Electronics For Imaging Inc. Annual Report 2011

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FY2011 Annual Report · Electronics For Imaging Inc.

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ELECTRONICS FOR IMAGING, INC.
2012 PROXY STATEMENT AND
2011 ANNUAL REPORT

ELECTRONICS FOR IMAGING, INC.
303 Velocity Way
Foster City, California 94404

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held on May 11, 2012

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TO THE STOCKHOLDERS:

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the “Annual Meeting”) of

ELECTRONICS FOR IMAGING, INC., a Delaware corporation (the “Company”), will be held on May 11, 2012 at
9:00 a.m., Pacific Time, at the Company’s corporate headquarters, 303 Velocity Way, Foster City, California
94404 for the following purposes:

To elect six (6) directors to hold office until the next annual meeting or until their successors are duly
elected and qualified.

To approve a non-binding advisory proposal on executive compensation.

To ratify the appointment of the independent registered public accounting firm for the Company for the
fiscal year ending December 31, 2012.

To transact such other business as may properly come before the meeting or any adjournment or
postponement thereof.

The foregoing items of business are more fully described in the Proxy Statement accompanying this Notice.

The Board of Directors has approved the proposals described in the Proxy Statement and recommends that you
vote “FOR” the election of all nominees for director in Proposal 1 and “FOR” Proposals 2 and 3.

Only stockholders of record at the close of business on March 27, 2012 are entitled to notice of and to vote

at the Annual Meeting and at any adjournment or postponement thereof.

All stockholders are cordially invited to attend the Annual Meeting in person. However, to ensure your
representation at the Annual Meeting, you are urged to submit your proxy electronically, by telephone or by
marking, signing, dating and returning the enclosed proxy for that purpose. Any stockholder attending the
Annual Meeting may vote in person even if he or she has returned a proxy.

Sincerely,

/s/ BRYAN KO

Bryan Ko
Secretary

Foster City, California
April 5, 2012

YOUR VOTE IS IMPORTANT.
IN ORDER TO ENSURE YOUR REPRESENTATION AT THE MEETING,
YOU ARE REQUESTED TO SUBMIT YOUR PROXY ELECTRONICALLY OR BY TELEPHONE,
AS DESCRIBED UNDER “SUBMISSION OF PROXIES; INTERNET AND TELEPHONE VOTING”
IN THE ATTACHED PROXY STATEMENT, OR
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY
AS PROMPTLY AS POSSIBLE AND RETURN IT IN THE ENCLOSED ENVELOPE.

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ELECTRONICS FOR IMAGING, INC.

PROXY STATEMENT

FOR THE ANNUAL MEETING OF STOCKHOLDERS

May 11, 2012

INFORMATION CONCERNING SOLICITATION AND VOTING

General

This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors
(the “Board of Directors” or the “Board”) of ELECTRONICS FOR IMAGING , INC., a Delaware corporation (the
“Company”), for use at the Annual Meeting of Stockholders to be held on May 11, 2012 at 9:00 a.m., Pacific
Time (the “Annual Meeting”), or at any adjournment or postponement thereof. The Annual Meeting will be held
at the Company’s corporate headquarters, 303 Velocity Way, Foster City, California 94404. The Company
intends to mail this Proxy Statement and accompanying proxy card on or about April 6, 2012 to stockholders
entitled to vote at the Annual Meeting.

At the Annual Meeting, the stockholders of the Company will be asked: (1) to elect six (6) directors to hold

office until the next annual meeting or until their successors are duly elected and qualified; (2) to provide a
non-binding advisory vote to approve the Company’s executive compensation program; (3) to ratify the
appointment of the Company’s independent registered public accounting firm for the Company for the fiscal year
ending December 31, 2012; and (4) to transact such other business as may properly come before the meeting or
any adjournment or postponement thereof. All proxies which are properly completed, signed and returned to the
Company or properly submitted electronically or by telephone prior to the Annual Meeting will be voted.

Voting Rights and Outstanding Shares

Only stockholders of record at the close of business on March 27, 2012 (the “Record Date”) are entitled to
receive notice of and to vote at the Annual Meeting. As of the Record Date, the Company had outstanding and
entitled to vote 46,317,526 shares of common stock. The holders of a majority of the shares outstanding and
entitled to vote at the Annual Meeting constitute a quorum. Therefore, the Company will need at least 23,158,764
shares entitled to vote present in person, by telephone or by proxy at the Annual Meeting for a quorum to exist.
Each holder of record of common stock on the Record Date will be entitled to one vote per share on all matters to
be voted upon by the stockholders. There is no cumulative voting for the election of directors.

All votes will be tabulated by the inspector of election appointed for the Annual Meeting, who will

separately tabulate affirmative and negative votes, abstentions, withheld votes and broker non-votes. Abstentions,
withheld votes and broker non-votes are counted as present for purposes of establishing a quorum for the
transaction of business at the Annual Meeting. Abstentions represent a stockholder’s affirmative choice to
decline to vote on a proposal. Broker non-votes occur when a broker, bank or other nominee holding shares for a
beneficial owner does not vote on a particular matter because such broker, bank or other nominee does not have
discretionary authority to vote on that matter and has not received voting instructions from the beneficial owner.
Brokers, banks and other nominees typically do not have discretionary authority to vote on non-routine matters.
Under the rules of the New York Stock Exchange (the “NYSE”), as amended (the “NYSE Rules”), which apply
to all NYSE-licensed brokers, brokers have discretionary authority to vote on routine matters when they have not
received timely voting instructions from the beneficial owner.

Stockholders’ choices for Proposal One (election of directors) are limited to “for” and “withhold.” A

plurality of the shares of common stock voting in person or by proxy is required to elect each of the six
(6) nominees for director under Proposal One. A plurality means that the six (6) nominees receiving the largest
number of votes cast (votes “for”) will be elected. Because the election of directors under Proposal One is

considered to be a non-routine matter under the NYSE Rules, if you do not instruct your broker, bank or other
nominee on how to vote the shares in your account for Proposal One, brokers will not be permitted to exercise
their voting authority and uninstructed shares may constitute broker non-votes. Abstentions and broker non-votes
will have no effect on the outcome of Proposal One because the election of directors is based on the votes
actually cast. Withheld votes will be considered for purposes of the Company’s “majority withheld vote” policy
as set forth in the Company’s Board of Director Guidelines (the “Board of Director Guidelines”). The Board of
Director Guidelines can be found at the Company’s website at www.efi.com.

The affirmative vote of a majority of shares entitled to vote that are present in person or by proxy is required

to approve Proposal Two (advisory vote on executive compensation). Because the advisory vote under Proposal
Two is considered to be a non-routine matter under the NYSE Rules, if you do not instruct your broker, bank or
other nominee on how to vote the shares in your account for Proposal Two, brokers will not be permitted to
exercise their voting authority and uninstructed shares may constitute broker non-votes. Abstentions will have
the same effect as negative votes on this proposal because they represent votes that are present, but not cast.
Although broker non-votes are considered present for quorum purposes, they are not considered entitled to vote,
and so have no effect on the outcome of Proposal Two.

The affirmative vote of a majority of shares entitled to vote that are present in person or by proxy is required

to ratify the selection of the independent registered public accounting firm for the fiscal year ending
December 31, 2012 under Proposal Three (ratification of appointment of auditors). Abstentions have the same
effect as negative votes on this proposal because they represent votes that are present, but not cast. Proposal
Three is considered to be a routine matter and, accordingly, if you do not instruct your broker, bank or other
nominee on how to vote the shares in your account for Proposal Three, brokers will be permitted to exercise their
discretionary authority to vote for the ratification of the appointment of auditors.

Please be advised that Proposal Two (advisory vote on executive compensation) and Proposal Three

(Ratification of appointment of auditors) are advisory only and not binding on the Company. Our Board of
Directors will consider the outcome of the vote on each of these proposals in considering what action, if any,
should be taken in response to the advisory vote by stockholders.

Adjournment of Meeting

In the event that sufficient votes in favor of the proposals are not received by the date of the Annual

Meeting, the persons named as proxies may propose one or more adjournments of the Annual Meeting to permit
further solicitation of proxies. Any such adjournment will require the affirmative vote of a majority of shares
entitled to vote present in person or by proxy at the Annual Meeting.

