ITEM 1. BUSINESS

Overview

We develop, manufacture and sell proprietary biological testing technologies and products with applications throughout the diagnostics and life sciences industries.  These industries depend on a broad range of tests, called bioassays, to perform diagnostic tests and conduct life science research.

Our xMAP® (Multi-Analyte Profiling) technology, an open architecture, multiplexing technology, allows simultaneous analysis of up to 500 bioassays from a small sample volume, typically a single drop of fluid, by reading biological tests on the surface of microscopic polystyrene beads called microspheres. xMAP technology combines this miniaturized liquid array bioassay capability with small lasers, light emitting diodes (LEDs), digital signal processors, photo detectors, charge-coupled device imaging and proprietary software to create a system offering advantages in speed, precision, flexibility and cost. Our xMAP technology is currently being used within various segments of the life sciences industry, which includes the fields of drug discovery and development, and for clinical diagnostics, genetic analysis, bio-defense, food safety and biomedical research.  In addition to our xMAP technology, we have our proprietary MultiCode® technology, used for real-time polymerase chain reaction (PCR) and multiplexed PCR assays. During the fourth quarter of 2014, in conjunction with the appointment of our new CEO, Luminex evaluated its historical reporting segments: the technology and strategic partnerships (TSP) segment and the assays and related products (ARP) segment. As a result of this evaluation and based upon how our new Chief Executive Officer as Chief Operating Decision Maker (CODM) and our management team collectively is managing our business, we determined that the two former segments have become so integrated and interrelated that they no longer provide an accurate representation of our current business when reported separately. Additionally, we have taken actions to consolidate sales and service functions. Therefore, effective with the fourth quarter of 2014, we no longer have two operating segments and, accordingly, will present our business as one operating segment and one reporting unit. Accordingly, prior periods' information has been restated to conform to the current periods' presentation. Our products are described below under “Products.”

Our primary focus for growth is the development and sale of molecular diagnostic assays utilizing xMAP®, xTAG® and MultiCode technology on our installed base of systems. We utilize a direct sales model for sales of these products, which is intended to take advantage of our increasing installed base of xMAP-based instrumentation.  Our assays are primarily focused on multiplexed applications for the human molecular clinical diagnostics market. Our assay products are currently focused on three segments of the molecular diagnostic testing market: human genetics, personalized medicine and infectious disease. We have established our position in the marketplace through our global regulatory compliant product development and manufacturing processes,

We have established a position in several segments of the life sciences industry by developing and delivering products that meet customer needs in specific market segments, including multiplexing, accuracy, precision, sensitivity, specificity, reduction of labor and ability to test for proteins and nucleic acids. These needs are addressed by our proprietary technology, which allows the end user in a laboratory to perform biological testing in a multiplexed format. Multiplexing allows for many different laboratory results to be generated from one sample at one time. This is important because our end user customers and partners, which include laboratory professionals performing research and clinical laboratories performing tests on patients as ordered by a physician and other laboratories, have a fundamental need to perform high quality testing as efficiently as possible. Until the availability of multiplexing technology such as xMAP, the laboratory professional had to perform one test per sample in a sequential manner, and if additional testing was required on a sample, a second procedure would be performed to generate the second result, and so on until all the necessary tests were performed. We have a full range of instruments in our xMAP line: our LX200 system offers 100-plex testing; our FLEXMAP 3D® system is our high-throughput, 500-plex testing system; and our MAGPIX® system provides 50-plex testing at a lower cost using imaging rather than flow cytometry. By using xMAP technology, the end users have the opportunity to become more efficient by generating multiple simultaneous results per sample. We believe that this technology may also offer advantages in other industries, such as in food safety/animal health, newborn screening and bio-defense/bio-threat markets. Using the products Luminex has available today, up to 500 simultaneous analyte results can be generated from a single sample.

A significant portion of our revenue is derived from our partnership channel. We license our xMAP technology to our partners, who then develop products that incorporate the xMAP technology into products that they sell to end users. We also develop and manufacture the proprietary xMAP laboratory instrumentation and the proprietary xMAP microspheres and sell these products to our partners. When our partners sell xMAP-based reagent consumable products or xMAP-based testing services, which run on the xMAP instrumentation, to end users, such as testing laboratories, we obtain a royalty on the sales from the partner. As of December 31, 2014 , we had 66 strategic partners, 46 of which have developed reagent-based products utilizing our technology. Luminex and these partners have sold approximately 11,700 xMAP-based instruments in laboratories worldwide as of December 31, 2014 .

Luminex was incorporated under the laws of the State of Texas in May 1995 and reincorporated in the State of Delaware in February 2000.  

Recent Events

CEO Transition

Our Board of Directors named Nachum "Homi" Shamir as President and CEO effective October 15, 2014. In addition, he was also elected to our Board of Directors. Patrick J. Balthrop, Sr. retired as President and CEO following ten years of service as our chief executive and also resigned as a director. Mr. Balthrop continues to serve the Company and its shareholders as a consultant to the Board and Mr. Shamir, and will be assisting in the transition through April 14, 2015.

Segment Reporting

During the fourth quarter of 2014, in conjunction with the appointment of our new CEO, Luminex evaluated its historical reporting segments: the TSP segment and the ARP segment. As a result of this evaluation and based upon how our new Chief Executive Officer as Chief Operating Decision Maker (“CODM”) and our management team collectively is managing our business, we determined that the two former segments have become so integrated and interrelated that they no longer provide an accurate representation of our current business when reported separately. Additionally, we have taken actions to consolidate sales and service functions. Effective with the fourth quarter of 2014, we no longer have two operating segments and, accordingly, will present our business as one operating segment and one reporting unit. Accordingly, prior periods' information has been restated to conform to the current periods' presentation.

Available Information

Our shares of common stock are traded on the Nasdaq Global Select Market under the symbol “LMNX.”  Our principal executive offices are located at 12212 Technology Blvd., Austin, Texas 78727, and our telephone number is (512) 219-8020.   Our website address is www.luminexcorp.com . Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, are available free of charge through our website as soon as reasonably practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission, or the SEC.  Information contained or accessible on our website is not incorporated by reference into this report and such information should not be considered to be part of this report except as expressly incorporated herein.  The public may read and copy these materials at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549 or on the SEC’s website at www.sec.gov U.   The SEC’s website contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.  Questions regarding the public reference room may be directed to the SEC at 1-800-732-0330.

Industry Background

The life sciences industry uses bioassays to detect the presence and characteristics of certain biochemicals, proteins or nucleic acids in a sample. Drug discovery, genetic analysis, pharmacogenomics, clinical diagnostics and general biomedical research all use bioassays. For example, bioassays can be used to:

The life sciences customer can purchase bioassays in the form of complete off-the-shelf kits, develop them from scratch or utilize a customized service to meet their specific needs.

The table below briefly describes the key bioassay technologies in the life sciences industry:

 

Our xMAP Technology

Our xMAP technology combines existing biological testing techniques with illumination, advanced digital signal processing, detection and proprietary software. With our technology, discrete bioassays are performed on the surface of color-coded microspheres. These microspheres are read in a compact analyzer that utilizes lasers or LEDs, detectors, charge-coupled device imaging and high-speed digital signal processing to simultaneously identify the bioassay and measure the individual assay results. The key features of xMAP technology include the following:

xMAP technology has been designed to simultaneously perform up to 500 distinct bioassays in a single tube or well of a microtiter plate using only a small amount of sample. Moreover, unlike most existing technologies that are dedicated to only one type of bioassay, xMAP can perform multiple types of assays including enzymatic, genetic and immunologic tests on the same instrumentation platform.

xMAP technology allows flexibility in customizing test panels. Panels can be modified to include new bioassays in the same tube by adding additional microsphere sets. It is also scalable, meaning that there is no change in the manufacturing process and only minimal changes to the required labor to produce a small or large number of microsphere-based tests.

xMAP technology has an advantage due to its ability to analyze both proteins and nucleic acids.  This allows customers to utilize a single platform to evaluate samples across more biological parameters and generate a more complete assessment of these samples.  Alternative technologies are typically restricted to either proteins or nucleic acid, requiring customers to use two or more technologies from other vendors to get the same information.

