[ x ]
|
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934 |
|
For the fiscal year ended December 31, 2009 | ||
or | ||
[ ]
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934 |
|
For the transition period from to |
Oregon | 91-1761992 | |
(State or other jurisdiction of
incorporation or organization) |
(I.R.S. Employer Identification No.) |
16760 SW Upper Boones Ferry Road, Suite 101 | 97224 | 503-601-4545 | ||
(Address of principal executive offices) | (Zip Code) |
(Registrants telephone number,
including area code) |
Title of each class
|
Name of each exchange on which
registered
|
|
Common Stock
|
NASDAQ Global Market |
Large accelerated filer
|
Accelerated filer |
Non-accelerated filer
(Do not check if a smaller reporting company) |
Smaller reporting company X |
i
Item 1. | Business. |
1
2
3
4
5
6
7
8
Item 1A. | Risk Factors. |
9
10
| problems combining the acquired operations, technologies or products; | |
| unanticipated costs; | |
| diversion of managements attention from existing operations; | |
| adverse effects on existing business relationships with customers; | |
| risks associated with entering markets in which we have no or limited prior experience; |
11
| potential loss of key employees, particularly those of the acquired organizations; and | |
| risks associated with implementing adequate internal control, management, financial and operating reporting systems. |
| issuance of stock that dilutes current shareholders percentage ownership; | |
| incurrence of debt; | |
| assumption of liabilities; | |
| amortization expenses related to acquired intangible assets; | |
| impairment of goodwill; | |
| large and immediate write-offs; and | |
| decreases in cash and marketable securities that could otherwise serve as working capital. |
12
| increased difficulties in managing international distributors and manufacturers due to varying time zones, languages and business customs; | |
| foreign currency exchange fluctuations in the currencies of Japan, the Peoples Republic of China (PRC), Taiwan or Korea; | |
| reduced or limited protection of our IP, particularly in software, which is more prone to design piracy; | |
| difficulties in collecting outstanding accounts receivable balances; | |
| potentially adverse tax consequences; | |
| difficulties regarding timing and availability of export and import licenses; | |
| political and economic instability, particularly in the PRC, Japan, Taiwan, or Korea; |
13
| difficulties in maintaining sales representatives outside of the U.S. that are knowledgeable about our industry and products; | |
| changes in the regulatory environment in the PRC, Japan, Taiwan and Korea that may significantly impact purchases of our products by our customers; | |
| outbreaks of health epidemics in the PRC or other parts of Asia; and | |
| increased transaction costs related to sales transactions conducted outside of the U.S., such as charges to secure letters of credit. |
14
15
16
| stop selling products using technology that contains the allegedly infringing IP; | |
| attempt to obtain a license to the relevant IP, which may not be available on reasonable terms or at all; | |
| attempt to redesign those products that contain the allegedly infringing IP; or | |
| pay damages for past infringement claims that are determined to be valid or which are arrived at in settlement of such litigation or threatened litigation. |
17
18
19
20
| actual or anticipated fluctuations in our operating results; | |
| changes in expectations as to our future financial performance; | |
| changes in financial estimates of securities analysts; | |
| announcements by us or our competitors of technological innovations, design wins, contracts, standards or acquisitions; | |
| the operating and stock price performance of other comparable companies; | |
| inconsistent trading volume levels of our common stock; and | |
| changes in market valuations of other technology companies. |
21
| our board of directors is authorized, without prior shareholder approval, to change the size of the board (our articles of incorporation provide that if the board is increased to eight or more members, the board will be divided into three classes serving staggered terms, which would make it more difficult for a group of shareholders to quickly change the composition of our board); | |
| our board of directors is authorized, without prior shareholder approval, to create and issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to acquire us or to effect a change of control, commonly referred to as blank check preferred stock; | |
| members of our board of directors can be removed only for cause and at a meeting of shareholders called expressly for that purpose, by the vote of 75 percent of the votes then entitled to be cast for the election of directors; | |
| our board of directors may alter our bylaws without obtaining shareholder approval; and shareholders are required to provide advance notice for nominations for election to the board of directors or for proposing matters to be acted upon at a shareholder meeting. |
Item 1B. | Unresolved Staff Comments. |
Item 2. | Properties. |
22
Total Square
|
Square Feet
|
Square Feet
|
Lease
|
Sublease
|
||||||||||||||
Location | Function(s) | Feet Leased | Utilized | Subleased | Expiration | Expiration | ||||||||||||
China
|
Engineering; sales; | 46,000 | 46,000 | | November 2011 | | ||||||||||||
customer support | ||||||||||||||||||
California
|
Administration; | 37,000 | 23,000 | 14,000 | June 2013 | May 2010 | ||||||||||||
engineering; sales | ||||||||||||||||||
Taiwan
|
Customer support; | 22,000 | 22,000 | | Various dates | | ||||||||||||
sales; operations |
through
November 2011 |
|||||||||||||||||
Oregon
|
Administration | 5,000 | 5,000 | | November 2013 | | ||||||||||||
Japan
|
Sales; customer | 4,000 | 4,000 | | January 2011 | | ||||||||||||
support | ||||||||||||||||||
Washington
|
None; fully | 10,000 | | 10,000 | October 2011 | Various dates | ||||||||||||
subleased |
through
October 2011 |
Item 3. | Legal Proceedings. |
Item 4. | (Removed and Reserved). |
23
73
74
Item 5.
Market
for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities.