Submission of Proxies; Internet and Telephone Voting

If you hold shares as a registered stockholder in your own name, you should complete, sign and date the

enclosed proxy card as promptly as possible and return it using the enclosed envelope. If your completed proxy
card is received prior to or at the Annual Meeting, your shares will be voted in accordance with your voting
instructions. If you sign and return your proxy card but do not give voting instructions, your shares will be voted
FOR (1) the election of the Company’s six (6) nominees as directors; (2) the advisory vote on executive
compensation; (3) the ratification of the appointment of the independent registered public accounting firm for the
Company for the fiscal year ending December 31, 2012; and (4) as the proxy holders deem advisable, in their
discretion, on other matters that may properly come before the Annual Meeting. If you hold shares through a
bank or brokerage firm, the bank or brokerage firm will provide you with separate voting instructions on a form
you will receive from them. Many such firms make telephone or Internet voting available, but the specific
processes available will depend on those firms’ individual arrangements.

Solicitation

The cost of preparing, assembling, printing and mailing the Proxy Statement, the Notice of Annual Meeting

and the enclosed proxy, as well as the cost of soliciting proxies relating to the Company’s proposals for the
Annual Meeting, will be borne by the Company. The Company will request banks, brokers, dealers and voting
trustees or other nominees to solicit their customers who are beneficial owners of shares listed of record in names
of nominees and will reimburse such nominees for the reasonable out-of-pocket expenses of such solicitations.
The original solicitation of proxies by mail may be supplemented by telephone, facsimile, telegram, email and
personal solicitation by directors, officers and regular employees of the Company or, at the Company’s request, a
proxy solicitation firm. No additional compensation will be paid to directors, officers or other regular employees
of the Company for such services, but a proxy solicitation firm will be paid a customary fee if it renders
solicitation services.

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Revocability of Proxies

Any proxy given pursuant to this solicitation may be revoked by the person giving it at any time before its

use by delivering to the Secretary of the Company at the Company’s principal executive office, 303 Velocity
Way, Foster City, California 94404, a written notice of revocation or a duly executed proxy bearing a later date,
or by attending the Annual Meeting and voting in person. Attendance at the Annual Meeting will not, by itself,
revoke a proxy.

Stockholder Proposals To Be Presented at Next Annual Meeting

The deadline for submitting a stockholder proposal for inclusion in the Company’s proxy statement and

form of proxy for the Company’s annual meeting of stockholders to be held in 2013, pursuant to Securities and
Exchange Commission (the “SEC”) Rule 14a-8, is currently expected to be December 6, 2012. The Company’s
amended and restated bylaws (the “Bylaws”) also establish a deadline with respect to discretionary voting for
submission of stockholder proposals that are not intended to be included in the Company’s proxy statement. For
nominations of persons for election to the Board of Directors and other business to be properly brought before
the 2013 annual meeting by a stockholder, notice must be delivered to or mailed and received at the principal
executive offices of the Company not earlier than the close of business on January 11, 2013 and not later than the
close of business on February 10, 2013 (the “Discretionary Vote Deadline”). These deadlines are subject to
change if the date of the 2013 annual meeting is more than 30 calendar days before or more than 60 calendar
days after the date of the Annual Meeting. If a stockholder gives notice of such proposal after the Discretionary
Vote Deadline, the Company’s proxy holders will be allowed to use their discretionary voting authority to vote
the shares they represent as the Board of Directors may recommend, which may include a vote against the
stockholder proposal when and if the proposal is raised at the Company’s 2013 annual meeting.

Additional Copies

The Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011 (the “Annual

Report”) will be mailed concurrently with the mailing of the Notice of Annual Meeting and Proxy Statement to
all stockholders entitled to notice of and to vote at the Annual Meeting. Except to the extent expressly
incorporated by reference into this Proxy Statement, the Annual Report does not constitute, and should not be
considered, a part of this proxy solicitation material.

If you would like a copy of the Annual Report, the Company will provide one to you free of charge
upon your written request to Investor Relations at Electronics For Imaging, Inc., 303 Velocity Way, Foster
City, California 94404.

IMPORTANT NOTICE REGARDING INTERNET AVAILABILITY OF PROXY MATERIALS

FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 11, 2012: The
Company’s Proxy Statement dated APRIL 5, 2012 and Annual Report are available electronically at
http://ir.efi.com/proxy.cfm.

PROPOSAL ONE

ELECTION OF DIRECTORS

Nominees

There are six (6) nominees for election at the Annual Meeting. Each nominee currently serves as a director
and, was elected by stockholders at the 2011 annual meeting. On December 29, 2011, Fred Rosenzweig notified
the Company of his resignation from the Board of Directors effective December 31, 2011. Votes cannot be cast,
whether in person or by proxy, for more individuals than the six (6) nominees named in this Proxy Statement.
Following the Annual Meeting, the Board of Directors will consist of six (6) members. Although fewer nominees
are named than the number fixed by the Bylaws, proxies cannot be voted for a greater number of persons than the
number of nominees named. The Board may elect additional members in the future in accordance with the
Bylaws.

Unless otherwise instructed, the proxy holders will vote the proxies received by them for the six (6) nominees

named below. In the event that any Board of Director’s nominee is unable or declines to serve as a director at the
time of the Annual Meeting, the proxies will be voted for the nominee who shall be designated by the present Board
of Directors to fill the vacancy. In the event that additional persons are nominated for election as directors by the
present Board of Directors, the proxy holders intend to vote all proxies received by them in such a manner as will
assure the election of as many of the nominees listed below as possible. Each person has been recommended for
nomination by the Nominating and Governance Committee of the Board of Directors and has been nominated by
the Board of Directors for election. Each person nominated for election has agreed to serve, and the Company is not
aware of any nominee who will be unable or will decline to serve as a director. The term of office for each person
elected as a director will continue until the next annual meeting of stockholders or until his successor has been duly
elected and qualified, or until such director’s earlier death, resignation or removal.

As set forth in the Company’s Board of Director Guidelines and the Nominating and Governance
Committee Charter, the Company has a majority voting policy for the election of directors in an uncontested
election. Pursuant to this policy, in the event that a nominee for director in an uncontested election receives more
“withheld” votes for his or her election than “for” votes, the director must submit a resignation to the Board of
Directors. The Nominating and Governance Committee of the Board of Directors will evaluate and make a
recommendation to the Board of Directors with respect to the offered resignation. The Board of Directors will
take action on the recommendation within 90 days following certification of the stockholder vote. No director
who tenders a resignation may participate in the Nominating and Governance Committee’s or the Board of
Directors’ consideration of the matter. The Company will publicly disclose the Board of Directors’ decision
including, as applicable, the reasons for rejecting a resignation.

The names of the nominees, each of whom is currently a director of the Company elected by the

stockholders or appointed by the Board of Directors, and certain information about them as of March 27, 2012
are set forth below.

Name of Nominee and Principal Occupation

Age Director Since

Eric Brown(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

2011

Chief Operating Officer, Chief Financial Officer and Executive Vice President,

Polycom, Inc.

Gill Cogan(1)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

Founding Partner, Opus Capital Ventures LLC

Guy Gecht . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

Chief Executive Officer of the Company

Thomas Georgens(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

Chief Executive Officer, President and Director, NetApp, Inc.

Richard A. Kashnow(2)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

Consultant, Self-Employed

Dan Maydan(1)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76

Member, Board of Trustees, Palo Alto Medical Foundation

1992

2000

2008

1996

(1) Member of the Compensation Committee.
(2) Member of the Nominating and Governance Committee.
(3) Member of the Audit Committee.

Mr. Brown has served as a director of the Company since April 7, 2011. Mr. Brown has served as Chief
Operating Officer, Chief Financial Officer and Executive Vice President of Polycom, Inc. since February 21,
2012. Prior to that Mr. Brown served as Executive Vice President, Chief Financial Officer of Electronic Arts,
Inc., an interactive entertainment software company, from April 2008 to February 2012. From January 2005 to
April 2008, Mr. Brown worked at McAfee, Inc., a security technology company, serving as Chief Operating
Officer and Chief Financial Officer. Mr. Brown was the President and Chief Financial Officer of MicroStrategy
Incorporated, a business intelligence software provider, from 2000 until 2004. From 1998 to 2000, Mr. Brown
worked at Electronic Arts as Vice President and Chief Operating Officer of the Electronic Arts Redwood Shores
(California) studio division. From 1995 to 1998, Mr. Brown was co-founder and Chief Financial Officer of
Datasage, Inc., a Boston-based enterprise technology company. Mr. Brown received a B.S. in Chemistry from the
Massachusetts Institute of Technology and a M.B.A from the MIT Sloan School of Management. Mr. Brown’s
oversight of worldwide business and finance operations with responsibility for public company financial
reporting, balance sheet management, audit, and tax matters provides the Board of Directors with a broad range
of expertise on various operational and financial issues facing a global organization.

