Western Asset Investment Grade Defined Opportunity Trust Inc. (IGI) - Description of business

Company Description
General Imagistics International Inc. ("Imagistics" or the "Company"), headquartered in Trumbull, Connecticut, is an independent direct sales, service and marketing organization offering business document imaging and management solutions, including copiers, multifunctional products, often referred to as MFPs, and facsimile machines, in the United States, Canada and the United Kingdom that sources its products from various suppliers throughout the world. MFPs provide businesses with the ability to copy, print, fax, email and scan documents on a single device and eliminate costs associated with multiple devices. MFPs also allow businesses to easily move documents from paper images to digital files and back. We provide our customers with flexible, comprehensive document imaging products and services at competitive market prices.History Imagistics traces its origins to Pitney Bowes Inc. ("Pitney Bowes"). Pitney Bowes began marketing and distributing copiers in 1967 and started selling facsimile products in 1982. Pitney Bowes' office systems division, which combined the copier and facsimile product lines, was created in 1998. In 2000, Pitney Bowes decided to spin-off the United States and the United Kingdom operations of the office systems division to, among other things, enable the newly formed company, Imagistics, to more fully realize its potential within the dynamic office document markets. In connection with the planned spin-off, Pitney Bowes incorporated the Company as Pitney Bowes Office Systems, Inc. in February 2001 and, in August 2001, contributed substantially all of the business and assets of its office systems division to the Company. The name of the Company was changed to Imagistics International Inc. on October 12, 2001, and on December 3, 2001, 100% of the common stock of the Company was distributed by Pitney Bowes to the common shareholders of Pitney Bowes based on a distribution ratio of 1 share of Imagistics common stock for every 12.5 shares of Pitney Bowes common stock held at the close of business on November 19, 2001 (the "Distribution" or "Spin-off"). In connection with the Spin-off, we entered into several agreements with Pitney Bowes and Pitney Bowes subsidiaries including a transition services agreement with Pitney Bowes providing for certain essential services for a limited period following the Spin-off, including technology related services and field equipment maintenance services, agreements with Pitney Bowes Management Services and Pitney Bowes of Canada Ltd. ("Pitney Bowes of Canada"), under which they could continue to purchase and use our products and a vendor financing agreement providing for Pitney Bowes Credit Corporation ("PBCC") to continue as our primary lease vendor on a multi-year basis after the Spin-off, an intellectual property agreement with Pitney Bowes allowing us to continue using the "Pitney Bowes" brand name in the United States and the United Kingdom for a period of up to two years following the Spin-off, a tax separation agreement and certain other agreements. Substantially all of the services provided by Pitney Bowes under these agreements, other than the vendor financing agreement, which had an initial term of five years, have ceased in accordance with the terms of the agreements. The implementation of the order to cash phase of our enterprise resource planning ("ERP") system in October 2003 permitted us to replace the remaining information technology related services that had been provided by Pitney Bowes. We reached a new agreement with Pitney Bowes of Canada in the fourth quarter of 2003 through which Pitney Bowes of Canada may purchase and resell Imagistics' products in Canada for an additional period of two years on a non-exclusive basis. In the fourth quarter of 2004, we negotiated an agreement with Pitney Bowes for the continued provision of equipment maintenance services in remote areasthat we do not directly service. There are alternative providers for both the vendor financing and equipment maintenance services on substantially similar terms and conditions and these ongoing arms length relationships with Pitney Bowes are not considered to be material.Available Information Additional information about us is available on the Internet at our corporate website, www.imagistics.com, or our investor website, www.IGIinvestor.com. In addition to other information, we make available free of charge on our investor website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after electronically filing with or furnishing such material to the Securities and Exchange Commission. The Securities and Exchange Commission maintains an Internet site at www.sec.gov, which contains reports, proxy and information statements, and other information regarding us. You may also read and copy any document we file with the SEC at its Public Reference Room, 450 Fifth Street, N.W., Washington, D.C. 20549. The SEC can be contacted at 1-800-SEC-0330 for further information on the operation of the Public Reference Room. Our investor website also provides shareholders and other interested parties with access to important corporate governance information including our Corporate Governance Guidelines, Code of Ethics, and the Charters of our Audit, Executive Compensation and Development, and Governance Committees. These documents are also available in print to any shareholder requesting a copy from our Investor Relations department. Amendments to our Code of Ethics and any waiver related to our Chief Executive Officer, Chief Operating Officer, Chief Financial Officer or Controller will also be made available on our investor website. Currently, there are no waivers related to our Chief Executive Officer, Chief Operating Officer, Chief