Our technology can perform up to 500 tests in a single well permitting up to 96,000 unattended tests to be detected in approximately one hour with only a small amount of sample.  Rapid sample analysis permits efficient use for high-throughput applications.

Most xMAP-based bioassays are simple to perform. A test sample is added to a solution containing microspheres that have been coated with reagents. The solution is then processed through our xMAP technology system which incorporates proprietary software to automate data acquisition and analysis in real-time.

By performing multiple assays at one time, xMAP technology is designed to be cost effective for customers compared to competitive techniques such as ELISA or real-time PCR. By analyzing only those assays in which a customer is interested, xMAP is also more cost effective than most competing microarray technologies. In addition, microsphere-based bioassays are inexpensive compared to other technologies, such as biochips.

Two types of microspheres, polystyrene microspheres and polystyrene magnetic microspheres, are both fundamental components of the xMAP technology. We purchase and manufacture microspheres and, in a proprietary process, dye them with varying intensities of proprietary dyes to achieve up to 500 distinct colors. The specific dye proportions permit each color-coded microsphere to be readily identified based on its distinctive fluorescent signature. Our customers create bioassays by attaching different biochemical reactants to each distinctly colored microsphere set. These unique reactants bind, or capture, specific substances present in the test sample.  The microsphere sets can then be combined in test panels as required by the user, with a maximum of 500 tests per panel.  Customers can order either standard microspheres or magnetic microspheres.

To perform a bioassay using xMAP technology on our flow cytometry platforms, a researcher attaches biochemicals, or reagents, to one or more sets of color-coded microspheres, which are then mixed with a test sample. This mixture is injected into the xMAP analyzer such as the Luminex 200 instrument, or LX200, where the microspheres pass single-file in a fluid stream through two laser beams. The first laser excites the internal dyes that are used to identify the color of the microsphere and the test being performed on the surface of the microsphere. The second laser excites a fluorescent dye captured on the surface of the microspheres that is used to quantify the result of the bioassay taking place. Our proprietary optics, digital signal processors and software record the fluorescent signature of each microsphere and compare the results to the known identity of that color-coded microsphere set. The results are analyzed and displayed in real-time with data stored on the computer database for reference, evaluation and analysis.

We have a full range of instruments in our xMAP line. Our LX200 system offers 100-plex testing. Our FLEXMAP 3D® system is our high-throughput, 500-plex testing system and our MAGPIX® system provides 50-plex testing at a lower cost using imaging rather than flow cytometry.

Our xTAG and MultiCode Technologies

Our xTAG technology consists of several components including multiplexed PCR or target identification primers, DNA Tags, xMAP microspheres and data analysis software.  xTAG technology permits the development of molecular diagnostic assays for clinical use by hospital and reference laboratories.  xTAG technology has been applied, in particular, to human genetic assays, pharmacogenetic assays and infectious disease assays.

Our MultiCode technology is based upon a unique assay chemistry that is a flexible platform for both real-time PCR and multiplex PCR-based applications. We have multiple molecular diagnostic assays based on the MultiCode platform. Our MultiCode technology is powered by a base pair (man-made nucleotide pair isoC:isoG in addition to the A:T and G:C nucleotide pairs found in nature) that does not exist in nature, but can be combined with natural base pairs, and incorporated into a wide range of molecular diagnostic applications. The MultiCode base pair is recognized by naturally occurring enzymes and can be used for the specific placement of reporter molecules and to increase the molecular recognition capabilities of hybridization-based assays. The MultiCode base pair enables solutions to complex molecular challenges that were previously not possible with natural nucleic acid alone.

 

We have multiple assay development activities ongoing and these activities are focused in the areas of infectious disease, human genetics, pharmacogenetics and bio-threat.  In 2015, we have plans to submit certain assay products to regulatory authorities, including the U.S. Food and Drug Administration (FDA) and foreign equivalents, for clearance in order to comply with established guidelines across the jurisdictions in which we participate.

Business Strategy

Our Company’s current focus is the transition from a technology-based tools company to a market-based diagnostic company and the establishment of Luminex as an industry leader and our xMAP and MultiCode technologies as the industry standards for performing molecular diagnostic bioassays. To achieve these objectives, we have implemented and are pursuing the following strategies:

We have identified the following key market segments: (i) molecular infectious disease, (ii) genetic or inherited disease, (iii) human leukocyte antigen (HLA) transplant diagnostics, (iv) pharmacogenetic testing, (v) immunodiagnostics, (vi) life sciences research, and (vii) bio-defense, or bio-threat testing. We will continue to employ a combination of both a partnership-driven business model and a product-driven business model focused on selected market segments and bioassay applications.

Our acquisitions and research and development have expanded the breadth of technology and solutions we offer our customers to meet their needs. We acquired the MultiCode RTx real-time PCR technology for both quantitative and qualitative low-plex real-time assays and GenturaDx and its IDbox sample-to-answer platform, which is compatible with our MultiCode RTx technology, to provide our customers with molecular assays that are easy to implement. A key focus currently is the final development of our ARIES® system. The ARIES sample-to-answer instrument, when combined with our proprietary real-time PCR chemistry and a new menu of highly automated assays that we are developing, is designed to enable us to offer a differentiated, easy to use solution. ARIES is designed to help labs overcome today's challenges: seeking to avoid healthcare cost increases while maintaining quality, the scarcity of highly trained personnel and limited lab bench space with its barcode data entry, efficient workflow, importance of slim design that occupies minimal bench space, universal protocols that enable true walkaway automation, and ability to simplify laboratory developed tests (LDTs).

 

We are focusing resources on improving the simplicity and ease of use of our multiplex products through the development of a new version of our multiplex PCR technology. This new NxTAG™ chemistry is expected to enable customers to experience streamlined workflow without sacrificing throughput. We recognize that the crucial aspect of our current technology that we want to preserve for our larger customers is the ability to process anywhere from 1 to 96 patients in a single batch. This throughput flexibility and capacity is a crucial aspect for tests like our xTAG Respiratory Viral Panel (RVP), in which seasonality and local outbreaks can cause testing volumes to surge unpredictably. We intend to offer the convenience of a one-step workflow with the throughput of a batch-based system. In addition, products using this new chemistry are expected to have the convenience of room temperature shipping and storage. We intend to release our NxTAG Respiratory Pathogen Panel (RPP) product in 2015. Additionally, we continue pursuing projects such as the development of consumables, automation, software and the expansion and enhancement of our multiplexing capabilities to advance our technologies and market acceptance.

We have developed a full range of multiplexing instruments and consumables to cover a broad range of customer applications and budgets.  We have developed, and continue to improve, the xTAG multiplex PCR chemistry for our proprietary multiplex assays in areas such as human genetic testing, personalized medicine testing and infectious disease testing.  All of these technology solutions provide our customers with a breadth of innovative solutions to meet their many testing needs.

 

In addition, we are collaborating with industry participants, biomedical research institutions and government entities to develop additional products. We continuously consider other adjacent markets where our platform and assay offerings would be beneficial.