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Mr. Cogan has served as a director of the Company since 1992 and as Chairman of the Board of Directors

since June 28, 2007. Mr. Cogan is a founding Partner of Opus Capital Ventures LLC, a venture capital firm
established in 2005. Previously, he was the Managing Partner of Lightspeed Venture Partners, a venture capital
firm, from 2000 to 2005. From 1991 until 2000, Mr. Cogan was Managing General Partner of Weiss, Peck &
Greer Venture Partners, L.P., a venture capital firm. From 1986 to 1990, Mr. Cogan was a partner of Adler &
Company, a venture capital group handling technology-related investments. From 1983 to 1985, he was
Chairman and Chief Executive Officer of Formtek, Inc., an imaging and data management computer company,
whose products were based upon technology developed at Carnegie-Mellon University. Mr. Cogan is currently a
director of several privately held companies. Mr. Cogan holds an M.B.A. from the University of California at
Los Angeles. Mr. Cogan’s experience in venture capital firms brings him extensive knowledge of technology
companies that is valuable to the Board of Directors’ discussions of the Company’s technology-related
investments.

Mr. Gecht was appointed Chief Executive Officer of the Company on January 1, 2000. From July 1999 to
January 2000, he served as President of the Company. From January 1999 to July 1999, he was Vice President
and General Manager of Fiery products of the Company. From October 1995 through January 1999, he served as
Director of Software Engineering. Prior to joining the Company, Mr. Gecht was Director of Engineering at
Interro Systems, Inc., a technology company, from 1993 to 1995. From 1991 to 1993, he served as Software
Manager of ASP Computer Products, a networking company, and from 1990 to 1991 he served as Manager of
Networking Systems for Apple Israel, a technology company. From 1985 to 1990, he served as an officer in the
Israeli Defense Forces, managing an engineering development team, and later was an acting manager of one of
the IDF high-tech departments. Mr. Gecht currently serves as a member of the board of directors, audit
committee and compensation committee of Check Point Software Technologies Ltd., a global information
technology security company. Mr. Gecht holds a B.S. in Computer Science and Mathematics from Ben Gurion
University in Israel. Mr. Gecht’s different previous roles within the Company, along with his experience as the
Company’s Chief Executive Officer for over ten (10) years, give him unique insights into the Company’s
challenges, opportunities and operations.

Mr. Georgens has served as a director of the Company since 2008. Mr. Georgens is currently Chief Executive

Officer, President and Director of NetApp, Inc., a provider of data management solutions. Prior to becoming its
Chief Executive Officer, from February 2008 to August 2009, Mr. Georgens was President and Chief Operating
Officer of NetApp, Inc. From January 2007 to January 2008, Mr. Georgens was Executive Vice President,

Product Operations and from October 2005 to January 2007, he was Executive Vice President and General
Manager of Enterprise Storage Systems for NetApp, Inc. From 1996 to 2005, Mr. Georgens served LSI Logic
and its subsidiaries, including Engenio, in various capacities, including as President, Chief Executive Officer,
Vice President and General Manager, and Director. Prior to working with LSI Logic and its subsidiaries,
Mr. Georgens spent 11 years at EMC Corporation in a variety of engineering and marketing positions.
Mr. Georgens graduated from Rensselaer Polytechnic Institute with a B.S. and M.Eng. degrees in Computer and
Systems Engineering, and also holds an M.B.A. from Babson College. Mr. Georgens’s current role of Chief
Executive Officer of a NASDAQ-100 company brings to the Board of Directors the perspective of a leader
facing similar current economic, social and governance issues. In addition, his role provides Mr. Georgens with
insight in the preparation and review of financial statements of a public company.

Mr. Kashnow has served as a director of the Company since 2008. Since 2003, Mr. Kashnow has been self-
employed as a consultant. From 1999 until 2003, Mr. Kashnow served as President of Tyco Ventures, the venture
capital unit he established for Tyco International, Inc., a diversified manufacturing and services company. From
1995 to 1999, he served as Chairman, Chief Executive Officer, and President of Raychem Corporation, a global
technology materials company. He started his career as a physicist at General Electric’s Corporate Research and
Development Center in 1970. During his seventeen years with General Electric, he progressed through a series of
technical and general management assignments. He served in the U.S. Army between 1968 and 1970 and
completed his active duty tour as a captain. He also serves on the board of directors of Ariba, Inc., a public
company providing on-demand spend management solutions. Until March 2008, he served as Chairman of
ActivIdentity, a public software security company. Until September 2007, he also served as Chairman of Komag,
Inc., a public data storage media company, which was acquired at that time by Western Digital. Until September
2006, he served on the board of directors of Parkervision, Inc., a radio frequency technology company, and as
Chairman of its Compensation Committee. Mr. Kashnow received a Ph.D. in Physics from Tufts University in
1968 and a B.S. in Physics from Worcester Polytechnic Institute in 1963. Mr. Kashnow’s experience in
supervising a principal financial officer as the former Chief Executive Officer of Raychem Corporation provides
the Board of Directors with a perspective of an executive involved in the preparation and review of financial
statements of a public company.

Dr. Maydan has served as a director of the Company since 1996. Dr. Maydan was President of Applied
Materials Inc., a semiconductor manufacturing equipment company, from January 1994 to April 2003 and a
member of that company’s board of directors from June 1992 to October 2005. From March 1990 to January
1994, Dr. Maydan served as Applied Materials’ Executive Vice President, with responsibility for all product
lines and new product development. Before joining Applied Materials in September 1980, Dr. Maydan spent
thirteen years managing new technology development at Bell Laboratories during which time he pioneered laser
recording of data on thin-metal films and made significant advances in photolithography and vapor deposition
technology for semiconductor manufacturing. In 1998, Dr. Maydan was elected to the National Academy of
Engineering. He serves on the board of directors of Infinera Corporation, a digital optical communications
company and the board of directors of a privately held company. Dr. Maydan is a member of the Board of
Trustees of the Palo Alto Medical Foundation (P.A.M.F.). Dr. Maydan received his B.S. and M.S. degrees in
Electrical Engineering from Technion, the Israel Institute of Technology, and his Ph.D. in Physics from
Edinburgh University in Scotland. Dr. Maydan’s broad experience in technology, innovation, marketing and
operations provides the Board of Directors with a global perspective on the issues faced by manufacturing and
technology companies.

Vote Required

Subject to the “majority withheld votes” policy in the Board of Director Guidelines, directors are elected if

they receive a plurality of the votes present in person or represented by proxy at the Annual Meeting.
Accordingly, the six (6) nominees receiving the largest number of votes cast (votes “for”) will be elected.

Recommendation of the Board of Directors

The Company’s Board of Directors recommends a vote “FOR” the election of all six (6) nominees listed
above. Proxies received by the Company will be voted “FOR” the election of all nominees listed above
unless the stockholder specifies otherwise in the proxy.

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MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS

Meetings of Board of Directors and Committees

The Board of Directors of the Company held a total of five (5) meetings in 2011 and acted once (1) by
unanimous written consent. The Board of Directors has established the following committees, among others, to
assist the Board of Directors in discharging its duties: (i) an Audit Committee, (ii) a Compensation Committee
and (iii) a Nominating and Governance Committee (collectively, the “Board Committees”). Current copies of the
charters for the Board Committees can be found on the Company’s website at www.efi.com. Each director
attended 75% or more of the total number of meetings of the Board of Directors and of the Board Committees
upon which such director served during 2011.

Audit Committee

The Audit Committee currently consists of Directors Georgens, Brown (Chairman) and Kashnow. The
Audit Committee conducted ten (10) meetings in 2011. Dr. Maydan served as a member of the Audit Committee
for part of 2011, until April 7, 2011. The Audit Committee oversees the accounting and financial reporting
processes of the Company and audits of the financial statements of the Company and assists the Board of
Directors in oversight and monitoring of the integrity of the Company’s financial statements, the Company’s
compliance with certain legal and regulatory requirements, the independent auditor’s qualifications,
independence and performance, and the Company’s systems of internal controls. The Audit Committee also
approves the engagement of and the services to be performed by the Company’s independent auditors. The Board
of Directors has determined that all members of the Audit Committee are “independent” as that term is defined in
Rule 5605(a)(2) of the NASDAQ Listing Rules (the “NASDAQ Rules”) and also meet the additional criteria for
independence of Audit Committee members set forth in Section 10A(m) under the Securities Exchange Act of
1934, as amended (the “Exchange Act”). In addition, the Board of Directors has determined that each member of
the Audit Committee is an “audit committee financial expert” as defined by the SEC.

