UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended: December 31, 2004
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 000-18908
INFOCUS CORPORATION
(Exact name of registrant as specified in its charter)
|
Oregon |
93-0932102 |
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(State or other
jurisdiction of |
(I.R.S. Employer |
|
27700B SW Parkway Avenue, Wilsonville, Oregon |
97070 |
|
(Address of principal executive offices) |
(Zip Code) |
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Registrant’s telephone number, including area code: 503-685-8888 |
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, without par value
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K, or any amendment to this Form 10-K. x
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).Yes x No o
The aggregate market value of the voting and non-voting common equity held by non-affiliates, computed by reference to the last sales price ($8.50) as reported by the Nasdaq National Market System, as of the last business day of the Registrant’s most recently completed second fiscal quarter (June 30, 2004), was $257,296,581.
The number of shares outstanding of the Registrant’s Common Stock as of February 15, 2005 was 39,645,787 shares.
Documents Incorporated by Reference
The Registrant has incorporated into Part III of Form 10-K, by reference, portions of its Proxy Statement for its 2005 Annual Meeting of Shareholders.
INFOCUS
CORPORATION
2004 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
1
Forward Looking Statements and Factors Affecting Our Business and Prospects
Some of the statements in this annual report on Form 10-K are forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995, or the PSLRA. Forward-looking statements in this Form 10-K are being made pursuant to the PSLRA and with the intention of obtaining the benefits of the “safe harbor” provisions of the PSLRA. Forward-looking statements are those that do not relate solely to historical fact. They include, but are not limited to, any statement that may predict, forecast, indicate or imply future results, performance, achievements or events. You can identify these statements by the use of words like “intend,” “plan,” “believe,” “anticipate,” “project,” “may,” “will,” “could,” “continue,” “expect” and variations of these words or comparable words or phrases of similar meaning. They may relate to, among other things:
· our ability to operate profitably;
· anticipated commencement of operations and initial product shipments by South Mountain Technologies, our newly formed joint venture with TCL Corporation;
· the supply of components, subassemblies, projectors, and display products;
· our financial risks;
· fluctuations in our revenues and results of operations;
· our ability to manage future growth; and
· our various expenses and expenditures, including marketing and sales expenses, research and development expenses, general and administrative expenses, and expenditures for property and equipment.
These forward-looking statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties, including, but not limited to, economic, competitive, governmental and technological factors outside of our control, which may cause actual results to differ materially from trends, plans or expectations set forth in the forward-looking statements. These risks and uncertainties may include, but are not limited to, those discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operation” in Item 7, under the heading “Factors that Could Affect Future Results.”
Where You Can Find More Information
We file annual reports, quarterly reports, current reports, proxy statements and other information with the Securities and Exchange Commission (“SEC”) under the Securities Exchange Act of 1934 as amended (“Exchange Act”). You can inspect and copy our reports, proxy statements and other information filed with the SEC at the offices of the SEC’s Public Reference Room in Washington, D.C. Please call the SEC at 1-800-SEC-0330 for further information on the Public Reference Room. The SEC maintains an Internet site at http://www.sec.gov/ where you can obtain most of our SEC filings. We also make available, free of charge on our website at www.infocus.com, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after they are filed electronically with the SEC. The information found on our website is not part of this Form 10-K. You can also obtain copies of these reports by contacting our investor relations department at (503) 685-8609.
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InFocus Corporation is the worldwide leader in digital projection technology and services based on market share. Our products include projectors, thin displays and related accessories and solutions for business, education, government and home users. Beginning in 2005, we organized our operations into three lines of business to better align our resources to take advantage of the opportunities and minimize the challenges presented by each business line and ensure that we are growing each line of business profitably as we move into the future. The three lines of business are Projectors, Displays and Complementary Products, Solutions and Integration. In addition, we have formed a team to focus on growing our royalty revenue stream through licensing of our intellectual property. All other functions in the company including sales, corporate marketing, operations, service and our administrative functions support each line of business. According to Stanford Resources, the worldwide market for front projectors is expected to steadily grow from $7.8 billion in 2004 to $9.1 billion in 2007, representing a compound annual growth rate of 6%. In addition, the worldwide markets for commercial displays and rear projection televisions greater than 40 inches in diagonal are estimated by Stanford Resources to grow much faster from $8.4 billion in 2004 to $13.8 billion in 2007, representing a compound annual growth rate of 18%.
