved by the Board of Directors. For
2015 and 2014
, the Company matched 50% of the participant’s contribution up to 5% of eligible compensation with a maximum of $2,500 per year. Effective April 1, 2016, the Company started to match 50% of the participant’s contribution up to 6% of eligible compensation, with a maximum of $750 per calendar quarter and $3,000 per calendar year. The Company also makes a non-elective employer contribution equal to 2% of base salary for non-highly compensated employees in specified job codes. Contributions for the years ended December 31,
2015 and 2014
were $7,409,313 and $6,766,332 respectively.
Vesting -
Participants are immediately vested in their entire account, including employer contributions. Employer contributions made for the non-elective contribution account is fully vested after the employee has completed three years of service or attained age 60, whichever occurs first.
Participant
accounts
-
Each participant's account is credited with the participant's contribution, Plan earnings or losses and an allocation of the Company's contributions. The allocation of the Company’s contributions is based on participant contributions and eligible compensation, as defined in the Plan.
Payment of benefits
-
Upon termination, each participant or beneficiary may elect to leave their account balance in the Plan, or receive their total benefits in a lump sum amount equal to the value of the participant's interest in their account. The Plan allows for automatic distribution of participant account balances that do not exceed $5,000.
Notes receivable from participants -
The Plan allows each participant to borrow not less than $1,000 and up to the lesser of $50,000 or 50% of their account balance. The notes receivable are secured by the participant's balance. Such notes receivable bear interest at the available market financing rates and must be repaid to the Plan within a five-year period, unless the notes receivable are used for the purchase of a principal residence in which case the maximum repayment period is ten years. The specific terms and conditions of such notes receivable are established by the Committee. Outstanding notes receivable at December 31, 2015 carry interest rates ranging from 3.25% to 9.5%.
NOTE 5
-
INVESTMENTS
The following table presents the fair values of investments and investment funds that include 5% or more of the Plan’s net assets at December 31:
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2015
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2014
|
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PIMCO Total Return Fund Institutional Class
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$
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20,856,684
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$
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19,580,026
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Fidelity Contrafund Class K
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50,384,027
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47,669,474
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Fidelity Balanced Fund Class K
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25,440,971
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26,364,074
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Fidelity Diversified International Fund Class K
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20,184,168
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*
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Fidelity Low Price Stock Fund Class K
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19,926,187
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20,621,180
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Fidelity Capital Appreciation Fund Class K
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22,216,478
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21,307,400
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Fidelity Institutional Money Market Fund
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27,234,040
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27,454,308
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Spartan 500 Index Fund
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22,122,185
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19,427,206
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Trimble Navigation Limited Common Stock
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21,134,303
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25,186,034
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* Less than 5% at year end
The Plan's investments, including gains and losses on investments bought and sold, as well as held during the year, appreciated (depreciated) in value as follows for the years ended December 31:
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2015
|
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2014
|
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Common stocks
|
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$
|
(4,904,515
|
)
|
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$
|
(7,555,645
|
)
|
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Mutual funds
|
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(20,334,275
|
)
|
|
2,900,761
|
|
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$
|
(25,238,790
|
)
|
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$
|
(4,654,884
|
)
|
NOTE 6 - PLAN TERMINATION OR MODIFICATION
The Company intends to continue the Plan indefinitely for the benefit of its employees; however, it reserves the right to terminate or modify the Plan at any time by resolution of its Board of Directors and subject to the provisions of ERISA.
NOTE 7 - SUBSEQUENT EVENT
On May 3, 2011, the Company acquired privately-held Ashtech S.A.S., headquartered in Carquefou, France, and its affiliates. Ashtech is a leading provider of precision GNSS products for positioning, guidance, navigation and timing, with a wide range of solutions for diverse applications in science, education, government, industry and commerce. On May 9, 2016, Ashtech 401(k) Profit Sharing Plan and Trust merged into the Plan and $3,268,505 of assets were transferred into the Plan.
During 2016, the Company acquired several companies that sponsored 401(k) plans. Each of the plans sponsored by these companies were resolved to be terminated. Each of the employees hired by the Company became eligible to participate in the Plan and were allowed to rollover existing balances from their former plan to the Plan.