The Audit Committee oversees the Company’s Ethics Program, which presently includes, among other
things, the Company’s Code of Business Conduct and Ethics, the Company’s Code of Ethics for the Management
Team, the Company’s Code of Ethics for the Accounting and Finance Team and the Company’s Code of Ethics
for the Sales Team (collectively, the “Codes”), an internal audit function responsible for receiving and
investigating complaints, a 24-hour global toll-free hotline and an internal website whereby employees can
anonymously submit complaints via email. The Company’s Codes can be found on the Company’s website at
www.efi.com. As further set forth below, the Audit Committee also oversees the Company’s risk assessment
function.

We intend to disclose any amendment to the Codes, or waiver from, certain provisions of the Codes as
applicable for our directors and executive officers, including our principal executive officer, principal financial
officer, principal accounting officer or controller or persons performing similar functions, by posting such
information on our website, at the address specified above.

Compensation Committee

The Compensation Committee currently consists of Directors Cogan (Chairman) and Maydan. The

Compensation Committee held eight (8) meetings in 2011. The Board of Directors has determined that all
members of the Compensation Committee are “independent” as that term is defined in Rule 5605(a)(2) of the
NASDAQ Rules. The Compensation Committee reviews and approves the Company’s executive compensation
policy and administers the Company’s stock plans. The Compensation Committee also reviews the
Compensation Discussion and Analysis contained in the Company’s proxy statements and prepares and approves
the Compensation Committee Report for inclusion in the Company’s proxy statements.

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Nominating and Governance Committee

The Nominating and Governance Committee currently consists of Directors Cogan, Kashnow (Chairman)

and Maydan. The Nominating and Governance Committee held one (1) meeting in 2011. The Board of Directors
has determined that all members of the Nominating and Governance Committee are “independent” as that term is
defined in Rule 5605(a)(2) of the NASDAQ Rules. The Nominating and Governance Committee develops and
recommends governance principles, recommends director nominees to the Board of Directors and considers the
resignation offers of any nominee for director, in accordance with its Charter and the Company’s Board of
Director Guidelines.

Consideration of Director Nominees

Stockholder Nominees

The policy of the Nominating and Governance Committee is to consider properly submitted stockholder
nominations for candidates for membership on the Board of Directors as described below under “Identifying and
Evaluating Nominees for Directors.” Properly communicated stockholder recommendations will be considered in
the same manner as recommendations received from other sources. In evaluating such nominations, the
Nominating and Governance Committee seeks to achieve a balance of knowledge, experience and capability on
the Board of Directors and to address the membership criteria set forth under “Director Qualifications.”

Stockholders may recommend individuals for consideration by submitting the materials set forth below to
the Company addressed to the Nominating and Governance Committee at the Company’s corporate headquarters.
To be timely, the written materials must be submitted within the time provided by the advance notice provisions
in the Bylaws in order to be included in the Company’s proxy statement for the subject annual meeting.

The written materials must include: (1) the name(s) and address(es) of the stockholder(s) providing the
notice, as they appear in the Company’s books, and of the other Proposing Persons (as defined below), (2) any
Disclosable Interests (as defined in the Bylaws) of the stockholder(s) providing the notice (or, if different, the
beneficial owner on whose behalf such notice is given) and/or each other Proposing Person, (3) all information
with respect to such proposed nominee that would be required to be set forth in a stockholder’s notice if such
proposed nominee were a Proposing Person, (4) all information relating to such proposed nominee that is
required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations
of proxies for election of directors in a contested election pursuant to Section 14 under the Exchange Act and the
rules and regulations thereunder, (5) a description of all direct and indirect compensation and other material
monetary agreements, arrangements and understandings during the past three years, and any other material
relationships, between or among the stockholder providing the notice (or, if different, the beneficial owner on
whose behalf such notice is given) and/or any Proposing Person, on the one hand, and each proposed nominee,
his or her respective affiliates and associates and any other persons with whom such proposed nominee (or any of
his or her respective affiliates and associates) is Acting in Concert (as defined below), on the other hand,
including, without limitation, all information that would be required to be disclosed pursuant to Item 404 under
Regulation S-K if such stockholder or beneficial owner, as applicable, and/or such Proposing Person were the
“registrant” for purposes of such rule and the proposed nominee were a director or executive officer of such
registrant, and (6) such other information (including one or more accurately completed and executed
questionnaires and executed and delivered agreements) as may reasonably be required by the Company to
determine the eligibility of such proposed nominee to serve as an independent director of the Company or that
could be material to a reasonable stockholder’s understanding of the independence or lack of independence of
such proposed nominee.

For purposes of the information required to be disclosed in the written materials described above, the term
“Proposing Person” means (i) the stockholder providing the notice of the nomination proposed to be made at the
meeting, (ii) the beneficial owner, if different, on whose behalf the nomination proposed to be made at the
meeting is made, (iii) any affiliate or associate of such beneficial owner (as such terms are defined in Rule 12b-2
under the Exchange Act) and (iv) any other person with whom such stockholder or such beneficial owner (or any
of their respective affiliates or associates) is Acting in Concert.

A person shall be deemed to be “Acting in Concert” with another person for purposes of the information

required to be disclosed in the written materials described above if such person knowingly acts (whether or not
pursuant to an express agreement, arrangement or understanding) in concert with, or towards a common goal
relating to the management, governance or control of the Company in parallel with, such other person where
(i) each person is conscious of the other person’s conduct or intent and this awareness is an element in their
decision-making process and (ii) at least one additional factor suggests that such persons intend to act in concert
or in parallel, which such additional factors may include, without limitation, exchanging information (whether
publicly or privately), attending meetings, conducting discussions, or making or soliciting invitations to act in
concert or in parallel; provided, that a person shall not be deemed to be Acting in Concert with any other person
solely as a result of the solicitation or receipt of revocable proxies from such other person in connection with a
public proxy solicitation pursuant to, and in accordance with, the Exchange Act. A person which is Acting in
Concert with another person shall be deemed to be Acting in Concert with any third party who is also acting in
concert with such other person.

Any director nominations proposed by stockholders for consideration by the Nominating and Governance

Committee should be addressed to:

Electronics For Imaging, Inc.
Attention: Nominating and Governance Committee
c/o Bryan Ko
303 Velocity Way
Foster City, CA 94404

Director Qualifications

The Nominating and Governance Committee has established the following minimum criteria for evaluating

prospective Board of Director candidates:

• Reputation for integrity, strong moral character and adherence to high ethical standards.

• Holds or has held a generally recognized position of leadership in the community and/or chosen field

of endeavor, and has demonstrated high levels of accomplishment.

• Demonstrated business acumen and experience, and ability to exercise sound business judgment and

common sense in matters that relate to the current and long-term objectives of the Company.

• Ability to read and understand basic financial statements and other financial information pertaining to

the Company.

• Commitment to understand the Company and its business, industry and strategic objectives.

• Commitment and ability to regularly attend and participate in meetings of the Board of Directors,
Board Committees and stockholders, the number of other company boards on which the candidate
serves and the ability to generally fulfill all responsibilities as a director of the Company.

• Willingness to represent and act in the interests of all stockholders of the Company rather than the

interests of a particular group.

• Good health and ability to serve.

•

For prospective non-employee directors, independence under applicable standards of the SEC and the
NASDAQ Rules, and the absence of any conflict of interest (whether due to a business or personal
relationship) or legal impediment to, or restriction on, the nominee serving as a director.

• Willingness to accept the nomination to serve as a director of the Company.

Other Factors for Potential Consideration

The Nominating and Governance Committee will also consider the following factors in connection with its

evaluation of each prospective nominee:

• Whether the prospective nominee will foster a diversity of skills and experiences.

• Whether the nominee possesses the requisite education, training and experience to qualify as

“financially literate” or as an “audit committee financial expert” under applicable rules of the SEC and
the NASDAQ Rules.

• Composition of the Board of Directors and whether the prospective nominee will add to or complement

the Board of Director’s existing strengths.

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The Nominating and Governance Committee does not have a formal policy with respect to diversity;
however, the Board of Directors and the Nominating and Governance Committee believe that it is essential that
our directors represent diverse viewpoints, skills, education and professional experience. In considering
candidates for the Board of Directors, the Nominating and Governance Committee considers the entirety of each
candidate’s credentials in the context of these standards.