Fiscal 2009
High
Low
$
4.09
$
2.15
4.06
1.25
1.97
0.56
0.84
0.37
Fiscal 2008
High
Low
$
1.45
$
0.55
1.90
1.08
2.95
1.53
2.64
1.50
24
Table of Contents
PIXELWORKS, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX AND
THE
NASDAQ ELECTRONICS COMPONENTS INDEX
25
Table of Contents
Item 6.
Selected
Financial Data.
Year Ended December 31,
2009
2008
2007
2006
2005
(In thousands, except per share data)
$
61,093
$
85,164
$
105,980
$
133,607
$
171,704
33,798
42,963
59,273
107,506
108,748
27,295
42,201
46,707
26,101
62,956
20,075
26,512
38,792
57,019
51,814
13,745
17,945
25,437
35,053
30,616
235
1,589
13,285
13,316
1,162
164
359
602
1,084
133,739
1,753
34,055
46,210
77,873
241,482
84,676
(6,760
)
(4,009
)
(31,166
)
(215,381
)
(21,720
)
12,338
11,979
2,483
10,254
1,532
5,578
7,970
(28,683
)
(205,127
)
(20,188
)
(877
)
(8
)
2,237
(949
)
22,422
$
6,455
$
7,978
$
(30,920
)
$
(204,178
)
$
(42,610
)
$
0.48
$
0.55
$
(1.92
)
$
(12.69
)
$
(2.70
)
$
0.47
$
0.55
$
(1.92
)
$
(12.69
)
$
(2.70
)
13,318
14,399
16,069
16,096
15,779
13,687
14,410
16,069
16,096
15,779
26
Table of Contents
December 31,
2009
2008
2007
2006
2005
(In thousands)
$
17,797
$
53,149
$
74,572
$
63,095
$
68,604
13,062
10,168
44,385
71,489
77,033
25,359
61,947
112,360
108,169
139,291
56,078
91,732
161,916
207,771
421,556
26,703
73,250
151,871
147,414
163,357
13,073
4,711
(8,027
)
21,948
215,217
Item 7.
Managements
Discussion and Analysis of Financial Condition and Results of
Operation.
27
Table of Contents
Year ended December 31,
2009 v. 2008
2008 v. 2007
%
%
2009
2008
2007
$ change
change
$ change
change
$
61,093
$
85,164
$
105,980
$
(24,071
)
(28
)%
$
(20,816
)
(20
)%
28
Table of Contents
Year ended December 31,
% of
% of
% of
2009
revenue
2008
revenue
2007
revenue
$
30,630
50
%
$
39,362
46
%
$
53,807
51
%
2,336
4
2,820
3
2,820
3
518
1
488
1
2,376
2
314
0
293
0
270
0
$
33,798
55
%
$
42,963
50
%
$
59,273
56
%
$
27,295
45
%
$
42,201
50
%
$
46,707
44
%
29
Table of Contents
Year ended December 31,
2009 v. 2008
2008 v. 2007
%
%
2009
2008
2007
$ change
change
$ change
change
$
20,075
$
26,512
$
38,792
$
(6,437
)
(24
)%
$
(12,280
)
(32
)%
Depreciation and amortization expense, software maintenance
expense and expensed equipment and software decreased
$2.7 million. This decrease resulted from fewer engineering
software tools due to changes in product development strategy as
well as decreased amortization from certain licensed technology
which became fully amortized during the first and second
quarters of 2009.
Compensation expense decreased $1.9 million as a result of:
a company-wide 10% salary reduction that was in effect during
the second and third quarters of 2009;
a reduced senior management bonus for 2009 compared to
2008; and
continuous improvement in our engineering practices to lower
costs and improve efficiency.
Stock-based compensation expense decreased $786,000 due to
personnel reductions and reduced valuation of our stock options.
Facilities and information technology expense allocations
decreased $748,000, primarily due to reductions in rent and
decreased depreciation of equipment and leasehold improvements.
30
Table of Contents
Depreciation and amortization expense, software maintenance
expense and expensed equipment and software decreased
$6.4 million. This decrease is primarily due to the
December 31, 2007 write-off of engineering software tools,
which we are no longer using due to reductions in research and
development personnel and changes in product development
strategy.
Compensation expense decreased $2.6 million. The decrease
in compensation expense in 2008 is primarily due to headcount
reductions that occurred in the second half of 2007.
Facilities and information technology expense allocations
decreased $1.7 million, primarily due to reductions in
headcount, outsourced IT support, lower rent and decreased
equipment depreciation.
Stock-based compensation expense decreased $1.1 million due
to personnel reductions and reduced valuation of our stock
options.
Travel and related expenses decreased $656,000.
Year ended December 31,
2009 v. 2008
2008 v. 2007
%
%
2009
2008
2007
$ change
change
$ change
change
$
13,745
$
17,945
$
25,437
$
(4,200
)
(23
)%
$
(7,492
)
(29
)%
Compensation expense decreased $1.6 million as a result of:
a company-wide 10% salary reduction that was in effect during
the second and third quarters of 2009;
a reduced senior management bonus for 2009 compared to
2008; and
headcount reductions during 2009.
Stock-based compensation expense decreased $658,000 due to
personnel reductions and reduced valuation of our stock options.
Facilities and information technology allocations decreased
$525,000, primarily due to reductions in headcount, outsourced
IT support, lower rent and decreased equipment depreciation.