We utilize analytical tools and an evaluation template to assess potential acquisition targets to accelerate our business strategies in the key markets described above. This approach led to several successful acquisitions historically, including the most recent acquisition of GenturaDx in 2012, which is the foundation of our new ARIES platform in development. We actively evaluate opportunities to enhance our capabilities or our access to targeted markets or technologies, or provide us other advantages in executing our business strategies in our key markets.

 

As of December 31, 2014 , 46 of our 66 strategic partners have developed and commercialized xMAP based assay products and are submitting royalties.  We also have strategic partners who distribute Luminex products.  During 2014 , the 46 strategic partners who have commercialized xMAP based assay products accounted for approximately 66% of our total revenue and all of our strategic partners represented approximately 71% of our total revenue. We intend to continue pursuing opportunities to expand market acceptance of xMAP technology through development, marketing and distribution partnerships with leading companies in the life sciences markets. By leveraging our strategic partners’ market positions and utilizing their distribution channels and marketing infrastructure, we believe we can continue to expand our installed instrument base.  Furthermore, our partners’ investments in research and development for xMAP applications provide Luminex xMAP customers with more assay product options than any one company or Luminex could develop and commercialize individually.

We will continue to focus our commercialization efforts through our strategic partners covering large sectors of the life science research market where Luminex believes it has competitive advantages over alternative technologies and approaches. We define strategic partners as those companies in the life sciences markets that develop and distribute assays and tests on xMAP technology or may only distribute our xMAP technology based systems and consumables.  With our partners’ support and through our direct commercial efforts in the molecular diagnostics clinical laboratory segment, we have targeted major pharmaceutical companies, large clinical laboratories, research institutions and major medical institutions for our principal marketing efforts. We believe these customers provide the greatest opportunity for maximizing the use of xMAP based products and continued adoption by these industry leaders will promote wider market acceptance of our xMAP technology.

 

Products

Instruments

Luminex® LX 100/200™ (LX Systems). The LX Systems are compact analyzers that integrate fluidics, optics and digital signal processing to perform up to 100 bioassays simultaneously in a single tube or well of a microtiter plate using only a small amount of sample. By combining semiconductor lasers with digital signal processors and microcontrollers, these systems perform rapid, multi-analyte profiles under the control of a Windows®-based personal computer and our proprietary software.

FLEXMAP 3D® .  The FLEXMAP 3D system is intended for use as a general laboratory instrument in markets, including but not limited to, life science research and diagnostics. This device can simultaneously measure up to 500 analytes from a single sample and offers increased speed and enhanced ease-of-use and serviceability.   Like our LX Systems, the FLEXMAP 3D system combines semiconductor lasers with digital signal processors and microcontrollers and these systems perform rapid, multi-analyte profiles under the control of a Windows®-based personal computer and our proprietary software.

 

MAGPIX®. The MAGPIX system is a versatile multiplexing analyzer capable of performing qualitative and quantitative analysis of proteins and nucleic acids in a variety of sample matrices.  This system can perform up to 50 tests in a single reaction volume, reducing sample input, reagents and labor while improving productivity.  MAGPIX is based on an innovative detection mechanism that uses LEDs and a charge-coupled device ( CCD) imaging system, rather than the lasers and detection mechanisms used in our flow cytometry-based instruments.

Consumables

MicroPlex® Microspheres. Our xMAP systems use polystyrene microspheres that are approximately 5.6 microns in diameter. We dye the microspheres in sets with varying intensities of a red and a near infrared dye to achieve up to 100 distinct color sets. Each microsphere can carry the reagents of an enzymatic, genetic or immunologic bioassay.

MagPlex® Microspheres.   These microspheres feature super-paramagnetic properties that make them ideal for running automated xMAP-based assays.  We dye the microspheres in sets with varying intensities of a red and a near infrared dye to achieve up to 500 distinct color sets.  These microspheres can be moved or held in place by a magnetic field. Many automated systems utilize magnetic properties to automate the performance of the assay. Automating sample testing using MagPlex microspheres on a robotic sample preparation system decreases hands-on technician time, improves precision, and streamlines workflow.

xTAG® Microspheres. These dyed microspheres are linked to a set of 100 proprietary nucleic acid capture sequences providing a “universal array” for DNA and RNA work.  They are designed for conducting genotyping and other nucleic acid-based experiments in the life sciences markets. When used in conjunction with our Luminex systems, the xTAG microspheres are designed to simplify the genotyping assay development process and increase assay flexibility. The xTAG microspheres may be used in customized end user identified single nucleotide polymorphisms or in pre-defined kits developed by our strategic partners.

SeroMAP™ Microspheres.   These 100 distinct sets of microspheres are designed for specific protein based serological applications.  Certain Luminex partners use this product for enhanced sensitivity in serum-based assays.

Calibration and Control Microspheres.   Calibration microspheres are microspheres of known fluorescent light intensities used to calibrate the settings for the classification and reporter channel for the Luminex systems.  Control microspheres are microspheres that are used to verify the calibration and optical integrity for both the classification and reporter channels for the various systems.

Software

xPONENT®.   Our xPONENT software is included in all of our new instruments and enhances both ease-of-use and automation capabilities expanding xMAP functionality in our core markets. The software suite incorporates important features, all designed to simplify laboratory workflow and increase productivity, including: enhanced security (21 CFR Part 11 compliance and electronic signatures); integration capabilities that allow users to transmit and receive data from Laboratory Information Systems (LIS/LIMS); integration with the most popular automated sample preparation systems; the ability to run magnetic bead applications; and touch-screen capability. xPONENT is sold on new Luminex 100, 200, FLEXMAP 3D, and MAGPIX systems and is available as an upgrade to the existing LX systems in the marketplace.

Assay Product Families

A product family consists of two or more assay products which are focused on similar or related markets.  Each assay consists of a combination of chemical and biological reagents and our proprietary bead technology used to perform diagnostic and research assays on samples.  As of February 23, 2015 the following product families are commercially available:

 

Respiratory Viral Family

This family of products includes RVP, as well as xTAG RVP FAST, a newer version of the original RVP assay.   These in vitro diagnostic (IVD) products enable our laboratory end users to identify the causative agent for respiratory infections, a major cause of illness and mortality globally, for physicians and their patients.

Gastrointestinal Pathogen Detection Family

The Gastrointestinal Pathogen Panel (GPP) family of products includes IVD assays as well as individual analyte specific reagents, which can be developed by Clinical Laboratory Improvement Amendments labs into laboratory developed tests.  These products enable laboratory end users to identify the pathogens causing infectious gastroenteritis, which is a major cause of morbidity and mortality globally.

MultiCode Assays and Products Family

This product family includes our FDA-cleared HSV1/2 kit as well as a number of analyte specific reagents and other products.  These products are generally designed to detect infectious agents in clinical samples using our proprietary MultiCode RTx real-time PCR chemistry.

Cystic Fibrosis Family

These FDA-cleared and Conformité Européenne   (CE) marked IVD kits include the first-ever FDA-cleared IVD for cystic fibrosis genotyping.  Current recommendations by the American College of Medical Genetics and the American College of Obstetricians and Gynecologists include screening for 23 mutations in the cystic fibrosis transmembrane conductance regulator gene. The xTAG Cystic Fibrosis kits screen for these mutations in addition to a variety of other important cystic fibrosis (CF) mutations, commonly found in the ethnically diverse North American and European populations.  These kits are typically used for screening newborns and for diagnosing adult carriers of the CF gene.