All of our directors bring to the Board of Directors executive leadership experience derived from their
service as executives and, in most cases, chief executive officers of large corporations. As a group, they bring
extensive board experience and several decades of diverse and extensive business and technical experience. The
process undertaken by the Nominating and Governance Committee in identifying and evaluating qualified
director candidates is described below. Certain individual qualifications and skills of our directors that contribute
to the Board of Directors’ effectiveness as a whole are described above, under each director’s biographical
information.

Identifying and Evaluating Nominees for Directors

The Nominating and Governance Committee initiates the process by preparing a slate of potential

candidates who, based on their biographical information and other information available to the Nominating and
Governance Committee, appear to meet the criteria specified above and/or who have specific qualities, skills or
experience being sought, based on input from the full Board of Directors.

• Outside Advisors. The Nominating and Governance Committee may engage a third party search firm

or other advisors to assist in identifying prospective nominees.

• Nomination of Incumbent Directors. The re-nomination of existing directors should not be viewed as

automatic, but should be based on continuing qualification under the criteria set forth above.

For incumbent directors standing for re-election, the Nominating and Governance Committee will
assess the incumbent director’s performance during his or her term, including the number of meetings
attended, level of participation and overall contribution to the Company, the number of other company
boards on which the individual serves, composition of the Board of Directors at that time and any
changed circumstances affecting the individual director which may bear on his or her ability to
continue to serve on the Board of Directors.

• Management Directors. The number of officers or employees of the Company serving at any time on

the Board of Directors should be limited such that, at all times, a majority of the directors is
“independent” under applicable standards of the SEC and the NASDAQ Rules.

After reviewing appropriate biographical information and qualifications, first-time candidates will be
interviewed by at least one member of the Nominating and Governance Committee and by the Company’s Chief
Executive Officer. Upon completion of the above procedures, the Nominating and Governance Committee will
determine the list of potential candidates to be recommended to the full Board of Directors for nomination at an

annual meeting or appointment to the Board of Directors between annual meetings. The Board of Directors will
select the slate of nominees only from candidates identified, screened and approved by the Nominating and
Governance Committee.

In accordance with the Company’s “majority withheld vote” policy, the Nominating and Governance
Committee will also consider the resignation offer of any nominee for director who, in an uncontested election,
receives a greater number of votes “withheld” from his or her election than votes “for” such election, and
recommend to the Board of Directors the action it deems appropriate to be taken with respect to such offered
resignation.

DIRECTOR COMPENSATION

FISCAL 2011 DIRECTOR COMPENSATION

The compensation paid by the Company to non-employee directors, for the fiscal year ended December 31,

2011 is summarized as follows:

Name(1)
(a)

Fees earned or
paid in cash
($)(b)

Stock
awards
($)(2)(3)
(c)

Option
awards
($)(2)(4)
(d)

Non-equity
incentive plan
compensation
($)(e)

Eric Brown . . . . . . . . .
Gill Cogan . . . . . . . . .
Dan Maydan . . . . . . .
Richard Kashnow . . .
Thomas Georgens . . .

$46,500
60,500
58,000
67,500
51,000

$ — $274,774
133,120
116,512
133,120
85,680
133,120
85,680
133,120
85,680

$ —
—
—
—
—

Change in
pension value
and
nonqualified
deferred
compensation
earnings
($)(f)

$ —
—
—
—
—

All other
compensation
($)(g)

$ —
—
—
—
—

Total
($)(h)

$321,274
310,132
276,800
286,300
269,800

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(1) Guy Gecht, the Company’s Chief Executive Officer is not included in this table as he is an employee of the
Company and Fred Rosenzweig, the Company’s former President is not included in this table as he was an
employee of the Company during 2011, and thus they received no compensation for their services as
directors. The compensation received by Mr. Gecht and Mr. Rosenzweig is shown in the Summary
Compensation Table for 2011 on page 38 of this Proxy Statement. Mr. Rosenzweig resigned as President
and Director effective December 31, 2011.

(2) The amounts reported in the Stock Awards and Option Awards columns represent the aggregate grant date
fair value determined in accordance with ASC 718 of equity-based awards granted during 2011. See
Note 12 of the consolidated financial statements in our Annual Report on Form 10-K for the year ended
December 31, 2011 regarding assumptions underlying the valuation of equity awards.

(3) At December 31, 2011, the aggregate number of restricted stock units outstanding for each non-employee

director was as follows:

Name

Eric Brown . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gill Cogan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dan Maydan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Richard Kashnow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thomas Georgens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total
(#)

—
18,596
16,500
15,000
15,000

(4) At December 31, 2011, the aggregate number of option awards outstanding for each non-employee director

was as follows:

Name

Eric Brown . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gill Cogan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dan Maydan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Richard Kashnow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thomas Georgens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Vested
(#)

—

109,793
35,000
57,375
57,375

Unvested
(#)

Total
(#)

40,000
56,875
56,875
57,625
57,625

40,000
166,668
91,875
115,000
115,000

The compensation of non-employee directors is determined by the Board of Directors. Employee members
of the Board of Directors currently receive cash and equity compensation in connection with their employment
with the Company and do not receive any additional compensation for service on the Board of Directors.

Cash Compensation Non-employee directors receive cash compensation in the form of annual retainers

and attendance fees per meeting of the Board of Directors and the Board Committees as set forth below:

Annual Retainer

Meeting Fees

Chairperson Member

In Person Telephone

Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Audit Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nominating and Governance Committee . . . . . . . . . . . . . . . . . . . . .

*
20,000
10,000
10,000

$25,000
10,000
5,000
5,000

$2,000
1,000
1,000
1,000

$1,000
500
500
500

Annual Board of Directors chair retainer is paid annually in the form of an RSU grant on the first trading
day of the year calculated as $30,000 divided by the closing stock price on the trading day preceding the
annual grant date.

The Company reimburses each non-employee director for out-of-pocket expenses incurred in connection with
attendance at meetings of the Board of Directors and of the Board Committees.

Equity Compensation. Equity awards may be granted to the non-employee directors under the Company’s
stock incentive plans from time to time. Non-employee directors, excluding Mr. Brown, received an equity award
grant of 25,000 and 6,000 stock options and restricted stock units, respectively, during 2011. As a new director,
Mr. Brown received an equity award grant of 40,000 stock options. The stock options are scheduled to vest with
respect to 25% of the shares subject to the option on the first anniversary of the grant date and with respect to the
remaining 75% of the shares subject to the option at the rate of 2.5% per month thereafter over the next 30
months. The restricted stock units are scheduled to vest in annual installments over the four-year period after the
grant date.

CERTAIN RELATIONSHIPS, RELATED PARTY TRANSACTIONS, DIRECTOR INDEPENDENCE,
LEADERSHIP STRUCTURE AND RISK OVERSIGHT

Indemnification of Officers and Directors

As permitted under Delaware law, and pursuant to the Bylaws, the Company’s amended and restated
certificate of incorporation (the “Certificate of Incorporation”) and the indemnification agreements that the
Company has entered into with its current and former executive officers, directors and general counsel, the
Company is required, subject to certain limited qualifications, to indemnify its executive officers, directors and
general counsel for certain events or occurrences while the executive officer, director or general counsel is or was
serving in such capacity at the Company’s request. The indemnification period covers all pertinent events and
occurrences during the executive officer’s, director’s or general counsel’s lifetime. The maximum potential
amount of future payments the Company may be obligated to make under these indemnification agreements is
unlimited; however, the Company has director and officer insurance coverage that limits its exposure and may
enable the Company to recover a portion of any future amounts paid.

Related Party Transactions

The Audit Committee was responsible for reviewing and approving in advance any proposed related party

transactions as defined under Item 404 of Regulation S-K during 2011. The obligation of the Audit Committee to
review and approve in advance any proposed related party transaction is set forth in writing in the Charter of the
Audit Committee. Further, the Company’s Code of Business Conduct and Ethics provides that the nature of all
related party transactions must be fully disclosed to the Chief Financial Officer, and, if determined to be material
by the Chief Financial Officer, the Audit Committee must review and approve in writing in advance such related
party transactions.

The Company has previously entered into employment agreements with its named executive officers. These

agreements are described below under “Employment Agreements.”

There were no other related party transactions as defined under Item 404 of Regulation S-K during 2011.

Director Independence

The Board of Directors has determined that each of the non-employee directors is independent and that each

director who serves on each of its Board Committees is independent, as the term is defined by the applicable
rules of the SEC and the NASDAQ Rules.