Sales commissions decreased $520,000 primarily due to lower
sales volume.
31
Table of Contents
Compensation expense decreased $3.3 million. The decrease
in compensation expense in 2008 is primarily due to significant
headcount reductions that occurred in the second half of 2007,
partially off-set by headcount increases in the second half of
2008.
Stock-based compensation expense decreased $2.3 million due
to personnel reductions and reduced valuation of our stock
options.
Facilities and information technology allocations decreased
$689,000, primarily due to reductions in headcount, outsourced
IT support, lower rent and decreased equipment depreciation.
Travel and related expenses decreased $530,000.
Year ended December 31, 2009
Year ended December 31, 2008
Dec. 08
Nov. 06
Dec. 08
Nov. 06
Plan
Plan
Total
Plan
Plan
Total
$
118
$
$
118
$
666
$
506
$
1,172
160
160
508
508
$
118
$
160
$
278
$
666
$
1,014
$
1,680
$
43
$
$
43
$
91
$
$
91
75
160
235
575
1,014
1,589
1
Includes severance payments for terminated employees in 2009 and
2008 and retention payments for certain continuing employees in
2008.
2
Expenses related to the consolidation of leased space included
future non-cancelable rent payments due for vacated space (net
of estimated sublease income) and moving expenses.
32
Table of Contents
Nov. 06
Plan
$
5,420
3,905
1,693
1,524
827
88
$
13,457
$
172
13,285
1
Termination and retention benefits included severance and
retention payments for terminated employees and retention
payments for certain continuing employees.
2
We wrote off assets with a net book value of $6.9 million
as a result of our November 2006 restructuring plan. These
assets consisted primarily of engineering software tools which
we are no longer using due to the reductions in research and
development personnel and changes in product development
strategy. We also reversed accrued liabilities in the amount of
$3.0 million related to the write-off of the engineering
software tools.
3
We paid a contract termination fee of $1.7 million to
cancel a software license agreement prior to its expiration.
4
Expenses related to the consolidation of leased space included
future non-cancelable rent payments due for vacated space (net
of estimated sublease income) and moving expenses.
5
Non-cancelable contract payments consist of amounts that we were
obligated to pay, but for which we did not realize a benefit due
to the restructuring plans.
Year ended December 31,
2009
2008
2007
$
$
164
$
359
33
Table of Contents
Year ended December 31,
$ change
2009
2008
2007
2009 v. 2008
2008 v. 2007
$
12,860
$
19,670
$
$
(6,810
)
$
19,670
(7,890
)
7,890
(7,890
)
242
2,102
5,786
(1,860
)
(3,684
)
(640
)
(1,695
)
(2,642
)
1,055
947
(124
)
(426
)
(661
)
302
235
218
(218
)
218
$
12,338
$
11,979
$
2,483
$
359
$
9,496
1
In February 2009, we repurchased and retired $27.1 million
of our 1.75% convertible subordinated debentures for a net gain
of $9.0 million. In May 2009, we repurchased and retired
$17.8 million of the debentures for a net gain of
$3.8 million. In 2008, we repurchased and retired
$79.4 million of the debentures for a net gain of
$19.7 million.
2
In the first quarter of 2008, we recognized an
other-than-temporary
impairment of $6.5 million on an investment in a
publicly-traded equity security, due to the duration of time
that the investment had been below cost, as well as decreased
target price estimates, analyst downgrades and macroeconomic
factors. In the fourth quarter of 2008, we recognized a second
other-than-temporary
impairment of $1.4 million on the same investment, based on
the same factors considered in our March 31, 2008 analysis.
3
Interest income is earned on cash equivalents and short- and
long-term marketable securities. The sequential decreases during
the 2009 and 2008 periods are due to lower balances of
marketable securities, which resulted from our repurchases of
long-term debt and decreased yields on our invested funds.
4
Interest expense primarily relates to interest payable on our
long-term debt. The sequential decreases during the 2009 and
2008 periods are due to the reduced outstanding principal
balance which resulted from our repurchases of our long-term
debt.
5
The fees associated with the issuance of our long-term debt have
been capitalized and are being amortized over a period of seven
years. The remaining amortization period is 17 months as of
December 31, 2009. The sequential decreases during the 2009
and 2008 periods is due to the write-off of fees associated with
the portions of long-term debt repurchased in 2009 and 2008.
6
In the second quarter of 2008, we recognized a gain of $218,000
on the sale of a non-marketable equity security.
Year ended December 31,
2009
2008
2007
$
(877
)
$
(8
)
$
2,237
34
Table of Contents
First quarter revenue of $17.5 million to
$19.5 million.
Gross profit margin of approximately 44% to 49%.
Operating expenses of $9.0 million to $10.0 million.
A benefit for income tax of approximately $5.0 million to
$5.5 million.
December 31,
$ Change
2009
2008
2007
2009 v. 2008
2008 v. 2007
$
17,797
$
53,149
$
74,572
$
(35,352
)
$
(21,423
)
9,822
8,058
34,581
1,764
(26,523
)
3,240
2,110
9,804
1,130
(7,694
)
$
30,859
$
63,317
$
118,957
$
(32,458
)
$
(55,640
)
35
Table of Contents
36
Table of Contents
37
Table of Contents
38
Table of Contents
Payments Due By Period
Less than
More than 5
Contractual Obligation
Total
1 year
1-3 years
3-5 years
years
$
15,779
$
$
15,779
$
$
414
276
138
5,694
2,182
2,911
601
2,620
2,067
553
7,195
7,195
$
31,702
$
11,720
$
19,381
$
601
$
1
The earliest date on which the holders of our 1.75% convertible
subordinated debentures due 2024 have the right to require us to
purchase all or a portion of the outstanding debentures is
May 15, 2011. We expect holders of the debentures to
require us to purchase all of the outstanding debentures on that
date.