Financial Officer or Controller.Industry Overview The document imaging and management industry consists of the production and supply of various imaging products, as well as the provision of pre-sale and after-market product services and related software and professional services. We have participated in the copier business for over 35 years and have been a leader in the facsimile machine segment of this industry for 20 years. Our competitors include the distribution units of large office equipment manufacturers such as Ricoh, Canon and Xerox, and other independent distributors such as Ikon, Danka and Global Imaging as well as numerous local independent office equipment dealers and, as technologies continue to merge, traditional printer companies such as Hewlett Packard and Lexmark. Companies in the document imaging industry sell products primarily through three channels of distribution: direct sales, independent dealer sales and retail sales. Recently, the Internet has begun to emerge as an additional channel, primarily for lower-end equipment and supplies. Direct sales involve the marketing of products by sales representatives working directly for the company whose products they offer. Independent dealer sales result from customer calls performed by independent dealer outlets that generally sell manufacturer-branded products. Retail sales include sales of low-end products, typically through national retail outlets or local retailers. The document imaging industry is rapidly changing. The copier industry has moved from standalone analog devices to connected products that utilize digital technologies and from monochrome to color capable devices. Digital technology provides more reliability, more functionality and higher quality. All new copier/MFP placements are digital machines. Digital products can connect with computer networks and communicate with other office imaging equipment, enabling customers to more efficiently connect and utilize their document management solutions over a wide array of more useful features, such as higher quality copies, color capability, finishing capability and the multifunctional capability of copying, printing, faxing, emailing and scanning. The scanning capability allows organizations to easily move between hard copy paper documents and electronic documents. MFPs can efficiently copy, print, fax and email documents. In addition, technological advances, added features and functionality and reduced pricing have led to a trend of increased placements of color copiers and MFPs. The migration from single function digital copiers to MFPs is now seeing the emergence of universal copiers/printers that provide cost efficient output in both black and white and color. Today's busy corporate environment demands office equipment, software and solutions that work faster and more efficiently than ever before, while providing reliable high-quality output. The expanding use of MFPs designed to address copying, printing, faxing, emailing and scanning needs in the workplace is a direct result of these demands. MFPs efficiently send, receive and print documents, thus eliminating office bottlenecks, improving employee productivity and saving valuable workspace in offices of all sizes. As workplaces increasingly rely on computer networks, document imaging providers are also developing more products that allow for shared communication and that work seamlessly with other office systems. These networked solutions offer greater speed and, by diverting print streams to more efficient output devices, can lower a company's imaging costs significantly. The cost of managing documents is high for most companies and increased use of the Internet for desktop research and printing has further increased the volume and cost of imaging activity for most businesses. In addition to searching for ways to minimizebusiness document costs, customers continue to demand high-performance machines that produce well-finished documents. In addition, corporations struggle with the issue of how to deploy new technology and get users to embrace it. Currently, the industry is producing a greater number of color machines to offer customers a range of options for their copying and printing needs. Color machines allow companies to increase their level of in-house document production and produce "finished" copies for meetings, presentations and mailings, often times at much lower costs than if they purchased these jobs externally. Corporate customers are also searching for new ways to manage their document imaging needs. Corporations are continuing to outsource non-core competencies, including document imaging. This is especially true as the complexity of these solutions increases and corporations seek to avoid hiring, training and retraining personnel to use new machines. In recent years, many large document-imaging providers have developed management services capabilities to address this need. Through management services relationships, document imaging providers offer a full range of services, from installation and training of employees to complete on-site document imaging management, including selection of equipment and provision of personnel, allowing corporate customers to choose the solution that is best for them.Vision and Strategy Our vision is to become the leading independent direct provider of enterprise office imaging and document solutions by providing world class products and services with unparalleled customer support and satisfaction with a focus on multiple location customers, thus building value for our shareholders, customers and employees. To achieve this vision, we plan to build on our strengths and pursue the following strategies: Maintain and Further Strengthen Major Account Relationships. We have maintained successful relationships with many large Fortune 1000 companies