Personalized Medicine Product Family

This product family includes three assays used to determine the drug metabolism status of individuals for specific medications.  All three products include genotyping of genes encoding different cytochrome P450 drug metabolizing enzymes.  This type of  information is typically used to determine if a patient will need a lower or higher dose of a specific drug, or whether they should be switched to a different medication altogether.  Two of the products in this category are the FDA-cleared CYP2D6 and CYP2C19 assays used for identifying patients with variants that affect the metabolism and efficacy of some pharmaceutical compounds.

Specialty Product Family and Instrumentation

This family of products includes a variety of assays targeted towards specialty, niche markets.

In addition to the commercially available assays, we are an original equipment manufacturer (OEM) of custom reagents and instrumentation for certain of our customers. 

Sales and Marketing

Our sales and marketing strategy is to expand the installed base and utilization of xMAP, xTAG and MultiCode technologies.  We are focused on generating recurring revenues from the sale of Luminex-developed assays, microspheres and other consumables, as well as from royalties on bioassay kits and testing services developed or performed by others that use our technology. We have two key elements of our sales and marketing strategy: i) our dedication to marketing the assays developed internally directly to end users and ii) our allegiance to Luminex’s historic strategic partner program with life sciences companies that develop applications or perform testing using our technology platforms and distribute our systems to their customers.

We continue to use strategic partners as the primary distribution channel for our systems, and we will continue to pursue new partnerships focusing on partners with market presence in our key segments described above.  Some of our strategic partners develop application-specific bioassay kits for use on our xMAP platform that they, in turn, sell to their customers thereby generating royalties for us. Certain strategic partners also perform testing services for third parties using our technology also resulting in royalties for us.  Other strategic partners buy our products, including xMAP Luminex systems and consumables, or xTAG test kits, and then resell those products to their customers. As of December 31, 2014 , we had 66 strategic partners, compared to approximately 58 strategic partners as of December 31, 2013 .  On a regular basis, we update our strategic partner listing to reflect results of partner consolidations due to mergers and acquisitions, commercial sales inactivity, as well as termination or expiration of existing non-performing partner agreements, which in 2014 did not account for material revenue. During 2014 , 48 strategic partners with commercialized products utilizing xMAP technology submitted royalties. As of December 31, 2014 , 46 of these strategic partners with commercialized products remain, of which 24 companies principally serve the clinical diagnostics market and 22 companies principally serve the life science research market. Revenues through these commercialized, royalty-submitting, strategic partners constituted 66% of our revenues for 2014 . We also believe our strategic partners provide us with complementary capabilities in product development, regulatory expertise and sales and marketing. By leveraging our strategic partners’ bioassay testing competencies, customer relationships and distribution channels, we believe that we can continue to achieve measurable market penetration and technology adoption.

We also serve as the OEM for certain strategic partners that choose to sell our xMAP technology as an embedded system under their own branding and marketing efforts.

Customers

In each of the last three years, one or more customers each accounted for more than 10% of our total revenues. Laboratory Corporation of America (LabCorp) accounted for 21% , 18% and 19% of our total revenues in 2014 , 2013 and 2012 , respectively.  Thermo Fisher Scientific, Inc. accounted for 17% , 17% and 24% of our total revenues in 2014 , 2013 and 2012 , respectively.  No other customer accounted for more than 10% of our total revenues in 2014 , 2013 or 2012 ; however, Bio-Rad Laboratories, Inc. accounted for 7% , 9% and 8% of our total revenues in 2014 , 2013 and 2012 , respectively. The loss of any of these customers could have a material adverse effect on our business, financial condition and results of operations.

International Operations

We currently sell our products to a number of customers outside the United States, primarily including customers in other areas of North America, Europe and Asia-Pacific.  For the annual periods ended December 31, 2014 , 2013 and 2012 , foreign sales to customers totaled $39.0 million, $35.1 million, and $34.7 million, respectively, representing 17%, 16% and 17%, respectively, of our total revenues for such periods.  We have foreign subsidiaries in Canada, the Netherlands, Australia, the People’s Republic of China and Japan, which increase our international support, service and marketing capabilities.  Our foreign subsidiaries are a direct and integral component of the U.S. entity’s operations and their efforts support the sales made by our North American entities.  Sales to territories outside of the U.S. are primarily denominated in U.S. dollars.  We believe that our activities in some countries outside the U.S. involve greater risk than our domestic business due to the foreign economic conditions, exchange rate fluctuations, local commercial and economic policies and political uncertainties.  See Note 19 to our Consolidated Financial Statements.

Technical Operations

Our Technical Operations Group provides technical support to our customers, our distributors, our strategic partners and their customers. Most of our technical operations personnel have experience as biologists, biochemists or electrical engineers and have extensive experience in academic, industrial and commercial settings. Cross training is a major focus, as is empowering group members to solve problems outside their primary assignment.

Remote Support

Our technical support department assists users primarily through a toll-free hotline, internet interface and e-mail communications.  We deliver “24/7” remote technical support with our staff based at our Austin and Toronto locations and from our European, Chinese and Japanese subsidiaries to better serve our customer base.  Personnel assist our distributors, strategic partners and customers with product orders, software, hardware, system implementation and development of their bioassays. A comprehensive software and database system is utilized to track customer interactions, follow trends and measure utilization. The information is categorized and presented to management for regular review.

Training

Through our training group, we offer comprehensive programs in basic system training, advanced assay development, instrument field service and technical support functions. A significant part of our training material is now web-based and available online.  For larger customers who have many users, such as our strategic partners, training may be performed on-site at their locations.

Field Support

We currently have field service and field application personnel based across North America, Europe, China and Japan in areas of our more significant system concentration. We intend to place additional field service personnel and pursue third-party service provider agreements through our certified service professional program, as required, in order to ensure responsive and cost-effective support of our customers worldwide.  In addition, several of our distributors and strategic partners provide their own field service and field application support. As we continue to expand our installed base, we believe a strong, reliable, efficient field support organization is crucial to maintaining a high level of customer satisfaction.

Research and Development

Our research and development groups work to develop next generation systems, chemistries, assays and software to provide new, innovative products to our customers. Our research and development expense for the years ended December 31, 2014 , 2013 and 2012 , was $43.1 million , $45.0 million and $43.0 million , respectively including customer-sponsored research funding of $ 0.7 million , $0.8 million , and $1.1 million , respectively.

Our current research and development projects include:

We have continued the development of the ARIES instrument for sample-to-answer molecular diagnostic automated testing. This involves the final design and development of the instrument, consumables and software, as well as the development of a menu of assay products based on the ARIES platform. The ARIES system is expected to launch in 2015.

Our research and development group has been working on the development of a new, easy-to-use chemistry for running multiplexed tests in 96-well plates. This chemistry is expected to combine our xTAG and xMAP technologies into a simple to use, closed-tube format. The first product using this streamlined format, the NxTAG RPP, is expected to launch in 2015.

Our research and development group is collaborating with Merck on the development of a companion diagnostic that will help screen patients into Merck's investigational candidate drug study for Alzheimer's disease. Luminex is also working with the Defense Threat Reduction Agency of the United States government to develop a hand-held diagnostic instrument. Luminex on occasion collaborates on other partnered research programs.