2
The operating lease payments above are net of sublease rental
income of $193,000 and $48,000 for the years ended
December 31, 2010 and 2011, respectively.
3
We are unable to reliably estimate the timing of future payments
related to uncertain tax positions; therefore, $9.5 million
of income taxes payable has been excluded from the table above.
Item 7A.
Quantitative
and Qualitative Disclosures about Market Risk.
39
Table of Contents
Item 8.
Financial
Statements and Supplementary Data.
41
42
43
44
45
46
40
Table of Contents
41
Table of Contents
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
42
Table of Contents
CONSOLIDATED STATEMENTS OF
OPERATIONS
(In thousands, except per share data)
Year Ended December 31,
2009
2008
2007
$
61,093
$
85,164
$
105,980
33,798
42,963
59,273
27,295
42,201
46,707
20,075
26,512
38,792
13,745
17,945
25,437
235
1,589
13,285
164
359
34,055
46,210
77,873
(6,760
)
(4,009
)
(31,166
)
12,860
19,670
242
2,102
5,786
(640
)
(1,695
)
(2,642
)
(124
)
(426
)
(661
)
(7,890
)
218
12,338
11,979
2,483
5,578
7,970
(28,683
)
(877
)
(8
)
2,237
$
6,455
$
7,978
$
(30,920
)
$
0.48
$
0.55
$
(1.92
)
$
0.47
$
0.55
$
(1.92
)
13,318
14,399
16,069
13,687
14,410
16,069
$
2,336
$
2,820
$
2,820
251
144
43
91
172
20
58
98
464
1,250
2,320
540
1,198
3,527
43
Table of Contents
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(In thousands)
Year Ended December 31,
2009
2008
2007
$
6,455
$
7,978
$
(30,920
)
(12,860
)
(19,670
)
7,890
4,607
6,700
13,999
2,336
2,984
3,179
1,024
2,506
5,945
124
426
661
68
291
512
24
(345
)
(583
)
4
180
210
14
3,905
55
55
55
530
74
3,092
(1,177
)
6,284
2,544
931
974
3,300
3,389
223
(4,101
)
(2,377
)
(1,454
)
(2,995
)
(1,147
)
(149
)
(130
)
1,986
14,961
(1,327
)
13,195
54,532
79,482
(15,110
)
(22,999
)
(52,885
)
(1,481
)
(2,158
)
(2,886
)
(102
)
2
20
26
(308
)
(3,496
)
29,395
23,434
(31,532
)
(58,554
)
(2,161
)
(4,646
)
(6,715
)
(167
)
(2,626
)
(4,269
)
18
47
354
(33,842
)
(65,779
)
(10,630
)
(35,352
)
(21,423
)
11,477
53,149
74,572
63,095
$
17,797
$
53,149
$
74,572
44
Table of Contents
CONSOLIDATED STATEMENTS OF
SHAREHOLDERS EQUITY (DEFICIT) AND COMPREHENSIVE INCOME
(LOSS)
(In thousands, except share data)
Accumulated
Total
Other
Shareholders
Common Stock
Exchangeable Shares
Comprehensive
Comprehensive
Accumulated
Equity
Shares
Amount
Shares
Amount
Income (Loss)
Income (loss)
Deficit
(Deficit)
16,204,514
$
331,567
15,878
$
450
$
(3,693
)
$
(306,376
)
$
21,948
149,376
354
354
(1,260,833
)
(4,269
)
(4,269
)
11,869
337
(11,869
)
(337
)
5,945
5,945
$
(30,920
)
(30,920
)
(30,920
)
(1,090
)
(1,090
)
(1,090
)
5
5
5
$
(32,005
)
15,104,926
333,934
4,009
113
(4,778
)
(337,296
)
(8,027
)
24,929
47
47
(1,625,737
)
(2,626
)
(2,626
)
4,009
113
(4,009
)
(113
)
2,506
2,506
$
7,978
7,978
7,978
4,810
4,810
4,810
50
50
50
(27
)
(27
)
(27
)
$
12,811
13,508,127
333,974
55
(329,318
)
4,711
123,530
18
18
(228,600
)
(167
)
(167
)
1,024
1,024
$
6,455
6,455
6,455
1,003
1,003
1,003
29
29
29
$
7,487
13,403,057
$
334,849
$
$
1,087
$
(322,863
)
$
13,073
45
Table of Contents
(In thousands, except share and per share data)
NOTE 2.
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
46
Table of Contents
Lesser of 3 years or contractual license term
2 years
2 years
Lesser of lease term or estimated useful life
47
Table of Contents
48
Table of Contents
December 31,
2009
2008
available-for-sale
and long-term marketable security
$
1,128
$
125
(48
)
(48
)
7
(22
)
$
1,087
$
55
49
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NOTE 3.