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Leadership Structure

Effective June 2007, the Board of Directors separated the roles of Chief Executive Officer and Chairman of

the Board. The Board of Directors leadership structure is set forth in the Board of Directors Guidelines, revised
in February 2011. The Board of Directors believes that the designation of an independent Chairman of the Board
facilitates processes and controls that support a strong and independently functioning Board of Directors and
further strengthens the effectiveness of the Board of Directors’ decision-making and appropriate monitoring of
both compliance and performance. The Chief Executive Officer is responsible for setting the strategic direction
for the Company and the day to day leadership and performance of the Company, while the Chairman of the
Board presides at all meetings of the stockholders and the Board of Directors at which he or she is present;
establishes the agenda for each Board of Directors meeting; sets a schedule of an annual agenda, to the extent
foreseeable; calls and prepares the agenda for and presides over separate sessions of the independent directors;
acts as a liaison between the independent directors and the Company’s management and performs such other
powers and duties as may from time to time be assigned to him by the Board of Directors or as may be prescribed
by the Company’s bylaws. The independent Chairman of the Board is designated by the Board of Directors.
Mr. Cogan has served as our Chairman of the Board since June 2007. Because Mr. Cogan meets the criteria for
independence established by NASDAQ, he also presides over separate meetings for the independent directors.
The Board of Directors regularly observes such independent directors separate meeting time. The Board of
Directors will review from time to time the appropriateness of its leadership structure and implement any
changes at it may deem necessary.

Risk Oversight

On behalf of the Board of Directors, the Audit Committee plays a key role in the oversight of the
Company’s risk management function performed by independent Business Risk Services (“BRS”), under the
leadership of a BRS director (the “BRS Director”). BRS is an independent assessment function, responsible for
advising management and the Board of Directors, through its Audit Committee, on the Company’s system of
internal controls and management of business risks. BRS assists management and the Audit Committee in
fulfilling their control responsibilities by providing regular reports, based on BRS’ reviews, that address:
(i) compliance with laws, regulations, and internal policies and procedures; (ii) reliability of financial reporting;
and (iii) efficiency and effectiveness of operations. BRS fulfills its objectives by providing analyses,
assessments, recommendations, advice, and information to the management or the Audit Committee, as the case
may be.

Each year, BRS develops an annual project plan based on assessed business risks and aligned with the
Company’s control objectives. BRS fulfills its responsibilities according to such annual project plan approved by
the Audit Committee and reports on the results in the implementation of the plan at the meetings of the Audit
Committee. Certain risks or policies are also discussed by the Board of Directors. While compensated by the
Company, the BRS Director reports directly to the Chairman of the Company’s Audit Committee.

Stock Ownership

In February 2011, the Board of Directors adopted a stock ownership policy for the Company’s directors,

including executive officers serving as directors. The policy was adopted to further align the interests of our
stockholders and directors. According to the policy, included in the Board of Directors’ Guidelines, directors are
required to hold at least 10,000 shares of the Company’s common stock within the later of three years of first
becoming a director or three years of the date of adoption of the stock ownership policy, and continue holding
such required minimum as long as they continue serving as directors. In determining whether the stock
ownership requirements are met, the Board of Directors shall take into account a director’s beneficial ownership,
including shares of common stock held by the director, shares of common stock held in trust for the benefit of the
director or his or her immediate family members, vested or unvested restricted stock and vested or unvested
restricted stock units. The Nominating and Governance Committee may extend in its discretion the deadline for
attainment of such stock ownership level.

COMMUNICATION WITH THE BOARD OF DIRECTORS

Pursuant to the process established by the Board of Directors, stockholders who wish to communicate with

any member (or all members) of the Board of Directors should send such communications via regular mail
addressed to the Company’s Secretary, at Electronics For Imaging, Inc., 303 Velocity Way, Foster City,
California 94404. The Secretary will review each such communication and forward it to the appropriate member
or members of the Board of Directors as he deems appropriate.

The Company encourages its directors to attend the Annual Meeting. All seven (7) directors serving on the

Board at that time attended the Company’s last annual meeting.

NON-BINDING ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

PROPOSAL TWO

The Company is providing its stockholders with the opportunity to cast an advisory vote to approve
executive compensation as described below. The Company believes that it is appropriate to seek the views of
stockholders on the design and effectiveness of the Company’s executive compensation program. After
consideration of the stockholders’ recommendations at the Company’s 2011 annual meeting, the Company has
decided to hold an advisory vote on the compensation of the Company’s named executive officers every year
until the earlier of the next statutorily required vote on frequency which shall be no later than the Company’s
annual meeting in 2017 or such as time as the Board of Directors determines, in its discretion, that it is
appropriate to hold such votes on a less frequent basis.

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The Company’s goal for its executive compensation program is to attract, motivate and retain a talented and
dynamic team of executives. The Company seeks to accomplish this goal in a way that rewards performance and
is aligned with its stockholders’ long-term interests. The Company believes that its executive compensation
program, which emphasizes long-term equity awards, satisfies this goal and is strongly aligned with the long-
term interests of its stockholders.

The Compensation Discussion and Analysis, beginning on page 24 of this Proxy Statement, describes the
Company’s executive compensation program and the decisions made by the Compensation Committee in 2011 in
more detail. Highlights of the program include the following:

• Executive compensation is allocated among base salaries and short and long-term incentive

compensation. The base salaries are fixed in order to provide the executives with a stable cash income,
which allows them to focus on the Company’s issues and objectives as a whole, while the short and
long-term incentive compensation are designed to both reward the Company’s overall performance and
align the named executive officers’ interests with those of our stockholders. Management
recommended, and the Compensation Committee agreed, that the executive’s base salaries would not
be increased for 2011.

• Our executive compensation program is designed to pay for performance. For 2011, the vast majority

of the total direct compensation for our named executive officers was in the form of incentive
compensation. For example, in 2011, approximately 83% of the total direct compensation for our Chief
Executive Officer and approximately 62% and 90% of the total direct compensation for our former
President and our Chief Financial Officer, respectively, was in the form of incentive compensation tied
to the achievement of specific financial performance goals and/or the level of our stock price. For these
purposes, “total direct compensation” consists of the executive’s base salary, annual incentive award
and long-term equity awards based on the grant date fair value of the award as determined under the
accounting principles used in the Company’s financial reporting.

• Our executive annual performance-based bonus program is intended to encourage our named executive
officers to focus on specific short-term goals important to our success, which correlates to long-term
goals and strategy of the Company. Our named executive officers’ annual bonus awards are determined
based on a combination of objective, financial performance criteria. The awards payable under our
annual bonus program are subject to a maximum payout, which limits the overall payout potential.

Company-wide measures only, designed to encourage our named executive officers to make decisions
that are in the best long-term interests of the Company and our stockholders. As described in the
“Compensation Discussion and Analysis,” the named executive officers recommended, and the
Compensation Committee approved, a reduction in the executives’ bonus amounts under the program
to be more consistent with the levels awarded to our non-executive management employees.

• Awards to our named executive officers under our long-term equity incentive program in 2011

consisted of 55% performance-based restricted stock units and 45% time-based restricted stock units.
The value of restricted stock units is tied directly to our stock price to help further align our executives’
interests with those of our stockholders. As with the performance-based restricted stock units granted
under our annual bonus program, the performance awards granted under our long-term equity program
vest based on the achievement of Company-wide performance measures in addition to continued
employment requirements and are intended to both provide a retention incentive and enhance
executives’ focus on specific financial goals considered important to the Company’s long-term growth.
Time-based grants under the program provide an additional retention incentive for our executives as
they are subject to three-year vesting schedules. Because these time-based and performance-based
awards will generally remain outstanding for a period of years, they help ensure that executives always
have significant value tied to delivering long-term stockholder value.

• Mr. Gecht owns approximately 2% of the Company’s outstanding common stock which significantly

aligns his interests with the stockholders’ interests.

In accordance with the requirements of Section 14A of the Exchange Act (which was added by the Dodd-
Frank Wall Street Reform and Consumer Protection Act) and the related rules of the SEC, our Board of Directors
will request your advisory vote to approve the following resolution at the Annual Meeting:

RESOLVED, that the compensation paid to the Company’s named executive officers as disclosed in this
Proxy Statement pursuant to the SEC’s executive compensation disclosure rules (which disclosure
includes the Compensation Discussion and Analysis, the compensation tables and the narrative
disclosures that accompany the compensation tables), is hereby approved.