Manufacturing

We have historically purchased many of the components and raw materials used in our products from numerous suppliers worldwide. For reasons of quality assurance, sole source availability or cost effectiveness, certain components and raw materials used in the manufacture of our products are available only from one supplier. We have worked closely with our suppliers to develop contingency plans to assure continuity of supply while maintaining high quality and reliability, and in some cases, we have established long-term supply contracts with our suppliers.  Due to the high standards and FDA requirements applicable to the manufacturing of our products, we may not be able to quickly establish additional or replacement sources for certain components or materials. In the event that we are unable to obtain sufficient quantities of raw materials or components on commercially reasonable terms or in a timely manner, our ability to manufacture our products on a timely and cost-competitive basis may be compromised, which may have a material adverse effect on our business, financial condition and results of operations.

We have approximately 60,700 square feet of manufacturing space located at our principal executive offices in Austin, Texas.  We recently expanded this space to enable ARIES cassette automation. We initially certified our Quality Management System (QMS) to the ISO 9001:2000 standard and in 2010 updated our certification to ISO 9001:2008.  ISO is an internationally recognized standard for quality management systems.  Subsequent audits by the registrar have been and will continue to be carried out at regular intervals to ensure we are maintaining our system in compliance with ISO standards.  Recertification is required every three years and we have been successfully recertified since obtaining our original ISO certification.  Also, we have our QMS certified to the ISO 13485:2012 Quality Management Standard and the Canadian Medical Devices Conformity Assessment System (CMDCAS) for Medical Devices.  These standards include a special set of requirements specifically related to the supply of medical devices and related services.  Additionally, we seek to manufacture to current Good Manufacturing Practice requirements and our QMS is implemented in accordance with FDA Quality System Regulations.

In addition, we have approximately 6,000 square feet of manufacturing space located in Toronto, Canada and approximately 10,000 square feet of manufacturing space located in Madison, Wisconsin.  The Toronto and Madison facilities and related QMS have been certified to the ISO 13485:2012 standard and registered under the CMDCAS.

Instruments

Contract manufacturers assemble certain components of our xMAP technology systems. The remaining assembly and manufacturing of our systems are performed at our facility in Austin, Texas. The quality control and quality assurance protocols are all performed at our facility.  Parts and component assemblies that comprise our xMAP technology system are obtained from a number of sources.  We have identified alternate sources of supply for several of our strategic parts and component assemblies.  Additionally, we have entered into supply agreements with most of our suppliers of strategic parts and component subassemblies to help ensure component availability and flexible purchasing terms with respect to the purchase of such components.  As of December 31, 2014 , a total of 11,687 Luminex multiplexing analyzers had been shipped since inception.

Microspheres

We manufacture as well as procure undyed, standard and magnetic carboxylated polystyrene microspheres.  We synthesize our dyes and manufacture our dyed polystyrene microspheres using a proprietary method in our Austin, Texas manufacturing facility in large lots.  We dye the microspheres with varying intensities of red and near infrared dyes to produce our distinctly colored microsphere sets. We currently purchase polystyrene microspheres from one supplier, in accordance with a supply agreement. We believe this agreement will help ensure microsphere availability and flexible purchasing terms with respect to the purchase of such microspheres. While we believe the microspheres will continue to be available from our supplier in quantities sufficient to meet our production needs, we believe our in-house manufacturing capabilities along with other potential suppliers would provide sufficient microspheres for us if given adequate lead-time to manufacture the microspheres to our specifications.

Assays and Reagents

Contract manufacturers produce certain components of our xMAP-based and MultiCode-based developed reagents. The remaining assembly and manufacturing of our developed kits are performed at one of our facilities in Austin, Texas; Toronto, Canada; or Madison, Wisconsin. The quality control and quality assurance protocols are all performed at our facilities.  Reagents, consumables and other raw material that comprise our kits are obtained from a number of sources.

Increasing regulatory requirements coupled with rising demand for new clinical applications are driving demand for laboratory developed tests. Our proprietary technologies and platforms offer a unique combination of flexibility and throughput, as our systems' open architecture, software and standard protocols allow our customers the ability to use our proprietary reagents to validate and verify a new test, while being able to utilize the same system to handle increasing volumes once the assay is commercialized.

Backlog

Our backlog as of December 31, 2014 and December 31, 2013 totaled $7.0 million and $5.8 million, respectively. Backlog consists of customer orders for which a delivery schedule within the next twelve months has been specified. Orders included in backlog may be canceled or rescheduled by customers without significant penalty. Backlog as of any particular date should not be relied upon as indicative of our net revenues for any future period.

Competition

We design our xMAP technology for use by customers across the various segments of the life sciences industry. Our competition includes companies marketing conventional testing products based on established technologies such as ELISA, real-time PCR, mass spectrometry, sequencing, gels, biochips and flow-based technologies as well as companies developing their own advanced testing technologies.

The pharmaceutical industry is a large market for the genomic, protein and high-throughput screening applications of the xMAP technology. In each application area, Luminex faces a different set of competitors. Genomic and protein testing can be performed by products available from Affymetrix, Inc., Life Technologies Corporation (a Thermo Fisher Scientific, Inc. brand), Becton, Dickinson and Company, Illumina, Inc., Qiagen N.V., Meso Scale Discovery (a division of Meso Scale Diagnostics LLC), and PerkinElmer, Inc., among others.

Our diagnostic market competitors include, among others, Abbott Laboratories, Life Technologies Corporation (a Thermo Fisher Scientific, Inc. brand), BioFire Diagnostics, Inc. (a bioMérieux company), Cepheid, GenMark Dx, Johnson & Johnson, Roche Diagnostics, Siemens Medical and Hologic, Inc., Alere, Inc., Quidel Corporation and Illumina, Inc. Some of these companies have technologies that can perform a variety of established assays. In addition, certain of these companies offer integrated systems and laboratory automation that are designed to meet the need for improved work efficiencies in the clinical laboratory.

Competition within the academic biomedical research market is highly fragmented. There are hundreds of suppliers to this market including, among others, Amersham Pharmacia Biotech, a part of GE Healthcare, Life Technologies Corporation and Becton, Dickinson and Company.

Intellectual Property

 

To establish and protect our proprietary technologies and products, we rely on a combination of patent, copyright, trademark and trade secret laws and confidentiality agreements.  We have filed for registration or obtained registration for trademarks used with our products and key technologies. 

We have implemented a strategy designed to optimize our intellectual property rights. For core intellectual property, we are pursuing patent coverage in the United States and those foreign countries that correspond to the majority of our current and anticipated customer base. We currently own 315 issued patents worldwide, including over 124 issued patents in the United States. Other countries in which we have issued patents directed to various aspects and applications of our products and technology include France, Germany, United Kingdom, Australia, Japan, Netherlands, Canada, Hong Kong and China, amongst others. In addition, our patent portfolio includes 162 pending patent applications in the United States and other foreign jurisdictions.  We believe our patents and pending claims provide, or will provide, protection for systems and technologies that allow real-time multiplexed analytical techniques for the detection and quantification of many analytes from a single sample. We also hold patents covering the precision-dyeing process used in the manufacture of our fluorescent microspheres and patents covering digital over-sampling to measure the area of a fluorescence pulse instead of “peak detection,” giving increased sensitivity with no lost events. In addition, multiple granted patents and pending applications describe aspects of Multicode technology, xTAG technology, as well as ARIES, our automated real-time PCR system, and NxTAG technology.

 

The source code for our proprietary software is protected as a trade secret and/or as a copyrighted work. Aspects of this software also are covered by an issued patent.

We also rely on trade secret protection of our intellectual property. We attempt to protect our trade secrets by entering into confidentiality agreements with strategic partners, third parties, employees and consultants. Our employees and third-party consultants also sign agreements requiring that they assign to us their interests in inventions and original works of expression and any corresponding patents and copyrights arising from their work for us. See risk factor on property rights we rely upon to protect the technology underlying our products on page 22.