for 20 years. We believe that our strong relationships with many of these customers, as well as our integrated sales and service organization and the broad national reach of our organization, have been the keys to our success in acquiring new business and retaining our current customers. Our sales effort is organized to create customer-centric national account and commercial user sales organizations, each offering our full range of products to their respective customer bases. This customer-centric organization allows us to leverage our customer relationships with major accounts while also expanding our product offerings to our commercial user customers. In light of competitive pressures, technological advances and changes in the corporate workplace, we must strive to meet our customers' needs in new ways. As many corporate customers seek to reduce administrative expenses through centralized purchasing and consolidation of their vendors, we believe that we are well positioned to offer a range of products and services, including technological innovations and consulting services that will provide new options, from a single source. Expand Our Product Offerings Through Sourcing and Distribution Relationships. We believe that one of our greatest strengths is our strategy of sourcing cost-effective "families" of products from different manufacturers to best suit our customers' requirements. We seek to form relationships with various manufacturers, each with different specialties and different strengths. Although we source from multiple vendors, all of our products meet our demanding specifications. In addition, we supplement our product offerings with value-added software and service offerings to optimize ease of use and operation and support them with trained staff. In January 2005, Better Buys for Business selected the Imagistics DL 850 as Editors Choice for 2005. In 2004, J.D. Power and Associates Copier Customer Satisfaction Study ranked Imagistics #1 Copier/Multifunction Product in Overall Customer Satisfaction Among Business Users, Two Years in a Row, Tied in 2003. We believe the study validates Imagistics' product sourcing strategy and direct sales and service infrastructure. In 2004, Imagistics also received the 2004 Buyers Laboratories Pick of the Year award for the im3520 in six different product categories and the ix3010 in five different product categories, as well as the Highly Recommended award for the im2020 in six different product categories and the Recommended award for six additional Imagistics products, all in more than five different product categories. In 2003, Imagistics received the 2003 Buyers Laboratories Most Outstanding Multifunctional Product Line of the Year award as well as six Pick of the Year awards in four different product categories. We continuously evaluate various imaging products from multiple manufacturers and software developers. We believe that our supply contracts provide us access to the best products and solutions. We believe that the transition to digital monochrome, full color and universal black and white and color copier/MFPs provides an important opportunity for us to reach new customers as manufacturers develop machines with increased capabilities. We continue to launch new digital products that offer faster, more efficient multifunctional features for our high-volume corporate customers. These new digital products offer increased document imaging options and capabilities as well as overall savings. We will continue to expand our digital document imaging product offerings in order to meet the needs of our current customers and to allow us to reach a new customer base. In order to remaincompetitive in light of the many technological options that are available to our customers, we will continue to collaborate with companies that develop integrated document solutions that incorporate multifunctional capabilities. Our success will also depend on our ability to accurately gauge shifts in market demand and to anticipate potentially unforeseen changes in market dynamics that may result from new technologies. Increase Outreach of Our Direct Sales and Service Force to the Copier/MFP Market. Our direct sales and service strategy aims to provide our customers with one point of contact for their product needs. Regardless of their location in the United States, the United Kingdom or our served markets in Canada, our customers can contact one of our representatives in their geographic area and receive consistent sales and service assistance. This allows us to control the quality of our sales and service effort and ensure a consistent positive experience for our customers. It also provides us with an opportunity to keep in regular contact with our customers, which we believe often leads to future sales. In some remote areas, however, we rely on Imagistics-trained third-party service providers for service of our products. Our marketing strategy is to offer an extensive portfolio of product offerings and diverse technology and to utilize our national direct sales and service organization to establish long-term relationships to meet customer document imaging and management needs. We have implemented an acquisition strategy, as described below, to expand, on a highly selective basis, service and distribution capabilities in areas where such presence will enhance our ability to serve national accounts, while increasing our sales effort with local companies and public agencies. Focus on Customer Needs. Since we have direct access to our end user customers through our direct sales force, we are able to monitor their changing needs and requirements and respond in an appropriate manner. Our goal is to meet all of our customers' needs and where price is particularly critical, we have offered them refurbished and remanufactured analog and refurbished