BALANCE
SHEET COMPONENTS
December 31,
2009
2008
$
6,047
$
6,691
(428
)
(542
)
$
5,619
$
6,149
50
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Year Ended December 31,
2009
2008
2007
$
542
$
542
$
200
(75
)
483
(39
)
(141
)
$
428
$
542
$
542
December 31,
2009
2008
$
2,888
$
4,617
5,410
5,358
8,298
9,975
(2,140
)
(4,994
)
$
6,158
$
4,981
Year Ended December 31,
2009
2008
2007
$
4,994
$
5,950
$
5,950
1,225
1,496
4,365
(707
)
(1,008
)
(1,989
)
518
488
2,376
(3,372
)
(1,444
)
(2,376
)
$
2,140
$
4,994
$
5,950
51
Table of Contents
December 31,
2009
2008
$
6,712
$
9,141
7,289
6,668
1,837
1,244
2,634
3,174
18,472
20,227
(13,351
)
(15,040
)
$
5,121
$
5,187
December 31,
2009
2008
$
19,170
$
19,170
(18,120
)
(15,784
)
$
1,050
$
3,386
52
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December 31,
2009
2008
$
2,279
$
3,749
2,068
1,116
853
728
304
593
257
236
190
940
55
100
2,507
1,957
$
8,513
$
9,419
Year Ended December 31,
2009
2008
2007
$
593
$
932
$
662
269
(203
)
1,418
(558
)
(136
)
(1,148
)
$
304
$
593
$
932
$
100
$
175
$
479
9
25
123
(54
)
(100
)
(427
)
$
55
$
100
$
175
December 31,
2009
2008
$
553
$
699
494
617
218
262
136
182
61
275
$
1,462
$
2,035
53
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54
Table of Contents
NOTE 4.
MARKETABLE
SECURTIES AND FAIR VALUE MEASUREMENTS
Unrealized
Fair
Cost
Gain (Loss)
Value
$
6,286
$
(3
)
$
6,283
2,996
2,996
542
1
543
$
9,824
$
(2
)
$
9,822
$
3,487
$
105
$
3,592
3,486
2
3,488
960
18
978
$
7,933
$
125
$
8,058
$
2,110
$
1,130
$
3,240
$
2,110
$
$
2,110
Level 2:
Valuations based on inputs other than quoted prices included
within Level 1 that are observable for the asset or
liability, either directly or indirectly.
Level 3:
Valuations based on unobservable inputs in which there is little
or no market data available, which require the reporting entity
to develop its own assumptions.
55
Table of Contents
Level 1
Level 2
Level 3
Total
$
17,073
$
$
$
17,073
9,822
9,822
3,240
3,240
$
20,313
$
9,822
$
$
30,135
$
34,213
$
$
$
34,213
8,058
8,058
2,110
2,110
$
36,323
$
8,058
$
$
44,381
NOTE 5.
EARNINGS
PER SHARE
56
Table of Contents
Year Ended December 31,
2009
2008
2007
$
6,455
$
7,978
$
(30,920
)
13,318
14,399
16,069
369
11
13,687
14,410
16,069
$
0.48
$
0.55
$
(1.92
)
$
0.47
$
0.55
$
(1.92
)
Year Ended December 31,
2009
2008
2007
1,500,767
1,793,187
1,962,893
356,309
1,191,026
1,916,259
NOTE 6.
RESTRUCTURINGS
Year Ended December 31,
2009
2008
2007
$
43
$
91
$
172
160
508
1,524
75
1,081
5,248
3,905
1,693
827
88
235
1,589
13,285
$
278
$
1,680
$
13,457
57
Table of Contents
Balance as of
Balance as of
December 31,
December 31,
2008
Expensed
Payments
2009
$
737
$
118
$
(855
)
$
465
160
(217
)
408
$
1,202
$
278
$
(1,072
)
$
408
Balance as of
Balance as of
December 31,
December 31,
2007
Expensed
Payments
2008
$
1,758
$
1,172
$
(2,193
)
$
737
999
508
(1,042
)
465
514
(514
)
$
3,271
$
1,680
$
(3,749
)
$
1,202
NOTE 7.
INCOME
TAXES
Year Ended December 31,
2009
2008
2007
$
4,376
$
6,141
$
(31,614
)
1,202
1,829
2,931
$
5,578
$
7,970
$
(28,683
)
58
Table of Contents
Year Ended December 31,
2009
2008
2007
$
55
$
55
$
55
20
142
6
(1,020
)
(496
)
1,664
(945
)
(299
)
1,725
68
291
512
68
291
512
$
(877
)
$
(8
)
$
2,237
Year Ended December 31,
2009
2008
2007
34%
35%
35%
(30)
(67)
(40)
(20)
(4)
26
4
2
1
3
1
(1)
(1)
1
(3)
(16)%
%
(8)%
59
Table of Contents
December 31,
2009
2008
$
65,666
$
73,861
12,471
12,951
8,717
9,073
2,873
2,983
2,705
3,372
2,304
2,613
1,103
2,651
213
338
2,208
2,256
98,260
110,098
(382
)
(1,225
)
(129
)
(3,983
)
(275
)
(230
)
(786
)
(5,438
)
(96,767
)
(104,090
)
$
707
$
570
60
Table of Contents
2009
2008
$
8,257
$
8,539
150
(49
)
159
91
(1,380
)
(324
)
$
7,186
$
8,257
$
2,324
$
2,096
391
463
(439
)
(235
)
$
2,276
$
2,324
61
Table of Contents
NOTE 8.
COMMITMENTS
AND CONTINGENCIES
$
2,182
1,839
1,072
601
$
5,694
62
Table of Contents
NOTE 9.