Government Regulation

Food and Drug Administration

The FDA regulates medical devices pursuant to various statutes, including the Federal Food, Drug and Cosmetic Act as amended and supplemented by the Medical Device Amendments of 1976; the Safe Medical Devices Act of 1990; the Medical Device Amendments of 1992; the FDA Export Reform and Enhancement Act of 1996; the FDA Modernization Act of 1997; the Public Health, Security and Bioterrorism Preparedness and Response Act of 2002; the Medical Device User Fee and Modernization Act of 2002; and the Project BioShield Act of 2004. Medical devices, as defined by statute, include instruments, machines, in vitro reagents or other similar or related articles, including any components, parts or accessories of such articles that are intended for use in the diagnosis of disease or other condition or in the cure, mitigation, treatment or prevention of disease; or are intended to affect the structure or function of the body and do not achieve their intended purpose through chemical action or metabolization. The FDA classifies medical devices intended for human use into three classes. For Class I devices, general controls (for example, labeling and Good Manufacturing Practices) provide reasonable assurance of safety and effectiveness. Class II devices are products for which general controls do not provide reasonable assurance of safety and effectiveness and for which there is sufficient information to establish special controls (for example, special control documents, guidelines and patient registries). Class III devices are products for which neither general nor special controls provide reasonable assurance of safety and effectiveness.  Generally, Class III includes devices that support or sustain human life, are for uses that are substantially important in preventing impairment of human health, are used as a stand-alone assay for patient screening or diagnosis of disease, or present a potential, unreasonable risk of illness or injury.

We manufacture versions of the Luminex instruments for use with diagnostic assay kits that are available through our strategic partners. For FDA purposes, the Luminex systems are IVD cleared and are considered a component of our partners’ kit products. Depending on the particular kit’s regulatory classification into Class I, II, or III and its intended use, kits manufactured by our strategic partners that are used in conjunction with our technology are subject to FDA requirements such as Good Manufacturing Practices and others, and may be subject to clearance or approval before they can be marketed and sold. After incorporating the Luminex systems into their products, our strategic partners may be required to make various premarket submissions such as premarket approval applications, premarket notifications, and/or investigational device exemption applications to the FDA for their products and are required to comply with numerous requirements and restrictions prior to clearance or approval of the applications. Our partners are also subject to a number of other requirements in the Food, Drug, and Cosmetic Act and its regulations, such as Good Clinical Practice requirements and Device Registration and Listing requirements. There can be no assurance that such requirements will always be met without interruption, or that the FDA will file, clear or approve our strategic partners’ submissions. A total of 53 Luminex products have been cleared, licensed or registered in 2014, including 3 products cleared for use by the FDA in the United States and 50 products cleared, licensed or registered for use in foreign jurisdictions.

We also manufacture kit products that are intended for research use only (RUO) applications (not for diagnostic use), as well as kits that are IVD cleared for diagnostic use (currently regulatory classification of Class I and II), as well as IUO or clinical applications. Although certain products intended for research use only are not currently subject to clearance or approval by the FDA, research use only products fall under the FDA’s jurisdiction if they are used for clinical rather than research purposes. Further, even where a product is not otherwise subject to clearance or approval by the FDA, the FDA, in order to limit sales to those who use the products for research only, can determine the manner in which we can market and sell our products and/or the types of customers to which we can market and sell our products.

In addition to the FDA, the U.S. Department of Health and Human Services, state authorities and foreign government regulators scrutinize genetic analysis tools that are labeled for research use only by clinical laboratories. We cannot predict the nature of future regulatory or policy initiatives with respect to the sale and use of products for the development of assays by laboratories, or the extent to which any such initiative will impact our business.

      

The laboratories that purchase certain of our products are subject to extensive regulation under the Clinical Laboratory Improvement Amendments of 1988 (CLIA), which require laboratories to meet specified standards in areas such as personnel qualifications, administration, participation in proficiency testing, patient test management, quality control, quality assurance, and inspections. Adverse interpretations of current CLIA regulations or future changes in CLIA regulations could have an adverse effect on sales of any affected products.

      

In December 2007, we submitted to the FDA our request for 510(k) clearance on our Luminex LX 100/200 Instrument. On December 13, 2007 the FDA received our 510(k) #k073506 submission for the Luminex LX 100/200 IS System.  On March 7, 2008, the instrument received FDA 510(k) clearance.  All related future diagnostic assay kits subject to FDA clearance may reference the 510(k) #k073506 for the instrument in their respective applications.  A master file letter from Luminex allowing the partner to reference the file may be required.  Subsequent clearances for FLEXMAP 3D and MAGPIX were received by the FDA on January 9, 2013 and March 21, 2013, respectively.

Certain of our instruments use lasers to identify the bioassays and measure their results. Therefore, we are required to ensure that these products comply with FDA regulations pertaining to the performance of laser products. The Radiation Control for Health and Safety Act, administered by the FDA, imposes performance standards and record keeping, reporting, product testing and product labeling requirements for devices that emit radiation.  These regulations are intended to ensure the safety of laser products by establishing standards to prevent exposure to excessive levels of laser radiation. There can be no assurance that the FDA will agree with our interpretation and implementation of these regulations.

We, and our strategic partners, are subject to periodic inspection by the FDA for, among other things, compliance with the FDA’s current Good Manufacturing Practice regulations. These regulations, also known as the Quality System Regulations, govern the methods used in, and the facilities and controls used for, the design, manufacture, packaging, labeling, servicing, installation and distribution of all finished medical devices intended for human use. Additionally, our strategic partners are subject to other pre-market and post-market controls such as labeling, complaint handling, medical device reporting, corrections and removals reporting and record keeping requirements. If the FDA has evidence demonstrating that a company is not in compliance with applicable regulations, it can detain or seize products, request or, in certain circumstances, require a recall, impose operating restrictions, enjoin future violations, recommend criminal prosecution to the Department of Justice and assess civil and criminal penalties against us, our officers and our employees. Other regulatory agencies may have similar powers. In addition, various federal and state statutes and regulations govern or influence the manufacturing, safety and storage of our products and components of our products, as well as our record-keeping.

Foreign Jurisdictions

Medical device laws and regulations are also in effect in many countries outside of the United States. These range from comprehensive pre-approval requirements for medical products to simpler requests for product data or certification. The number and scope of these requirements are increasing. There can be no assurance that we, and our strategic partners, will be able to obtain any approvals that may be required to market xMAP technology products outside the United States. In addition, we may incur significant initial and/or ongoing costs in obtaining or maintaining our foreign regulatory approvals. Further, the export by us of products that have not yet been cleared for domestic commercial distribution is subject to FDA or other export requirements and/or restrictions.

We have agreements relating to the sale of our products to government entities and, as a result, we are subject to various statutes and regulations that apply to companies doing business with the government. A failure to comply with these regulations could result in suspension of these contracts, or administrative or other penalties, and could have a material adverse effect on our ability to compete for future government contracts and programs.

We produce CE marked products, which are subject to a number of different European Union (EU) Directives, including, but not limited to, the In Vitro Diagnostic Devices Directive (98/79/EEC). CE marking of our products is currently by self-declaration, not issued by a third party, based on the intended uses of our products.  A product that is not CE marked is automatically considered to be non-compliant. The law is enforced through market surveillance by appointed national enforcement agencies.  Imported products are checked for compliance at customs offices.