digital systems as well as standalone devices. Because of our purchasing structure, we believe that we will be able to provide digital equipment and solutions as our customers require them. Because we source digital products and train our workforce on the sales, use and service of these products, and because we continue to research and source new products, we believe that we will be able to respond effectively as the industry changes in the future. However, if we fail to accurately predict changes in market demand we may lose sales or incur losses due to excess or obsolete inventories. Pursue an Expansion Strategy. In order to remain competitive, we will continue to expand our copier, MFP, software and solutions businesses in geographic markets in the United States and abroad. Our direct sales and service strategy has been an effective method for attracting and retaining customers and we believe we can use it to further expand our document imaging business. We currently supply document imaging products and services to a variety of large corporations, many of which have an international presence and seek global sourcing of their document imaging needs. In order to serve these clients more effectively, we purchased two dealerships in 2004 to establish direct operations in Canada. We expect to use our United Kingdom operation as a platform for expansion of our business into the larger European market over time. Our United Kingdom product offerings, which were limited to facsimile products, were expanded to include a full range of MFPs in January 2003. In March 2004, we acquired substantially all of the assets and business of Canadian Business Systems and Office Solutions Group, a combined business dealership in Mississauga, a suburb of Toronto, Canada and in August 2004, we acquired substantially all of the capital stock of Doering & Brown Corporation, an independent dealership based in London, Ontario, Canada. These acquisitions reflect our strategy to expand service and distribution capabilities internationally where such presence will enhance our ability to provide direct service to our broad base of global customers. In June 2004, we acquired substantially all of the assets and business of Copy Systems, an independent dealership based in Little Rock, Arkansas reflecting our continued strategy to expand direct service and distribution capabilities in areas of the country where such presence will enhance our ability to serve national accounts, while increasing our sales effort with local companies and public agencies.Business Segments We operate in two reportable segments based on geographic area: North America and the United Kingdom. Revenues from external customers and from Pitney Bowes are attributed to geographic regions based on where the revenues are derived. Financial information by segment is set forth in Note 5, "Business Segment Information," of the "Notes to Consolidated Financial Statements" included in Item 8 herein.Products We offer a broad range of office copier/MFPs, facsimile machines and related products and services. These products and services serve a wide range of customer needs from departmental to workgroup solutions. The utilization of digital technology has led to development of equipment that contains multiple capabilities and greater options for document imaging and management applications. Historically, we have used standard industry classifications to classify our equipment product offerings as part of either the copier product line or the facsimile product line based upon the primary function of the equipment. The evolution of technology has blurred distinctions between traditional copiers and facsimiles since most new products are multifunctional. Imagistics has not introduced a single function machine in over four years. Facsimile has evolved into a feature found on machines ranging in speed from 10 pages per minute to 65 pages per minute rather than a dedicated single function machine. Some time in the future, differentiating between facsimile and copier equipment will not be meaningful. We offer a broad range of products for departmental applications including color, universal black and white and color, black and white, digital, networked and stand-alone copiers/MFPs. Our definition of departmental machines incorporates the standard industry product segments 2 through 5, which range in speed from 20 to 90 pages per minute for black and white prints and typically produce a maximum size output consisting of ledger size copies/prints. Our digital black and white copier/MFP departmental solutions include twelve products with speeds from 20 to 85 pages per minute. Our line of products can address application needs of workgroups with as few as several hundred to as many as 750,000 impressions per month. Most of these solutions are available as multifunctional devices and offer a range of finishing solutions from simple collating to booklet making, Z-folding, hole punching and multi-position stapling. During 2004, we discontinued our black and white analog refurbished product line offerings and are currently concentrating on refurbished digital copier/MFP offerings and will be migrating our remanufactured copier/MFPs from analog to digital during 2005. Our current 22 and 31 page per minute digital color copier products are positioned to provide both color capable and color centric solutions to clients, ranging in speed from 31 to 45 pages per minute in monochrome and 11 to 31 pages per minute in full color. We currently offer four color products. These multifunctional digital copiers offer copying and networking functionality and are designed to support both color and monochrome applications and offer enhanced image quality color printing and copying, a wide range of digital art functions and enhanced finishing options that include booklet