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION
Year Ended December 31,
2009
2008
2007
$
620
$
1,882
$
2,618
196
218
101
$
2,966
$
1,815
$
1,818
1,003
50
(1,090
)
140
NOTE 10.
SHAREHOLDERS
EQUITY
63
Table of Contents
Weighted
average
Number
exercise
of shares
price
1,954,696
$
14.66
1,139,959
1.40
(6,198
)
1.48
(112,656
)
6.27
(487,965
)
25.92
2,487,836
$
6.79
64
Table of Contents
Weighted
average
Weighted
remaining
Number of
average
contractual
Aggregate
shares
exercise price
term
intrinsic value
1,202,849
$
12.13
6.12
$
653,830
1,029,387
1.77
8.07
1,500,286
2,232,236
$
7.35
7.02
$
2,154,116
65
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Year Ended December 31,
2009
2008
2007
2.24
%
2.71
%
4.65
%
0
%
0
%
0
%
5.0
4.8
5.2
84
%
68
%
70
%
0.33
%
2.05
%
5.09
%
0
%
0
%
0
%
0.5
0.5
0.5
137
%
85
%
55
%
66
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NOTE 11.
SEGMENT
INFORMATION
Year Ended December 31,
2009
2008
2007
$
34,030
$
50,408
$
60,135
13,399
10,582
12,053
3,182
5,583
8,338
3,012
6,639
6,734
2,809
1,734
6,253
2,047
3,872
4,627
2,614
6,346
7,840
$
61,093
$
85,164
$
105,980
Year Ended December 31,
2009
2008
2007
51
%
53
%
57
%
35
%
32
%
33
%
56
%
55
%
47
%
21
%
24
%
21
%
11
%
9
%
6
%
(1)
End customers include customers who purchase directly from us,
as well as customers who purchase our products indirectly
through distributors.
December 31,
2009
2008
34
%
20
%
22
%
32
%
11
%
4
%
0
%
15
%
67
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NOTE 12.
QUARTERLY
FINANCIAL DATA (UNAUDITED)
Quarterly Period Ended
March 31
June 30
September 30
December 31
$
10,780
$
14,213
$
16,732
$
19,368
4,156
6,773
7,341
9,025
(4,530
)
(1,163
)
(644
)
(423
)
4,280
2,577
(734
)
(545
)
5,897
2,219
(890
)
(771
)
0.44
0.17
(0.07
)
(0.06
)
0.44
0.16
(0.07
)
(0.06
)
$
23,976
$
20,793
$
21,479
$
18,916
11,671
10,498
11,451
8,581
(835
)
(1,102
)
441
(2,513
)
4,496
(875
)
8,533
(4,184
)
6,133
(1,250
)
8,219
(5,124
)
0.41
(0.09
)
0.57
(0.37
)
0.41
(0.09
)
0.56
(0.37
)
68
Table of Contents
Item 9.
Changes
in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Item 9A.
Controls
and Procedures.
69
Table of Contents
70
Table of Contents
Item 9B.
Other
Information.
Item 10.
Directors,
Executive Officers and Corporate Governance.
Item 11.
Executive
Compensation.
Item 12.
Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.
Item 13.
Certain
Relationships and Related Transactions, and Director
Independence.
Item 14.
Principal
Accounting Fees and Services.
Item 15.
Exhibits,
Financial Statement Schedules.
71
Table of Contents
(a)
3. Exhibits.
Exhibit
Description
3
.1
Sixth Amended and Restated Articles of Incorporation of
Pixelworks, Inc., As Amended (incorporated by reference to
Exhibit 3.1 to the Companys Quarterly Report on
Form 10-Q
filed on August 9, 2004).
3
.2
Third Amendment to Sixth Amended and Restated Articles of
Incorporation of Pixelworks, Inc. (incorporated by reference to
Exhibit 3.1 to the Companys Quarterly Report on
Form 10-Q
filed on August 11, 2008).
3
.3
Second Amended and Restated Bylaws of Pixelworks, Inc.
4
.1
Reference is made to Exhibit 3.1 above (incorporated by
reference to Exhibit 4.1 to the Companys Registration
Statement on
Form S-1
declared effective May 19, 2000).
4
.2
Third Amended Registration Rights Agreement dated
February 22, 2000 (incorporated by reference to
Exhibit 4.2 to the Companys Registration Statement on
Form S-1
declared effective May 19, 2000).
4
.3
Indenture dated May 18, 2004 between Pixelworks, Inc. and
Wells Fargo Bank, National Association (incorporated by
reference to Exhibit 4.1 to the Companys Quarterly
Report on
Form 10-Q
filed on August 9, 2004).
4
.4
Form of 1.75% Convertible Subordinated Debentures due 2024
dated May 18, 2004 (incorporated by reference to
Exhibit 4.2 to the Companys Quarterly Report on
Form 10-Q
filed on August 9, 2004).
4
.5
Registration Rights Agreement, dated May 18, 2004 among
Pixelworks, Inc., Citigroup Global Markets Inc. and D.A.
Davidson & Co. (incorporated by reference to
Exhibit 4.3 to the Companys Quarterly Report on
Form 10-Q
filed on August 9, 2004).
4
.6
Purchase Agreement, dated May 12, 2004 among Pixelworks,
Inc. and Citigroup Global Markets Inc. (incorporated by
reference to Exhibit 4.4 to the Companys Quarterly
Report on
Form 10-Q
filed on August 9, 2004).