The State Food and Drug Administration, P.R. China, is the government regulation authority in charge of safety management of drug, food, health food and cosmetics for the People’s Republic of China. In December 2007 we submitted the application for a certificate to combine both Luminex 100 and Luminex 200 into one product called "Luminex System".  This certificate is required for registration and approval to import our products into China.  Luminex received the registration certificate from the People’s Republic of China for the Luminex 100 and Luminex 200 Systems on March 4, 2009 and received recertification on October 17, 2013.  The MAGPIX System received its registration certificate on June 16, 2014. Such re-certifications are an ongoing requirement with the People’s Republic of China.

Failure by us, or our strategic partners, to comply with applicable federal, state and foreign medical product laws and regulations could have a material adverse effect on our business. In addition, federal, state and foreign regulations regarding the manufacture and sale of medical devices and components of such devices are subject to future changes. We cannot predict what impact, if any, such changes might have on our business, but any such change could have a material impact.

WEEE

The European Community Council Directive 2002/96/EC on Waste Electrical and Electronic Equipment (WEEE) outlines the responsibility for the disposal of waste electrical and electronic equipment. Compliance with WEEE is placed with the manufacturers of such equipment.  Those manufacturers are required to establish an infrastructure for collecting WEEE, in such a way that users of electrical and electronic equipment from private households should have the ability of returning WEEE at least free of charge.  All Luminex-manufactured equipment is in compliance with this directive. We have been in compliance with the requirements since August 13, 2005, regarding the labeling and disposal of our products containing electronic devices in each of the EU member states where our regulated products are distributed.

RoHS

RoHS stands for “The Restriction on the Use of Certain Hazardous Substances in Electrical and Electronic Equipment” and implements EU Directive 2002/95 which bans the placing on the EU market of new electrical and electronic equipment containing more than agreed levels of lead, cadmium, mercury, hexavalent chromium, polybrominated biphenyl and polybrominated diphenyl ether flame retardants. 

 

The Directive directly affects producers who manufacture or assemble electrical or electronic equipment in the EU, importers of electrical or electronic equipment from outside the EU and companies that re-brand electric producers as their own. The Directive applies to electrical and electronic equipment falling under the categories 1, 2, 3, 4, 5, 6, 7 and 10 set out in Annex IA of the WEEE Directive (2002/96/EC).  Equipment categories 8 and 9 defined in the WEEE Directive are currently outside the scope of the RoHS Directive.  Luminex IVD equipment is classified as category 8 (Medical Devices) in Annex IA of the WEEE Directive, which is not covered within the scope of the RoHS Directive.  Luminex research equipment is classified as category 9 (Monitoring and Control Instruments) in Annex IA of the WEEE Directive, which is not covered within the scope of the RoHS Directive.

European IVD Directive

The EU’s regulation of in vitro medical devices is under the In Vitro Diagnostic Directive (IVDD) 98/79/EC of October 27, 1998, as implemented in the EU member states.

The principle behind the IVDD is that no in vitro device or accessory may be placed on the market or put into service unless it satisfies the essential requirements set forth in the IVDD. Devices considered to meet the essential requirements must bear the CE marking of conformity when they are placed on the market. The responsibility for placing the CE marking on the device lies with the manufacturer. A manufacturer placing devices on the market in its name is required to notify its national competent authorities.

Luminex has declared that the LX100 IS, the LX200 IS, the FLEXMAP 3D and the MAGPIX are classified as self-declaration devices and are in conformity with Article 1, Article 9, Annex I (Essential Requirements), and Annex III and the additional provisions of IVDD 98/79/EC.  However, there can be no assurance that the EU member states will agree with our interpretation and implementation of these regulations. As the European marketplace continues to be material to our operations, failure by us or our strategic partners to comply with the IVDD could have a material adverse effect on our business.

Environmental

We are subject to federal, state and local laws and regulations relating to the protection of human health and the environment. In the course of our business, we are involved in the handling, storage and disposal of certain chemicals and biohazards. The laws and regulations applicable to our operations include provisions that regulate the discharge of materials into the environment. Some of these environmental laws and regulations impose “strict liability,” rendering a party liable without regard to negligence or fault on the part of such party. Such environmental laws and regulations may expose us to liability for environmental contamination, including remediation costs, natural resource damages and other damages as a result of the conduct of, or conditions caused by, us or others, or for acts that were in compliance with all applicable laws at the time such acts were performed. In addition, where contamination may be present, it is not uncommon for neighboring landowners and other third parties to file claims for personal injury, property damage and recovery of response costs. Although it is our policy to use generally accepted operating and disposal practices in accordance with applicable environmental laws and regulations, hazardous substances or wastes may have been disposed or released on, under or from properties owned, leased or operated by us or on, under or from other locations where such substances or wastes have been taken for disposal. These properties may be subject to investigation, remediation and monitoring requirements under federal, state and local environmental laws and regulations. We believe that our operations are in substantial compliance with applicable environmental laws and regulations. However, failure to comply with these environmental laws and regulations may result in the imposition of administrative, civil and criminal penalties or other liabilities. We do not believe that we have been required to expend material amounts in connection with our efforts to comply with environmental requirements or that compliance with such requirements will have a material adverse effect upon our capital expenditures, results of operations or competitive position. Because the requirements imposed by such laws and regulations may frequently change and new environmental laws and regulations may be adopted, we are unable to predict the cost of compliance with such requirements in the future, or the effect of such laws on our capital expenditures, results of operations or competitive position. Moreover, the modification or interpretation of existing environmental laws or regulations, the more vigorous enforcement of existing environmental laws or regulations, or the adoption of new environmental laws or regulations may also negatively impact our strategic partners, which in turn could have a material adverse effect on us and other similarly situated component companies.

Sunshine Act

In 2010, Congress enacted a statute called the Transparency Reports and Reporting of Physician Ownership or Investment Interests (commonly known as the Sunshine Act), as part of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the Health Reform Law). The Sunshine Act aims to promote transparency and requires manufacturers of most drugs, devices, biologicals and medical supplies covered by Medicare, Medicaid or the Children's Health Insurance Program (CHIP) to report annually to the Centers for Medicare and Medicaid Services (CMS) any payments or other transfers of value made to physicians and teaching hospitals, with limited exceptions. Manufacturers must also disclose to CMS any physician ownership or investment interests. In 2014, the annual reporting requirement applicable to manufacturers covered by the Sunshine Act, including Luminex entities operating or selling in the US, took effect, and CMS released datasets for payments made in 2013 to the public through the CMS website. Annual reports addressing transfers of value and relationships for the preceding calendar year will be published on the CMS website each year. We have provided internal training regarding the Sunshine Act requirements to relevant personnel and have implemented procedures to track and report any transfers of value covered by the Sunshine Act. Failure to comply with the reporting requirement may result in substantial monetary penalties.

Other

Based on the Health Reform Law, the IRS implemented a Medical Device Excise Tax of 2.3% of the sale price on non-exempt medical devices. This tax on manufacturers has not had, nor do we expect it to have, a material impact on our operations.

Employees

As of February 23, 2015 and December 31, 2014 , respectively, we had a total of 741 and 745 employees and contract employees, as compared with 731 as of December 31, 2013 .  The year over year increase is primarily the result of the addition of sales and marketing employees focused on direct sales to our end customers, as well as personnel added related to development, production, regulatory clearance and quality control for our new sample to answer instrument (ARIES) and our bead products and assays.  None of our employees are represented by a collective bargaining agreement, and we have not experienced any work stoppage. We believe that relations with our employees are good.

Seasonality

 

Worldwide sales, including U.S. sales, do not reflect any significant degree of seasonality; however, sales of our Respiratory Viral products have demonstrated seasonal fluctuations consistent with the onset and decline of influenza-like illnesses.