making capabilities. We also offer a broad range of lower-end workgroup products and solutions. Our definition of workgroup machines is the standard industry product Segment 1 which range in speed from 11 to 19 pages per minute for black and white prints and typically produce a maximum size output consisting of legal size copies/prints. Our workgroup products include traditional copiers, MFPs and facsimile solutions. We have historically been a leader in workgroup facsimile systems and one of the largest suppliers of facsimile equipment to the Fortune 1000. We currently offer a full range of workgroup facsimile solutions that range from traditional new and remanufactured facsimile equipment to MFPs. We currently offer eight new MFP solutions; five remanufactured facsimile machines and one new facsimile machine. We also maintain alliances with leading document software solutions providers to satisfy our customers' document management requirements. Through our alliances, we provide our customers with access to software solutions providers that enable printing from host applications directly to lower cost Imagistics' networked MFPs without re-coding, that deliver documents directly to point of need whenever required and that allow our customers to build customized document management applications, from simple scan-store-retrieve, to complex enterprise systems involving automated workflows, web-access, and multi-level security. Other partners provide facsimile server solutions that increase productivity and decrease costs of traditional facsimile applications and software tools for the design, generation and delivery of all types of forms, reports and other documents.Supplies We offer a full complement of consumable supplies for our products, such as copier and facsimile toner and cartridges, staples and paper. Many of our copier/MFP customers enter into cost-per-copy rental and/or maintenance agreement plans that include supplies. This accounts for a constant source of copier/MFP supply revenue and helps to achieve a high level of customer retention. Demand for facsimile supplies has decreased with the use of e-mail and the availability of third-party refilled toner cartridges. In response to this decrease in demand, we introduced our own line of refilled cartridges under the "ECO" brand. Refilled ECO cartridges work with many of our own facsimile machines and also with many competitor facsimile machines andlaser printers. With increased printing on multifunctional devices and the deployment of color solutions, we expect related supplies revenue related to these MFPs to increase, which will offset a portion of the loss in facsimile supplies revenue.Service Our continued commitment to our products and customers is evident in the many aftermarket service options that we provide. Our products are serviced by our nationwide service organization of approximately 1,200 Imagistics and contracted service representatives. We believe that this dedicated service force provides us with a distinct advantage over many of our competitors. These representatives are trained to service our product line and are managed through a central dispatch system to meet strict customer response time requirements. These representatives provide a full range of preventative maintenance and repair services to major account customers and commercial users. We support all of our customers through our 24 hour-a-day, 7 day-a-week diagnostic center. Located in Melbourne, Florida, the diagnostic center is staffed with Imagistics employees who are experts in the use and servicing of our products and who help minimize any downtime or disruption to our customers. The diagnostic center usually handles over 3,500 calls from customers each day.Financing Options We provide our customers with flexible financing options that allow for the sale, lease or rental of our products. In the past, we have sold products to commercial users either directly to the end user or to a leasing company that, in turn, leases the product to the end user. Where leasing is involved, we sell equipment to either Pitney Bowes' wholly owned subsidiary, PBCC, or to other finance companies. Currently, PBCC is the primary source of lease financing for our products. We have entered into an agreement with PBCC that provides for an ongoing lease-purchase equipment-financing program for our products. In December 2004, Pitney Bowes announced their intent to spin-off PBCC to shareholders. We do not believe that this will have a material impact on our relationship with PBCC. In 2004 and 2003, approximately 15% and 14% respectively, of our revenues were derived from sales to PBCC for lease to the end user. Historically, in offering products to our major account customers, we have used a rental strategy. Most often, we rent our facsimile machines at a flat rate and we are increasingly renting copier and MFP based solutions to our large major account customers as well. We typically rent our copiers on either a cost-per-copy basis, with minimum monthly page volumes, or at a flat rate with allowance and overage plans for certain services and other options. In the case of rentals, we seek to negotiate a master rental contract with our customers that can be revised to reflect rental of additional products and upgrades to current products or additional services. Generally, our rental contracts are for 36-month terms with renewal options that are automatic unless the customer gives prior notice of cancellation. These rental contracts also cover service and, in most cases, include supplies for use with our equipment. We believe that this approach provides the flexibility this customer base requires and many prefer compared to owning these assets.Customers Our primary customers are mid-to-large corporate customers and government entities. We serve major companies in