Projectors Line of Business
We are a pioneer in the digital projection industry with the #1 most recognized brand in the U.S. projector industry, according to TFCinfo. We also had a 12% worldwide market share in 2004 for all projectors, according to Pacific Media Associates. Our projectors deliver big picture experiences for business, education, government and home users in a variety of settings including training sessions, meetings, sales presentations, technical seminars, group collaboration, entertainment and other applications involving the sharing of computer-generated and/or video information with an audience.
We have established four product platforms for our projectors, each supporting multiple individual products, intended to meet the diverse projection requirements of our customers. These platforms are:
· mobile projectors, intended for mobile professionals who place a premium on reduced size and weight;
· meeting room projectors, intended for conference or training room environments;
· installation and integration projectors, intended for large venues and auditorium environments; and
· home entertainment projectors, intended for home cinema, home theater and gaming and entertainment experiences in the home.
We leverage our technological expertise and experience to deliver products that include true multimedia capabilities, can be integrated with other technologies and have a number of user friendly features to improve ease of use for our end customers. Users can connect to a variety of sources including digital and analog PCs, DVD players, HDTVs, S-video, VCRs, workstations, laser disc players and gaming devices.
We conduct and support research and development to expand the category, deliver new projection technologies and communicate the value of projection to professionals, educators and consumers. We leverage multiple projection technologies, including polysilicon LCD and Digital Light Processing™ (DLP) technology from Texas Instruments and develop proprietary imaging technology that we have licensed to a number of other vendors.
Displays Line of Business
We entered the displays business in 2003 by initially providing light engines for large standard depth rear screen projection televisions to certain television manufacturers, most notably Thomson RCA. By
3
leveraging our investments in front projection technology and existing DLP technology, in 2004 we released the InFocus Light Engine, which integrates our proprietary, patent-pending engine and screen technology with a micro-display device currently using Texas Instruments’ DLP™ technology. The InFocus Light Engine enables a new breed of ultra-thin micro displays above 50 inches in diagonal, combining the high quality image of a DLP rear projection television with an ultra-thin form factor that can be wall mounted, much like plasma and LCD displays, and provides a competitive price performance alternative in the market.
We began shipping our sub 7-inch thin ultra-thin microdisplay televisions and commercial displays based on the InFocus Light Engine late in the third quarter of 2004. In addition, Thomson RCA and Clarity Visual Systems are using the InFocus Light Engine in their product offerings on a co-branded OEM basis.
We also currently offer 30- and 40- inch diagonal thin displays for the commercial market leveraging direct view LCD technology provided by a third party in order to complete our portfolio of products for thin displays. Our value added channel partners have indicated that a complete lineup of different size and capability thin displays is an important ingredient for them securing business in this new and emerging market.
South Mountain Technologies-A 50/50 Joint Venture with TCL
On December 14, 2004, we and TCL Corporation (TCL), through wholly-owned subsidiaries, entered into a Shareholders Agreement to create a 50-50 owned joint venture named South Mountain Technologies (SMT). SMT was formed with the goal of integrating the low cost, high quality manufacturing capabilities of TCL with the innovative digital projection design leadership of InFocus. SMT’s business plan is to manufacture and sell projection engines on an OEM basis for rear projection televisions, commercial digital signage screens and front projectors to the parent companies and other brand operators in both China and the broader global market place. TCL is a leading multimedia consumer electronics manufacturing company in China, and through its majority-owned joint venture with Thomson, TCL Thomson Electronics (TTE), is now the largest manufacturer of televisions in the world. TTE has been a customer of ours, buying our standard and ultra-thin microdisplay rear projection light engines. TTE has also been the contract manufacturer for our ultra-thin microdisplay television, the ScreenPlay 61. Moving forward, TTE is expected to purchase rear projection light engines from SMT.