Segment Reporting

During the fourth quarter of 2014, in conjunction with the appointment of our new CEO, Luminex evaluated its historical reporting segments: the TSP segment and the ARP segment. As a result of this evaluation and based upon how our new Chief Executive Officer as Chief Operating Decision Maker and our management team collectively is managing our business, we determined that the two former segments have become so integrated and interrelated that they no longer provide an accurate representation of our current business when reported separately. Additionally, we have taken actions to consolidate sales and service functions. Effective with the fourth quarter of 2014, we no longer have two operating segments and, accordingly, will present our business as one operating segment and one reporting unit. Accordingly, prior periods' information has been restated to conform to the current periods' presentation.

Financial information relating to our reportable segment for the years ended December 31, 2014, 2013 and 2012 can be found in Item 7 “Management’s Discussion and Analysis of Financial Information and Results of Operations” and Item 8 “Financial Statements and Supplementary Data”.

Nachum Shamir . Mr. Shamir joined the Company on October 14, 2014 as President and Chief Executive Officer and was elected to our Board. From 2006 to 2014, Mr. Shamir was the President, Chief Executive Officer and Director of Given Imaging Ltd. (Given), a developer, manufacturer and marketer of diagnostic products for the visualization and detection of disorders of the gastrointestinal tract. Prior to joining Given, Mr. Shamir served as Corporate Vice President of Eastman Kodak Company, a technology company focused on imaging solutions and services for businesses from 2004 to 2006, and as the President of Eastman Kodak's Transaction and Industrial Solutions Group from 2005 to 2006, which includes several business units, including Kodak Versamark, Inc. (whose operations were previously those of Scitex Digital Printing Inc.) of which Mr. Shamir had served as President and Chief Executive Officer. From June 2003 to January 2004, Mr. Shamir served as the President and Chief Executive Officer of Scitex Corporation, a multinational public company which specialized in producing products, systems and equipment for the graphic design, printing and publishing markets through its various operating units. From January 2001 to January 2004, Mr. Shamir served as the President and Chief Executive Officer of Scitex Digital Printing, a subsidiary of Scitex Corporation Ltd., having previously served as its Chief Operating Officer since July 2000. Prior thereto, Mr. Shamir was Managing Director and General Manager of Scitex Digital Printing (Asia Pacific) Pte Ltd., a Singapore-based company, from its incorporation in 1994. From 1993 until 1994 Mr. Shamir was with the Hong Kong based Scitex Asia Pacific (H.K.) Ltd. Before joining Scitex, Mr. Shamir held senior management positions at various international companies mainly in the Asia Pacific regions. Mr. Shamir currently serves on the board of directors of Invendo Medical GmbH, a manufacturer and distributor of a single use and computer-assisted colonoscopy system. Mr. Shamir holds a Bachelor of Science from the Hebrew University of Jerusalem and a Masters of Public Administration from Harvard University.

Harriss T. Currie. Mr. Currie served as Vice President, Finance, Treasurer and Chief Financial Officer since October of 2002 and was appointed Senior Vice President, Finance (as well as Chief Financial Officer and Treasurer) in March 2013. Since joining Luminex in November of 1998, Mr. Currie previously served in the capacities of Controller and Treasurer. Prior to joining us, he was employed as the chief financial officer, secretary and treasurer of SpectraCell Laboratories, a specialized clinical testing laboratory company, from 1993 to 1998 where he also served as vice president of finance for two subsidiary companies. Mr. Currie earned his B.B.A. from Southwestern University and his M.B.A. in Finance and Marketing from The University of Texas at Austin. Prior to returning to graduate school for his M.B.A., Mr. Currie was a certified public accountant with Deloitte & Touche LLP.

Jeremy Bridge-Cook, Ph.D.   Dr. Bridge-Cook has served as Senior Vice President, Research and Development since June 2009.  Dr. Bridge-Cook joined Luminex in March 2007 as Vice President of Luminex Molecular Diagnostics.  Previously, Dr. Bridge-Cook served as senior vice president, corporate development of Tm Bioscience Corporation, which was acquired by Luminex in 2007.  Dr. Bridge-Cook joined Tm Bioscience Corporation in July 2000 as director of business development and served in various capacities thereafter, including vice president of business development, vice president of marketing and business development, and finally senior vice president, corporate development.  Prior to joining Tm Biosciences Corporation, Dr. Bridge-Cook worked for three years as an investment analyst at MDS Capital Corp. and University Medical Discoveries Inc. Dr. Bridge-Cook has a Ph.D. in Immunology from the University of Toronto and a B.Sc. in Biology from McMaster University.

Russell W. Bradley .  Mr. Bradley joined Luminex in May 2005 as Vice President of Business Development and Strategic Planning and was appointed as Senior Vice President, Corporate Development and Global Marketing in August 2013 and then promoted to Senior Vice President, Corporate Development and Chief Marketing and Sales Officer in October 2014.  Previously, Mr. Bradley spent 17 years at Beckman Coulter, Inc., a manufacturer of biomedical testing systems and products, where he served in various roles of increasing responsibility including commercial leadership of Beckman Coulter's flow cytometry business and most recently as the director of the Beckman Coulter CARES initiative, leading the company’s clinical HIV monitoring business in developing regions around the globe.  During his tenure at Beckman Coulter, Mr. Bradley was involved in the evaluation, market assessment and commercial launch of multiple life science technologies and applications.  Mr. Bradley holds a B.Sc. in Immunology and Biochemistry from Monash University, Melbourne, Australia.

David S. Reiter.   Mr. Reiter joined Luminex as Vice President, General Counsel and Corporate Secretary in October 2003 and was appointed Senior Vice President, General Counsel and Corporate Secretary in March 2013.  Prior to becoming General Counsel, Mr. Reiter was in private practice with the firm of Phillips & Reiter, PLLC from 2002 to 2004, which provides outsourced general counsel services for early to mid-stage companies.  Mr. Reiter is a graduate of the University of Southern California (Juris Doctorate/Master of International Relations), University of Sheffield, UK (M.B.A.) and the University of Notre Dame (B.A. in Government).  Mr. Reiter is a member of the Texas Bar and the American Bar Association. On December 19, 2014, Mr. Reiter informed the Company of his intention to resign as the Company's Senior Vice President, General Counsel and Corporate Secretary to pursue other interests. We anticipate Mr. Reiter's resignation will be effective April 1, 2015.

Nancy M. Fairchild. Ms. Fairchild joined Luminex Corporation as Senior Director, Human Resources in March 2010.  She was promoted to a Vice President, Human Resources in August 2012 and then promoted to Senior Vice President, Human Resources in January 2015.  Prior to Luminex, Ms. Fairchild served as Chief Administrative Officer and Vice President of Human Resources and Organizational Development for the Electric Reliability Council of Texas which provides the energy grid services for Texas, from 2006 to 2010. In this role she managed Strategic Planning, Project Management, Facilities and Human Resources.  Earlier in her career, she served as Vice President Human Resources for Esoterix, Inc., an international healthcare company specializing in laboratory services, from 2001 to 2006, the Sr. Vice President of Human Resources for Southern Union Company, a large natural gas conglomerate, from 1989 to 2001, and President of EnergyWorX, a training subsidiary, from 1996 to 2000. Ms. Fairchild is currently a member of the Board of Directors and Chair of the Audit Committee for Workforce Solutions, a local workforce development board in Texas, representing the biotech sector. She graduated with highest honors from Texas State University with a B.S. degree in Math Education and a Master’s degree in Counseling.