Vote Required

The approval of the executive compensation requires the affirmative vote of the holders of a majority of
shares of common stock present in person or represented by proxy and entitled to vote thereon, at the Annual
Meeting. As an advisory vote, this proposal is not binding on the Company. However, the Compensation
Committee, which is responsible for designing and administering the Company’s executive compensation
program, values the opinions expressed by stockholders in their vote on this proposal and will continue to
consider the outcome of the vote when making future compensation decisions for named executive officers.

Recommendation of the Board of Directors

The Company’s Board of Directors recommends a vote “FOR” the executive compensation.

PROPOSAL THREE

RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

PricewaterhouseCoopers LLP has served as the Company’s independent registered public accounting firm

since 1992 and has been appointed by the Audit Committee to continue as the Company’s independent registered
public accounting firm for the fiscal year ending December 31, 2012.

Stockholder ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent

registered public accounting firm for the fiscal year ending December 31, 2012 is not required by law, by the
NASDAQ Rules, or by the Certificate of Incorporation or Bylaws. However, the Board of Directors is submitting
the selection of PricewaterhouseCoopers LLP to the Company’s stockholders for ratification as a matter of good
corporate governance and practice. If the stockholders fail to ratify the appointment, the Board of Directors will
reconsider whether to retain that firm. Even if the selection is ratified, the Company may appoint a different
independent registered public accounting firm during the year if the Audit Committee determines that such a
change would be in the best interests of the Company and its stockholders.

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During the fiscal years ended December 31, 2011 and 2010, PricewaterhouseCoopers LLP provided various

audit, audit related and non-audit services to the Company as follows (in thousands):

Audit fees(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Audit related fees(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All other fees(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,325
233
—

$1,267
10
—
—

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,560

$1,277

2011

2010

(a) Audit fees consist of fees billed for professional services rendered for the audit of the Company’s

consolidated financial statements, review of the interim consolidated financial statements included in
quarterly SEC filings and reports, and services normally provided by PricewaterhouseCoopers LLP in
connection with statutory and regulatory filings and engagements.

(b) Audit-related fees consist of fees billed for assurance and related services that are reasonably related to the
performance of the audit or review of the Company’s consolidated financial statements and are not reported
under “Audit Fees.” These services include accounting consultations in connection with acquisitions, attest
services that are not required by statute or regulation, and consultations concerning financial accounting and
reporting standards.

accounting research tools.

The Audit Committee is responsible for pre-approving audit and non-audit services to be provided to the

Company by the independent auditors (or subsequently approving non-audit services in those circumstances
where a subsequent approval is necessary and permissible). In this regard, the Audit Committee has the sole
authority to approve the employment of the independent auditors, all audit engagement fees and terms and all
non-audit engagements, as may be permissible, with the independent auditors.

The Audit Committee has considered whether provision of the services described in sections (b) and
(c) above is compatible with maintaining the independent auditors’ independence and has determined that such
services have not adversely affected PricewaterhouseCoopers LLP’s independence. All of the services of each of
(b) and (c) were pre-approved by the Audit Committee.

Representatives of PricewaterhouseCoopers LLP are expected to be present at the Annual Meeting. The
representatives will have an opportunity to make a statement and will be available to respond to appropriate
questions.

Vote Required

The ratification of the selection of PricewaterhouseCoopers LLP requires the affirmative vote of the holders
of a majority of shares of common stock present in person or represented by proxy and entitled to vote thereon, at
the Annual Meeting.

Recommendation of the Board of Directors

The Company’s Board of Directors recommends a vote “FOR” the ratification of the appointment of the
Company’s independent registered public accounting firm for the fiscal year ending December 31, 2012.
Proxies received by the Company will be voted “FOR” this proposal unless the stockholder specifies
otherwise in the proxy.

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SECURITY OWNERSHIP

Except as otherwise indicated below, the following table sets forth certain information regarding beneficial

ownership of common stock as of March 27, 2012 by: (1) each of the Company’s current directors; (2) each of
the named executive officers listed in the Summary Compensation Table for 2011 on page 38 of this Proxy
Statement (collectively, the Company’s “named executive officers”); (3) each person known to the Company to
be the beneficial owner of more than 5% of the outstanding shares of the Company’s common stock based upon
Schedules 13G filed with the SEC; and (4) all of the Company’s directors and executive officers as a group. As
of March 27, 2012, there were 46,317,526 shares of common stock outstanding.

Shares of common stock subject to options or other rights that are currently exercisable or exercisable
within 60 days of March 27, 2012 are considered outstanding and beneficially owned by the person holding the
options or other rights for the purpose of computing the percentage ownership of that person, but are not treated
as outstanding for the purpose of computing the percentage ownership of any other person, except with respect to
the percentage ownership of all directors and executive officers as a group. Unless otherwise indicated below, the
address of each beneficial owner listed below is c/o Electronics For Imaging, Inc., 303 Velocity Way, Foster
City, California 94404.

Name of beneficial owner(1)

Common stock

Number of
shares

Percentage
owned

Ameriprise Financial, Inc.(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7,863,124

16.98%

145 Ameriprise Financial Center
Minneapolis MN 55474

Dimensional Fund Advisors, LP(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3,379,196

7.30

Palisades West, Building One
6300 Bee Cave Road
Austin TX 78746

BlackRock, Inc.(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,509,068

5.42

40 East 52nd Street
New York NY 10022

Third Avenue Management LLC(5)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,534,885

5.47

622 Third Avenue
32nd Floor
New York NY 10017

Guy Gecht(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fred Rosenzweig(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gill Cogan(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dan Maydan(9)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thomas Georgens(10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Richard Kashnow(11)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Eric Brown(12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vincent Pilette(13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

988,766
337,162
150,389
40,310
70,125
70,125
10,000
40,292

2.10
*
*
*
*
*
*
*

All executive officers and directors as a group (8 persons)(14)

. . . . . . . . . . . . . . . . . . . . .

1,707,169

3.58%

* Less than one percent.
(1) This table is based upon information supplied by officers, directors, and principal stockholders on Schedules
13G and Forms 4 filed with the SEC as of March 27, 2012. Unless otherwise indicated in the footnotes to
this table and subject to community property laws where applicable, each of the stockholders named in this
table has sole voting and investment power with respect to the shares indicated as beneficially owned.
Applicable percentages are based on 46,317,526 shares outstanding on March 27, 2012, adjusted as required
by rules promulgated by the SEC.

(2) Beneficial ownership information is based on information contained in Schedule 13G, as amended, filed
with the SEC on February 14, 2012 by Ameriprise Financial, Inc. (“AFI”), Columbia Management
Investment Advisers, LLC (“CMIA”), and Columbia Seligman Communications & Information Fund, Inc.
(“C&I Fund”). AFI and CMIA each has shared voting power as to 2,639,487 shares and shared dispositive
power as to 7,863,124 shares. C&I Fund has sole voting and shared dispositive power as to 4,675,900
shares. CMIA, in its capacity as investment adviser to the C&I Fund, may be deemed to beneficially own
the shares of common stock reported by C&I Fund. AFI, as the parent company of CMIA, may be deemed
to beneficially own the shares reported by CMIA. AFI, together with CMIA and C&I Fund, beneficially
own 7,863,124 shares.

(3) Beneficial ownership information is based on information contained in Schedule 13G, as amended, filed

with the SEC on February 14, 2012 by Dimensional Fund Advisors LP. Dimensional Fund Advisors, LP has
sole voting power as to 3,288,062 shares of common stock and sole dispositive power as to 3,379,196 shares
of common stock subject to the following qualification. Dimensional Fund Advisors LP furnishes
investment advice to four investment companies registered under the Investment Company Act of 1940 and
serves as investment manager to certain other commingled group trusts and separate accounts (such
investment companies, trusts, and accounts, collectively referred to as the “Funds”). In certain cases,
subsidiaries of Dimensional Fund Advisors LP may act as an adviser or sub-adviser to certain Funds. In its
role as investment advisor, sub-adviser, and/or manager, neither Dimensional Fund Advisors LP or its
subsidiaries possess voting and/or investment power over the securities of the Company that are owned by
the Funds, and may be deemed to be the beneficial owner of the shares of the Company held by the Funds.
Dimensional Fund Advisors LP disclaims beneficial ownership of such securities.

(4) Beneficial ownership information is based on information contained in Schedule 13G filed with the SEC on
February 9, 2012 by BlackRock, Inc. BlackRock, Inc. has sole voting and dispositive power as to 2,509,068
shares of common stock.