Each joint venture partner will contribute management personnel and an equal number of board members to manage and govern SMT. Each of the parties has also committed to invest $10 million in cash in the joint venture, for a total of $20 million in cash, to be contributed over the course of 2005 as agreed upon milestones are achieved. We are working to obtain all the necessary approvals to begin full operations in China, and at this time, believe these approvals will be secured in order to begin production during the second quarter of 2005. We expect to benefit from the joint venture through lower material costs on products procured from SMT, opening up the market for InFocus products in China and receiving royalties on the sale of products by SMT to third parties, including TCL. We will record 50% of the SMT operating results as a component of other income (expense) in our statement of operations on a quarterly basis. We expect SMT will have start-up losses from operations through mid 2006 before turning to profitability. Additional capital contributions by the parent companies beyond their initial $10 million commitments may be required to either fund start-up losses or provide future working capital as SMT grows its business. See Note 10 of Notes to Consolidated Financial Statements for additional details regarding SMT.
Structurally, SMT will consist of an offshore parent holding company with three wholly owned subsidiaries; a manufacturing, research and development center in Shenzhen, China and research and
4
development centers in Wilsonville, Oregon and Fredrikstad, Norway. Shenzhen will be the headquarters for the joint venture.
In addition, we have agreed to license a significant portion of our projection patent portfolio on a nonexclusive basis to SMT to allow shorter time to market and access to our innovative technology. In exchange, SMT will pay us a royalty for products sold to third parties that incorporate our patented technology.
Working together with TCL to make SMT a success is a key initiative for the Projectors and Displays lines of business. SMT is expected to allow both lines of business to realize a number of benefits including:
· Driving down material costs by supplying both parents and third parties with high volume products;
· Leveraging a low cost structure and supply base in China enabling a competitive business model that lowers our future product costs;
· Opening up the Chinese market for InFocus products and expanding duty free revenue growth potential in Asia;
· Creating a royalty revenue stream to InFocus on sale of product to third parties by SMT, including TCL, as a result of licensing SMT our intellectual property;
· Expanding the range and reach of our research and development capability by adding a research facility in China to go along with SMT research facilities in Norway and the U.S.;
· Royalty free access to future technology developments from SMT;
· Recording 50% of SMT operating results as a component of other income (expense) in our statement of operations on a quarterly basis; and
· Reducing our reported operating expenses by approximately $4 million in 2005 compared to 2004 as a result of the transfer of personnel and support infrastructure to SMT.
Complementary Products, Solutions and Integration Line of Business
Our projection and displays lines of business are in the center of the digital convergence allowing people to experience and see large images. One of our greatest assets is the InFocus brand which was again recently voted as the #1 recognized brand of projectors in the industry by end users in the independent 2005 U.S Projector Brand Study conducted by TFCinfo. We created our complementary products, solutions, and integration line of business to extend our brand proposition into complementary strategic markets and create incremental profitable revenue opportunities going forward. This line of business is tasked with implementing new innovative digital visual and audio immersion experience solutions for our customers by leveraging our technology portfolio, including our wireless and networking solutions for projectors. We expect to announce new product offerings over the course of 2005 from this line of business.
Licensing our Intellectual Property
We currently have royalty arrangements with Texas Instruments, which uses a portion of our technology in their DDP2000 DMD, with BenQ for various projection related technologies, and with SMT allowing them to leverage our extensive patent portfolio to speed time to market. In early 2005, we formed a team to pursue further intellectual property licensing opportunities, with a goal of generating a growing royalty revenue stream from these activities over the coming years.
In addition to our projection intellectual property, we also generate licensing profits from Motif, our 50/50 joint venture with Motorola. Motif has executed numerous licenses for its active addressing
5
technology, with additional licenses under negotiation. Motif results are not consolidated with InFocus, but we report our share of the net income of Motif as a component of other income.
Sales and Customer Service
We have devoted significant resources to developing and supporting a well-trained reseller network with the ability to demonstrate and sell our products to a wide range of end-users worldwide. We sell our InFocus and ASK Proxima brand products through wholesale distributors, which in turn sell to PC resellers, audiovisual resellers, online providers, catalogs, education resellers and government resellers. In addition, we have developed an extensive network of retailers including office products retailers, consumer electronics retailers, club stores, specialty retailers and home shopping networks. During 2004, we achieved over 30% market share in the U.S. for this emerging channel for our product category and we expect this channel of distribution to grow in importance in the future. In addition, we also offer our products for sale through our InFocus web store in the U.S., United Kingdom and Australia. We expect to open additional web direct stores in other geographies over the course of 2005. Finally, we also have a few private label OEM arrangements with companies that resell our projectors under their own brands.