the manufacturing, distribution, financial services, government and education markets as well as others. While continuing to strengthen and expand our relationships with our current customers, we have also established new initiatives geared specifically toward more efficiently serving mid-sized and regional companies or commercial users, while shifting our focus to multi-location customers. We plan to maintain our relationships with commercial users through the use of our trained team of commercial sales representatives. In an effort to expand our distribution organization and increase service coverage for multi-location customers, Imagistics has from time to time acquired independent regional office equipment dealerships. Imagistics' products are incorporated into their product mix and their sales and service teams are fully trained by Imagistics. We market and distribute our products to the following types of customers: o major national accounts, including large corporate customers, o government and education entities and o commercial accounts, including mid-size and regional businesses. National account customers include major national and international corporations. Because we began our business by serving major account customers in the facsimile market 20 years ago and have maintained steady relationships with many of these same customers, our major accounts provide us with recurring rental revenues over longer-term contracts. Our marketing strategy includes establishing long-term copier/MFP-based relationships with our customers, similar to those we have established with ourfacsimile customers, by leveraging our national sales and service organization to meet their needs. In addition, because of their individual and complex needs, we are able to provide our major account customers with cutting-edge products as well as customized approaches to their specific needs. We believe customers in these markets have a preference for doing business with companies they have a long-term relationship with and our existing business relationships allow us to monitor customer needs and provide appropriate upgrades. We target state governments and agencies, counties, cities, local governments and other political sub-divisions. These customers provide a long-term source of business and, because of our experience we can anticipate their document imaging needs. Government entities may source products through varied bidding processes or through negotiated agreements. Our government contracts are generally for a period of four to five years. State and local government entities typically acquire products through their own varied bidding processes. Although many of these contracts are terminable for non-appropriations of funds by our customers, we have not had a significant number of early terminations of these contracts for non-appropriation. We also target commercial accounts, which generally have more discrete document imaging needs for one specific area or portion of their business or workplace. We customarily sell or lease equipment to these customers and, in most instances, our contracts provide ongoing supplies and service to them. Because of our approach of providing a system of national direct sales and service, our ability to provide a range of products, system options and after-market arrangements to our major account customers and our attention to maintaining our relationships with customers through consistent product service, we believe that we can expand these markets in the future. Due to our diversified customer base, no single customer is large enough to have a material impact on our overall business. Also, due to our diverse customer base and the recurring nature of our rental, service and supply revenues, seasonal variations do not significantly impact our business.Sales and Marketing We believe that our sales and marketing approach is uncommon in our industry. While many of our competitors offer either their own or other manufacturers branded products either by dealer sales or retail sales, we rely solely on distributing Imagistics' branded products through direct sales with support by direct service. Research conducted by CAP Ventures and J.D. Power and Associates indicates a preference for direct sales and service. Our direct sales and service personnel are located throughout the United States, Canada and the United Kingdom, marketing and servicing our products to our customers and potential customers. Our representatives use national sales and service standards so that our customers receive consistent and reliable assistance regardless of where they are located or which one of our locations they call. In addition to our United States business, we currently operate in Canada and the United Kingdom. Our Canadian and U.K. businesses offer a complete product line. We plan to continue to increase the international marketing of our products. Our goal is to increase our service to our current customers as well as broaden our existing customer base. Our Canadian business is headquartered in Mississauga, Canada. Our U.K. business is headquartered in Harlow, England. Our products are also offered in Canada through Pitney Bowes of Canada, a subsidiary of Pitney Bowes.Suppliers and Distribution For maximum flexibility in product development and to assure our clients of the best possible business document solutions, we purchase equipment from a number of different firms throughout the world, rather than manufacture our products ourselves. We impose high quality standards on all of our equipment suppliers. We do internal testing of all products before adding them to the Imagistics family. The testing focuses on our customers' applications to ensure that we have the best offering to meet these needs. We source our equipment from suppliers throughout the world including Konica