10
.1
Form of Indemnity Agreement between Pixelworks, Inc. and each of
its Officers and Directors (incorporated by reference to
Exhibit 10.1 to the Companys Registration Statement
on
Form S-1
declared effective May 19, 2000).+
10
.2
Pixelworks, Inc. 1997 Stock Incentive Plan, as amended
(incorporated by reference to Exhibit 99.1 to the
Companys Registration Statement on
Form S-8
filed on June 21, 2005).+
10
.3
Pixelworks, Inc. 2000 Employee Stock Purchase Plan, As Amended
(incorporated by reference to Exhibit 99.2 to the
Companys Registration Statement on
Form S-8
filed on March 23, 2005).+
10
.4
Pixelworks, Inc. 2001 Nonqualified Stock Option Plan
(incorporated by reference to Exhibit 99.1 to the
Companys Registration Statement on
Form S-8
filed on May 31, 2001).+
10
.5
Equator Technologies, Inc. 1996 Stock Option Plan, as amended
(incorporated by reference to Exhibit 99.1 to the
Companys Registration Statement on
Form S-8
filed on June 17, 2005).+
10
.6
Pixelworks, Inc. Amended and Restated 2006 Stock Incentive Plan
(incorporated by reference to Exhibit 10.1 to the
Companys Quarterly Report on
Form 10-Q
filed on August 6, 2009).+
10
.7
Pixelworks, Inc. Amended and Restated 2006 Stock Incentive Plan,
Terms and Conditions of Restricted Stock Awards (incorporated by
reference to Exhibit 10.3 to the Companys Quarterly
Report on
Form 10-Q
filed on May 7, 2009).+
10
.8
Pixelworks, Inc. Amended and Restated 2006 Stock Incentive Plan,
Terms and Conditions of Option Grants (incorporated by reference
to Exhibit 10.4 to the Companys Quarterly Report on
Form 10-Q
filed on May 7, 2009).+
10
.9
Summary of Pixelworks Non-Employee Director Compensation.+
10
.10
Chair and Board Service Agreement dated and effective
December 12, 2006, by and between Allen Alley and
Pixelworks, Inc. (incorporated by reference to Exhibit 10.9
to the Companys Annual Report on
Form 10-K
filed on March 12, 2007).+
72
Table of Contents
Exhibit
Description
10
.11
CEO Transition Agreement dated and effective December 12,
2006, by and between Allen Alley and Pixelworks, Inc.
(incorporated by reference to Exhibit 10.10 to the
Companys Annual Report on
Form 10-K
filed on March 12, 2007).+
10
.12
Executive Employment Agreement dated and effective
March 31, 2008, by and between Bruce Walicek and
Pixelworks, Inc (incorporated by reference to Exhibit 10.1
to the Companys Quarterly Report on
Form 10-Q
filed on May 8, 2008).+
10
.13
2009 Executive Employment Agreement dated May 11, 2009 and
effective April 1, 2009, by and between Bruce Walicek and
Pixelworks, Inc.+
10
.14
Pixelworks, Inc. 2008 Senior Management Bonus Plan (incorporated
by reference to Exhibit 10.1 to the Companys
Quarterly Report on
Form 10-Q
filed on August 11, 2008).+
10
.15
Form of Pixelworks, Inc. Senior Management Bonus Plan
(incorporated by reference to Exhibit 10.1 to the
Companys
Form 8-K
filed December 31, 2009).+
10
.16
Offer letter dated June 22, 2007 between Pixelworks, Inc.
and Steven L. Moore (incorporated by reference to
Exhibit 10.2 to the Companys Quarterly Report on
Form 10-Q
filed August 9, 2007).+
10
.17
Change of Control Severance Agreement dated November 20,
2008, by and between Pixelworks, Inc. and Steven L. Moore
(incorporated by reference to Exhibit 10.1 to the
Companys
Form 8-K
filed November 20, 2008).+
10
.18
Change of Control Severance Agreement dated May 11, 2009
and effective April 1, 2009, by and between Pixelworks,
Inc. and Steven L. Moore.+
10
.19
Change of Control Severance Agreement dated November 20,
2008, by and between Pixelworks, Inc. and Hongmin (Bob) Zhang
(incorporated by reference to Exhibit 10.2 to the
Companys
Form 8-K
filed November 20, 2008).+
10
.20
Separation Agreement dated and effective February 11, 2009,
by and between Anthony Simon and Pixelworks, Inc. (incorporated
by reference to Exhibit 10.1 to the Companys
Quarterly Report on
Form 10-Q
filed on May 7, 2009).+
10
.21
Change of Control Severance Agreement dated November 22,
2008, by and between Pixelworks, Inc. and Tzoyao (T) Chan.+
10
.22
Intellectual Property Sublicense Agreement dated March 30,
1999 between VAutomation Incorporated and Pixelworks, Inc.
(incorporated by reference to Exhibit 10.9 to the
Companys Registration Statement on
Form S-1
declared effective May 19, 2000).
10
.23
License Agreement dated February 22, 2000 between
Pixelworks, Inc. and InFocus Systems, Inc. (incorporated by
reference to Exhibit 10.10 to the Companys
Registration Statement on
Form S-1
declared effective May 19, 2000).
10
.24
Office Lease dated June 20, 2005 and commencing
March 1, 2006, by and between Pixelworks, Inc. and Union
Bank of California as Trustee for Quest Group Trust VI
(incorporated by reference to Exhibit 10.22 to the
Companys Annual Report on
Form 10-K
filed March 12, 2007).