Our customer service organization supports customers through a call center and an Internet based support program. We also provide outsourced factory repair, authorized service center repair, accessories, service parts, remanufactured projectors, service contracts, and technical publications for our customers and end-users.
Our products are compatible with all major personal computers and video sources used in business, education and home entertainment. Two key characteristics of our products are resolution and video performance. Resolution is defined by using standard industry terms SVGA, XGA, SXGA, SXGA+ and UXGA, which are terms that define the number of pixels in a display. An SVGA display has 480,000 pixels (800X600), an XGA has 786,432 pixels (1,024X768), an SXGA has 1,310,720 pixels (1,280X1,024), an SXGA+ has 1,470,000 pixels (1,400X1,050) and a UXGA has 1,920,000 pixels (1,600X1,200). Video resolution in home entertainment projectors is defined as either 480p (854X480), 576p (1024X576), 720p (1280X720) or 1080p (1,920X1080). We utilize the latest in video electronics to improve the video performance over normal projection devices.
Our current product offering is as follows:
Mobile Projectors:
InFocus LP®120 and ASK Proxima M1 are digital mobile projectors weighing 1.98 lbs (.9kg) with 1,000 lumens, 2000:1 contrast ratio, native XGA resolution, a zoom lens, a user defined keypad, an interactive LDC display, data/video connectivity standard and DLP technology.
InFocus LP®70+ and ASK Proxima M2+ are digital mobile projectors weighing 2.4lbs (1.1kg) with 1,500 lumens, 1100:1 contrast ratio, native XGA resolution, a zoom lens, data/video connectivity standard and DLP technology.
Meeting Room Projectors:
InFocus X2 and ASK Proxima C110 have 1,600 lumens, SVGA resolution, weigh 6.8lbs (3.1kg), and have analog connectivity, Faroudja Video and DLP technology.
InFocus X1a has 1,100 lumens, SVGA resolution, weighs 6.8lbs (3.1kg), and has analog connectivity, Faroudja Video and DLP technology.
6
InFocus LP®540 and ASK Proxima C160 have 1,700 lumens, XGA resolution, weigh 7.5lbs (3.4kg), have analog and digital connectivity, a user-defined keypad, an interactive LCD display, automatic vertical keystone correction, with .79” polysilicon LCDs.
InFocus LP®600 and ASK Proxima C170 have 2,000 lumens, native XGA resolution, weigh 5.2lbs (2.4kg), have analog and digital connectivity, PC free playback through a standard USB flash drive using our exclusive LitePort functionality, a user-defined keypad, an interactive LCD display, and DLP technology.
InFocus LP®640 and ASK Proxima C180 have 2,200 lumens, XGA resolution, weigh 7.5lbs (3.4kg), have analog and digital connectivity, a user-defined keypad, an interactive LCD display, automatic vertical keystone correction, with .79” MLA polysilicon LCDs.
Installation and Integration Projectors:
InFocus LP®815 and ASK Proxima C410 are .99” LCD-based projectors offering installation quality and meeting room flexibility. These products have 2,800 lumens and significant flexibility for a sub-15 pound projector.
InFocus LP®820 and ASK Proxima C420 are .99” LCD-based projectors offering installation quality and meeting room flexibility. These products have 3,200 lumens and significant flexibility for a sub-15 pound projector.
InFocus LP®840 and ASK Proxima C440 are .99” LCD-based projectors designed for larger venues. These products have 3,500 lumens and significant flexibility for a sub-20 pound projector. With interchangeable, user-replaceable lenses, motorized lens shift and full connectivity, they can be adapted to almost any application.
InFocus LP®850 and ASK Proxima C450 are .99” LCD-based projectors designed for larger venues. These products have 4,500 lumens and significant flexibility for a sub-20 pound projector. With interchangeable, user-replaceable lenses, motorized lens shift and full connectivity, they can be adapted to almost any application.
Home Entertainment Projectors:
InFocus ScreenPlay 4805 has 750 video optimized lumens, native 480p 16:9 video resolution, a 2000:1 contrast ratio, comes calibrated to D65 color mastering standards, weighs 7.8lbs (3.6 kg) and have analog and digital (DVI) connectivity with High Bandwidth Digital Content Protection (HDCP), Faroudja video processing and DLP technology.