Minolta, Muratec, Brother, Sharp and Toshiba. We have contractual relationships with these suppliers, although we continue to search for the best products and do not enter into exclusive relationships with any of our suppliers. We do not have minimum order quantities with any of our suppliers. Konica Minolta, Sharp, Toshiba and Brother currently supply a significant portion of our new copier/MFP equipment. If Konica Minolta, Sharp, Toshiba or Brother were unable to deliver products for a significant period of time, we would be required to find replacement products, which may not be available on a timely or cost-effective basis. This could have a material adverse effect on our business, financial condition and results of operations. We do not believe that we are materially dependent upon any other supplier of products, whether new products, parts or consumable supplies. To mitigate against disruptions to our business, we keep an adequate level of inventory on hand to meet the needs of our customers for several months. Using third-party suppliers allows us to offer our customers products with the most current features and technologies. We believe that this sourcing strategy also offers us maximum flexibility. As we expand or upgrade our product line, we are able tochoose from the best available products for each product range. We select products by balancing costs and availability of features with ease of customer use, service personnel training, parts availability, reliability and serviceability. Because of these benefits, in most cases, we purchase similar products from one manufacturer to cover several product levels. We generally require manufacturers to build our products to order with 60 day or less lead times. We usually take title to the goods at the factory, or in the case of Asian factories, at the closest seaport. Finished goods are shipped by ocean freight to a United States port, primarily in California, and then trans-shipped to one of approximately nine warehouses in the United States. In the normal course of business, when a customer order is received, equipment is unpacked, set up and tested in the warehouse prior to shipping to the customer location. Supplies are stored primarily at one warehouse located in Columbus, Ohio and are shipped via ground service or overnight delivery directly to our customers or service engineers. Our Canadian and United Kingdom businesses use similar manufacturing and shipping procedures and finished goods are shipped directly to two contract warehouses in Canada and one of two contract warehouses in the United Kingdom. Our reliance on Asian manufacturing could make our business susceptible to disruptions in international transportation due to port strikes, acts of war or other factors beyond our control.Patents, Trademarks and Copyrights In connection with the Spin-off, we entered into a trademark license, patent license and copyright license agreement that provided us with a non-exclusive license to the Pitney Bowes trademark for a period of up to two years following the Spin-off. In addition, the agreement provides for us to license certain patents and patent applications on a non-exclusive basis in connection with our business in the United States and the United Kingdom, for the term of the relevant patents, none of which are material to our business. Finally, the agreement provides for us to license all copyrighted material used in connection with our business in the United States and the United Kingdom for the term of the relevant copyrights. We have registered "Imagistics" as a trademark in the United States, Canada, the European Community and other jurisdictions and we have completely transitioned to the use of the "Imagistics" brand name. In addition, as a reseller of equipment supplied to us by major manufacturers of imaging equipment, we benefit from the use of patents and patent licenses secured by our suppliers.Employees We employ approximately 3,600 individuals throughout the world including approximately 1,200 sales personnel. We employ approximately 100 people in Canada. We also employ approximately 100 people in the United Kingdom, almost all of whom are subject to the European Works Council regulations. None of our other employees are covered by a collective bargaining agreement. We believe that we have good relations with our employees.Competition We are primarily involved in the supply of document imaging equipment to corporate, governmental and commercial customers. The document imaging equipment supply industry is highly competitive. Customers rigorously evaluate suppliers on the basis of product features, functions, reliability and quality, service expertise, geographic reach and price competitiveness. Many of our competitors manufacture their own products. Although we believe that our reliance on third parties for manufacturing provides us with certain benefits, it is possible that our competitors' guaranteed access to product supply through captive manufacturing operations may provide them with a competitive advantage. In addition, our primary suppliers sell products in competition with us, either directly or through independent office equipment dealers. Some of our competitors have substantially greater financial resources than we do. Our primary competitors are Xerox, Ikon, Danka, Canon, Ricoh, Global Imaging, Hewlett Packard and Lexmark.Environmental Matters We are subject to federal, state and local laws intended to protect the environment. We believe that, as a general matter, our policies, practices and procedures are properly designed to reasonably prevent the risk of environmental damage and financial liability to the Company.Backlog Generally, equipment sales and rental orders are shipped within 30 days and supplies orders are shipped immediately. Accordingly, our backlog is not significant.