10
.25
Office Lease dated October 2, 2007 and commencing
November 1, 2007 by and between Pixelworks, Inc. and Union
Bank of California as Trustee for Quest Group Trust VI
(incorporated by reference to Exhibit 10.19 to the
Companys Annual Report on
Form 10-K
filed March 12, 2008).
10
.26
Amendment to Office Lease dated October 2, 2007 and
commencing November 1, 2007 by and between Pixelworks, Inc.
and Union Bank of California as Trustee for Quest Group
Trust IV (incorporated by reference to Exhibit 10.2 to
the Companys Quarterly Report on
Form 10-Q
filed on November 7, 2008).
10
.27
Office Lease Agreement dated December 2005, by and between
CA-The Concourse Limited Partnership and Pixelworks, Inc.
(incorporated by reference to Exhibit 10.42 to the
Companys Annual Report on
Form 10-K
filed March 13, 2006).
Table of Contents
Exhibit
Description
10
.28
Office Lease dated April 12, 2001, by and between Equator
Technologies, Inc. and Pike Street Delaware, Inc. (incorporated
by reference to Exhibit 10.18 to the Companys
Quarterly Report on
Form 10-Q
filed August 9, 2005).
10
.29
Amendment No. 1 to Office Lease dated July 7, 2005, by
and between Equator Technologies, Inc. and 520 Pike Street, Inc.
(incorporated by reference to Exhibit 10.20 to the
Companys Quarterly Report on
Form 10-Q
filed November 7, 2005).
10
.30
Office Lease Agreement dated September 10, 2008 and
commencing December 1, 2008 by and between Pixelworks, Inc.
and Durham Plaza, LLC (incorporated by reference to
Exhibit 10.3 to the Companys Quarterly Report on
Form 10-Q
filed on November 7, 2008).
21
Subsidiaries of Pixelworks, Inc.
23
Consent of KPMG LLP.
31
.1
Certification of Chief Executive Officer.
31
.2
Certification of Chief Financial Officer.
32
.1*
Certification of Chief Executive Officer.
32
.2*
Certification of Chief Financial Officer.
+
Indicates a management contract or compensation arrangement.
*
Exhibits 32.1 and 32.2 are being furnished and shall not be
deemed to be filed for purposes of Section 18
of the Securities Exchange Act of 1934, as amended (the
Exchange Act), or otherwise subject to the liability
of that section, nor shall such exhibits be deemed to be
incorporated by reference in any registration statement or other
document filed under the Securities Act of 1933, as amended, or
the Exchange Act, except as otherwise stated in such filing.
Table of Contents
By:
Signature
Title
Date
President and
Chief Executive Officer
March 10, 2010
Vice President, Chief Financial
Officer, Secretary and Treasurer
March 10, 2010
Chairman of the Board
March 10, 2010
Director
March 10, 2010
Director
March 10, 2010
Director
March 10, 2010
Director
March 10, 2010
Director
March 10, 2010
Director
March 10, 2010
Board Member Retainer
|
$27,000 per year | |||
|
||||
Audit Committee Retainer
|
$8,000 per year, regular member
$16,000 per year, Chair |
|||
|
||||
Compensation Committee Retainer
|
$5,000 per year, regular member
$10,000 per year, Chair |
|||
|
||||
Nominating and Governance
Committee Retainer |
$3,000 per year, regular member
$6,000 per year, Chair |
Pixelworks, Inc.
|
Executive | |||||
|
||||||
By: /s/ Daniel Heneghan
|
/s/ Bruce Walicek
|
Executive: Bruce Walicek
For 2009: $276,250 annually, payable on standard
payroll schedules from April 1, 2009 on, to be
reviewed periodically by the Compensation Committee of
the Board of Directors.
To be established by the Compensation Committee.
Executives Termination-Base Salary and
Termination-Base Target Bonus are as follows:
Termination-Base Salary: The higher of actual, annual
base salary then in effect, or $325,000.
Termination-Base Target Bonus: The higher of
Executives actual bonus target for the then-current
year, or $325,000.
Executives awards of equity or equity based
compensation shall be as determined from time to time
by the Compensation Committee.
Executive
/s/ Bruce Walicek
Pixelworks, Inc.
|
Executive | |||||
|
||||||
By: /s/ Bruce Walicek
|
/s/ Steven Moore
|
Pixelworks, Inc.
|
Executive | |||||
|
||||||
By: /s/ Bruce Walicek
|
/s/ Tzoyao Chan
|
1. | I have reviewed this annual report on Form 10-K of Pixelworks, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
c. | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
d. | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: March 10, 2010 | By: | /s/ Bruce A. Walicek | ||
Bruce A. Walicek | ||||
President and
Chief Executive Officer |
1. | I have reviewed this annual report on Form 10-K of Pixelworks, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
c. | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
d. | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: March 10, 2010 | By: | /s/ Steven L. Moore | ||
Steven L. Moore | ||||
Vice President, Chief Financial Officer, Secretary and Treasurer |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | ||
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
By: | /s/ Bruce A. Walicek | |||
Bruce A. Walicek | ||||
President and Chief Executive Officer |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | ||
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
By: | /s/ Steven L. Moore | |||
Steven L. Moore | ||||
Vice President, Chief Financial Officer Secretary and Treasurer |