InFocus ScreenPlay 5000 has 1,100 video optimized lumens, native 720p 16:9 video resolution, a 1200:1 contrast ratio, weighs 7.5lbs (3.4 kg) and have analog and digital (DVI) connectivity with HDCP, Genesis video processing, and .7” Dream4 polysilicon LCDs
InFocus ScreenPlay 5700 has 1,000 video optimized lumens, native 576p 16:9 video resolution, a 1400:1 contrast ratio, comes calibrated to D65 color mastering standards, weigh 9.5lbs (4.3kg), has analog and digital (DVI) connectivity with HDCP, Faroudja video processing and DLP technology.
InFocus ScreenPlay 7205 has 1,100 video optimized lumens, a 2200:1 contrast ratio, true High Definition 720p video resolution, comes calibrated to D65 color mastering standards, weighs 9.5 lbs (4.3 kg), has analog and digital (DVI) connectivity including HDCP, Faroudja video processing and DLP technology.
InFocus ScreenPlay 7210 has 1,100 video optimized lumens, a 2800:1 contrast ratio, true High Definition 720p video resolution using DarkChip3 DLP technology, comes calibrated to D65 color
7
mastering standards, weighs 9.5 lbs (4.3 kg), has analog and digital (DVI) connectivity including HDCP, and Faroudja video processing.
InFocus ScreenPlay 777 has a 3-chip DLP system delivering native High Definition 720p video resolution, comes calibrated to D65 color mastering standards, weighs 44 lbs (20.2 kg), has analog and digital (DVI) connectivity including HDCP, and Faroudja video processing.
Projection Solutions:
ProjectorNet is a client/server based software application designed to allow IT and facilities personnel to manage multiple projectors from a single PC. Utilizing a standard Microsoft® MMC snap-in, ProjectorNet gives organizations the power to manage projectors over the network, just as they would other shared computing and communication assets such as PCs and printers.
LiteShow® offers users wireless freedom through cable free digital projection. LiteShow® is Wi-Fi 802.11b compliant and uses industry leading 128-bit data encryption to ensure security. LiteShow® is also platform independent and works with all InFocus, ASK, Proxima and ASK Proxima projectors with a standard M1-DA connector.
LitePort® allows users to use their projector without being connected to a computer by converting digital images to Liteport® viewable media on a standard USB flash drive. By simply plugging your USB flash drive into the Liteport® slot in your projector, you are ready to present your converted materials PC free. This new capability is currently only available on the InFocus LP®600 and ASK Proxima C170 projectors.
Light Engines for Rear Projection Products:
IROC2 has 720p resolution (1280x720) and a 16:9 aspect ratio. It is designed for use in 50”+ diagonal rear projection televisions.
InFocus Light Engine enables a new category of large area (>50” in diagonal) ultra-thin rear projection microdisplays that are thin and light enough to hang on a wall. This product integrates proprietary, patent-pending engine and screen technology with a micro display device currently using DLP technology. It also has 720p video resolution and a 16:9 aspect ratio.
Commercial Thin Display Products:
The TD30 is a 30” diagonal thin display product that is four inches thin, built with active matrix LCD technology, and offers a 50,000 hour backlight life. The TD30 can be connected to a wide variety of data sources including DVD’s, computers, and live television feeds through its five video connections and two data connections.
The TD40 is a 40” diagonal thin display product that is under five inches thin, weighs 62 lbs., and is built with active matrix LCD technology. The TD40 can be connected to a wide variety of data sources and offers picture in picture and dual image data display.
The TD61 is a 61” diagonal commercial thin display product incorporating the InFocus Light Engine. The TD61 is under 7 inches thin, weighs 100 lbs, and offers 500 nits of brightness. The TD61 can be connected to a wide variety of data sources, is wireless ready and has zero burn in.
Consumer Thin Display Products:
The InFocus ScreenPlay61md10 micro display television incorporates the InFocus Light Engine and delivers a 16:9 format, native high definition image in a form factor under 7 inches thin and weighing 135 lbs. With a contrast ratio of 1000:1, a 160 degree viewing angle, multiple connectivity options, zero burn in,
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and a robust sound system, the InFocus ScreenPlay 61md10 is designed to hang on the wall competing with large diagonal plasma and LCD televisions.
The InFocus ScreenPlay 50md10 micro display television incorporates the InFocus Light Engine in a form factor under 7 inches thin and weighing 121 lbs. The InFocus ScreenPlay 50md10 offers the same full set of features as its sister product, the InFocus ScreenPlay 61md10.
Product and Technology Development
We continue to invest in research and development primarily for development of new projection products, display products and complementary products and solutions such as our networking and wireless initiatives. We plan to continue to invest in research and development to enable continued innovation in our product and solution offerings.
We expended $28.9 million, $33.2 million and $37.8 million on research and development activities for the years ended December 31, 2004, 2003 and 2002, respectively.
Marketing, Distribution and Geographic Sales
As our industry has grown and matured, our marketing and distribution strategy has evolved so that we can reach end-user customers with our products when and where they want to buy them. This strategy has resulted in offering products under two different brands, creating a differentiated product line for the home and developing private label OEM arrangements. We offer these products through multiple distribution channels.
In addition to our main InFocus brand, we have created a global reseller brand, ASK Proxima, to allow qualified value added dealers to create a unique value proposition, bundling our products with their other product and service offerings. The InFocus ScreenPlay product line, the designator of our video enhanced home entertainment products, has become widely recognized in the home theater industry and with specialty audio/video retailers. Lastly, we have private label OEM arrangements with a few companies that resell our projectors under their own brand.
We sell our products through multiple distribution channels, including direct resellers, and indirect resellers that procure product from our distributor customers. Over the years, we have devoted significant resources to develop and support a well-trained reseller network with the ability to demonstrate and sell our products to a wide range of end-users worldwide. In the U.S., we offer our products through authorized professional audiovisual dealers and direct resellers. We also sell our products through wholesale distributors, which in turn sell to PC resellers, online providers, catalogs and government resellers. We also sell our products directly to office products retailers, consumer electronics retailers, club stores, specialty retailers, and home shopping networks.
In addition, we sell our products and services directly to large multinational organizations via our Strategic Accounts Program. Strategic Accounts customers work with our teams to identify their presentation technology needs company-wide, then consolidate their purchase and support requirements across geographic boundaries. Sales of projectors and services are fulfilled either directly by us or through one of our local authorized business partners.
We see a growing opportunity in offering end-users the option of purchasing products directly from us over the Internet. Customers can now purchase most of our products and accessories directly from our online store in the U.S., United Kingdom, and Australia if they desire.
Outside the U.S., we sell our products to distributors and dealers worldwide. These distributors sell our products to audiovisual dealers, PC resellers and, in some cases, directly to end-users. Sales
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subsidiaries, located in Singapore, China, Norway, Germany, Sweden, Switzerland, France and The Netherlands work with international distributors and local direct dealers to sell and support our products.
Geographic revenues as a percentage of total revenues were as follows:
|
|
|
2004 |
|
2003 |
|
2002 |
|
|
United States |
|
56.8 |
% |
53.1 |
% |
54.1 |
% |
|
Europe |
|
29.4 |
|
29.4 |
|
29.6 |
|
|
Asia |
|
8.8 |
|
13.1 |
|
11.1 |
|
|
Other |
|
5.0 |
|
4.4 |
|
5.2 |
|
|
|
|
100.0 |
% |
100.0 |
% |
100.0 |
% |
Long-lived assets by geographic region are as follows (in thousands):
|
December 31, |
|
|
|
2004 |
|
2003 |
|
||
|
United States |
|
$ |
22,137 |
|
$ |
15,335 |
|
||
|
Europe |
|
2,692 |
|
3,281 |
|
||||
|
Asia |
|
100 |
|
752 |
|
||||
|
|
|
$ |
24,929 |
|
$ |
19,368 |
|
||
Given the buying patterns of various geographies and market segments, our revenues are subject to certain elements of seasonality during various portions of the year. Historically, approximately 30% of our revenues have come from Europe and, as such, we typically experience a seasonal downturn due to the vacation season in mid-summer, which results in our revenues from that region, and overall, to be down in the third quarter compared to the second quarter. Conversely, we typically experience a strong resurgence of revenue from Europe in the fourth quarter. This, coupled with a strong business and retail holiday buying season in the fourth quarter by larger wholesale distribution partners and retailers, typically leads to our strongest revenues being in the fourth quarter of each year. In addition, we sell our products into the education and government markets that in the United States typically see seasonal peaks in the third quarter of each year. The first quarter of each year is typically down from the immediately preceding fourth quarter due to corporate buying trends and typical aggressive competition from our Japanese competitors with March 31 fiscal year ends.
Some distributor and dealer agreements allow for limited partial return of products and/or price protection. Such return rights are generally limited to a contractually defined short-term stock rotation and defective or damaged product, although we have granted retailers return policies consistent with the retailers’ return policies for their customers. We also have incentive programs for dealers and distributors whereby rebates are offered based upon exceeding a percentage of quarterly and annual volume goals.
Our global service and solutions include: call center and Internet customer support, factory repair, authorized service center repair, accessories, service parts, remanufactured projectors, warranty extension contracts, service contracts, service-related training, service engineering and technical publications (including Service Guides, Technical Bulletins and User Guides). Design and consulting support is available for our authorized product integration resellers.
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Our service organization has facilities in Wilsonville, Oregon, Amsterdam and Singapore. Factory repair is performed in partnership with UPS Supply Chain Solutions (United States), DEXE (Ireland) and PCS (Asia Pacific).
In addition, personnel in approximately 160 Authorized Service Centers worldwide are trained by us to provide warranty, product repair, technical support, and training to their resellers and end-user customers.
Customers have access via telephone and email in the United States, Europe and Asia or the worldwide web to technical specialists who answer application and hardware questions. All current products are covered by a warranty for parts and labor with varying terms depending on the product and geography. Extended service agreements are available for purchase. Examples of enhanced service programs offered for purchase include product loaner programs to support end users while products are being repaired.
The principal components of our projector and display products are display devices, including various types of LCDs and DMDs, integrated circuits, light sources, optics, lenses, plastic housing parts and electronic sub-assemblies. We qualify certain parts manufactured to our specifications and also design and deliver certain electronic components for sub-assembly. The DMD imaging engines are produced in class 10,000 clean room environments, requiring the design, specification and handling of precision optics. The manufacture of finished projectors includes precise alignment of optical elements and 100% image quality testing.
Our projector contract manufacturers, Flextronics in Malaysia and Funai Electric Company in China, currently manufacture the majority of our projectors. Flextronics and Funai are directly sourcing most of the components with their suppliers. Thomson RCA is currently doing final assembly of our ultra-thin microdisplay televisions and Clarity Visual Systems is currently doing final assembly of our ultra-thin commercial microdisplay products. We are currently in the process of transitioning manufacturing of rear screen projection television engines, including the InFocus Light Engine, to SMT.
We sell our products to a large number of customers worldwide. Ingram Micro accounted for 13.3%, 12.4% and 14.5% of our total revenues in the years ended December 31, 2004, 2003 and 2002, respectively. Ingram Micro also accounted for 12.1%, 10.4% and 13.4% of our accounts receivable balance at December 31, 2004, 2003 and 2002, respectively. No other customer accounted for 10% or more of our total revenues in 2004, 2003, or 2002.
We had backlog of approximately $25.4 million at December 31, 2004, compared to approximately $33.0 million at December 31, 2003. Given current supply and demand estimates, it is anticipated that a majority of the current backlog will turn over by the end of the first quarter of 2005. The stated backlog is not necessarily indicative of sales for any future period nor is a backlog any assurance that we will realize a profit from filling the orders.
Our ability to compete depends on factors within and outside our control, including the success and timing of product introductions, product performance and price, product distribution, and customer
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support. We believe that our leadership in developing technologies and our focused effort on development activities give us a competitive advantage.
Our Projectors line of business faces competition for our projectors from 30 to 40 manufacturers, twelve of which, including us, make up approximately 80% of the products sold in the industry. We expect continued competition as new technologies, applications and products are introduced. Our principal current competitors include Epson, Sony, NEC, Sanyo, BenQ, Dell, HP, Coretronic, Panasonic, Hitachi and Toshiba.
Our Displays line of business faces competition from a number of companies in both the consumer and commercial flat panel display markets. Prior to the introduction of our new ultra-thin microdisplay technology, this industry had two major technologies, active matrix LCD and plasma. The competitors in the consumer display market include Samsung, Sony, Sharp and Philips. The competitors in the commercial display market include Panasonic, Pioneer and NEC.
Patents, Trademarks and Licenses
We have been issued more than 145 United States patents and numerous corresponding foreign patents covering various aspects of our display systems. In addition, numerous applications for United States patents are pending o