(5) Beneficial ownership information is based on information contained in Schedule 13G filed with the SEC on
February 14, 2012 by Third Avenue Management LLC. Third Avenue Management LLC (“TAM”) has sole
voting power as to 2,524,535 shares of common stock and sole dispositive power as to 2,534,885 shares of
common stock. Transamerica Third Avenue Value VP, an investment company registered under the
Investment Company Act of 1940, has the right to receive dividends from, and the proceeds from the sale
of, 104,921 of the shares reported by TAM, Met Investors Series Trust-Third Avenue Small Cap Portfolio,
an investment company registered under the Investment Company Act of 1940, has the right to receive
dividends from, and the proceeds from the sale of, 722,272 of the shares reported by TAM, OFI Select-
Third Avenue US Equity Fund (“SICAV”), an offshore fund for which TAM acts as investment advisor, has
the right to receive dividends from, and the proceeds from the sale of, 9,425 of the shares reported by TAM,
Transamerica Third Avenue Value, an investment company registered under the Investment Company Act
of 1940, has the right to receive dividends from, and the proceeds from the sale of, 212,436 of the shares
reported by TAM, Third Avenue Small Cap Value Fund, an investment company registered under the
Investment Company Act of 1940, has the right to receive dividends from, and the proceeds from the sale
of, 405,684 of the shares reported by TAM, Third Avenue Small Cap Value Fund, an umbrella open-ended
investment company authorized by the Irish Financial Services Regulatory Authority under the European
Communities (Undertakings for Collective Investment in Transferable Securities) Regulations, has the right
to receive dividends from, and the proceeds from the sale of, 3,870 of the shares reported by TAM,
Touchstone Variable Series Trust-Touchstone Third Avenue Value Fund, an investment company registered
under the Investment Company Act of 1940, has the right to receive dividends from, and the proceeds from
the sale of, 14,100 of the shares reported by TAM, and various separately managed accounts for whom
TAM acts as investment advisor have the right to receive dividends from, and the proceeds of the sale of,
1,062,177 of the shares reported by TAM.
Includes 744,393 shares of common stock issuable upon the exercise of options granted to Mr. Gecht under
the 2004, 2007, and 2009 equity incentive plans, which are currently exercisable and/or exercisable within
60 days of March 27, 2012. Of this amount, 197,639 options will expire on April 11, 2012.

(6)

(7) Mr. Rosenzweig resigned as President and Director effective December 31, 2011. The beneficial ownership
of Mr. Rosenzweig is as of December 31, 2011. Includes 288,084 shares of common stock issuable upon the

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exercise of options granted to Mr. Rosenzweig under the 1999, 2004, 2007 and 2009 equity incentive plans,
which are currently exercisable and/or exercisable within 60 days of March 27, 2012. Of this amount,
160,225 and 51,866 options will expire on April 11 and April 24, 2012, respectively.
Includes 117,293 shares of common stock issuable upon the exercise of options granted to Mr. Cogan under
the 1999, 2004, 2007 and 2009 equity incentive plans, which are currently exercisable and/or exercisable
within 60 days of March 27, 2012. Of this amount, 16,668 options will expire on April 24, 2012.
Includes 28,750 shares of common stock issuable upon the exercise of options granted to Mr. Maydan under
the 2007 and 2009 equity incentive plans, which are currently exercisable and/or exercisable within 60 days
of March 27, 2012.

(8)

(9)

(10) Includes 65,625 shares of common stock issuable upon the exercise of options granted to Mr. Georgens

under the 2007 and 2009 equity incentive plans, which are currently exercisable and/or exercisable within
60 days of March 27, 2012.

(11) Includes 65,625 shares of common stock issuable upon the exercise of options granted to Mr. Kashnow

under the 2007 and 2009 equity incentive plans, which are currently exercisable and/or exercisable within
60 days of March 27, 2012.

(12) Mr. Brown was appointed by the Board of Directors of the Company as a Director on April 7, 2011.

Includes 10,000 shares of common stock issuable upon the exercise of options granted to Mr. Brown under
the 2009 equity incentive plan, which are currently exercisable and/or exercisable within 60 days of
March 27, 2012.

(13) Mr. Pilette became our Chief Financial Officer on January 1, 2011. Mr. Pilette does not hold any options

which are currently exercisable and/or exercisable within 60 days of March 27, 2012.

(14) Includes an aggregate of 1,319,770 shares of common stock issuable upon the exercise of options granted to
executive officers and directors collectively under the 1999, 2004, 2007, and 2009 equity incentive plans,
which are currently exercisable and/or exercisable within 60 days of March 27, 2012.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires the Company’s officers, directors and persons who beneficially

own more than ten percent of a registered class of the Company’s equity securities to file reports of security
ownership and changes in such ownership with the SEC. Officers, directors and greater than ten percent
beneficial owners are also required by rules promulgated by the SEC to furnish the Company with copies of all
Section 16(a) forms they file.

Based solely upon a review of the copies of such forms furnished to the Company, or written representations

that no Form 5 filings were required, the Company believes that during the period from January 1, 2011 to
December 31, 2011, all Section 16(a) filing requirements were timely met.

EXECUTIVE OFFICERS

The following table lists certain information regarding the Company’s executive officers as of

December 31, 2011:

Name

Guy Gecht . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vincent Pilette . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Age

46
40

Position

Chief Executive Officer
Chief Financial Officer

Mr. Gecht was appointed Chief Executive Officer of the Company on January 1, 2000. From July 1999 to
January 2000, he served as President of the Company. From January 1999 to July 1999, he was Vice President
and General Manager of Fiery products of the Company. From October 1995 through January 1999, he served as
Director of Software Engineering. Prior to joining the Company, Mr. Gecht was Director of Engineering at
Interro Systems, a technology company, from 1993 to 1995. From 1991 to 1993, he served as Software Manager
of ASP Computer Products, a networking company and from 1990 to 1991, he served as Manager of Networking
Systems for Apple Israel, a technology company. From 1985 to 1990, he served as an officer in the Israeli
Defense Forces, managing an engineering development team, and later was an acting manager of one of the IDF
high-tech departments. Mr. Gecht currently serves as a member of the board of directors, audit committee and
compensation committee of Check Point Software Technologies Ltd., a global information technology security
company. Mr. Gecht holds a B.S. in Computer Science and Mathematics from Ben Gurion University in Israel.

Mr. Pilette was appointed Chief Financial Officer of the Company on January 1, 2011. From January 2009
through December 2010, he served as Vice President of Finance for Enterprise Server, Storage and Networking
Group at Hewlett-Packard Company (“HP”). Prior to this role, Mr. Pilette served as Vice President of Finance for
HP Software Group from December 2005 through December 2008. Mr. Pilette occupied various other finance
positions at HP, in the U.S and Europe, Middle East and Africa, since joining HP in 1997. Mr. Pilette holds a
B.S. in Engineering and M.S. in Business from Louvain University in Belgium where he graduated magna cum
laude. He also holds a Master’s degree in Business Administration from Kellogg School of Management at
Northwestern University.

COMPENSATION DISCUSSION AND ANALYSIS

The following sections of this proxy statement describe the Company’s compensation arrangements with its

named executive officers (below also referred to as the “executives”), who, for fiscal year 2011, included Guy
Gecht, Chief Executive Officer; Fred Rosenzweig, President; and Vincent Pilette, Chief Financial Officer. As
noted below, Mr. Pilette joined the Company as Chief Financial Officer effective January 1, 2011, and
Mr. Rosenzweig resigned as President of the Company effective December 31, 2011.

Executive Summary

The Company believes that compensation paid to the named executive officers should be closely aligned

with the performance of the Company on both a short-term and long-term basis, and linked to specific,
measurable results intended to create value for stockholders. The Compensation Committee oversees the
executive compensation program and determines the compensation for the named executive officers.

The compensation of the named executive officers consists primarily of three elements—a base salary, an

annual incentive program and long-term equity awards—that are designed to reward executives for performance
and to promote retention among our executive team.

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This Compensation Discussion and Analysis describes the Company’s executive compensation program and

the decisions made by the Compensation Committee in 2011 in more detail. Highlights of the program include
the following:

• Executive compensation is allocated among base salaries and short and long-term incentive

compensation. The base salaries are fixed in order to provide the executives with a stable cash income,
which allows them to focus on the Company’s issues and objectives as a whole, while the short and
long-term incentive compensation are designed to both reward the Company’s overall performance and
align the named executive officers’ interests with those of our stockholders. Executives recommended,
and the Compensation Committee agreed, that the executive’s base salaries would not be increased for
2011.

• Our executive compensation program is designed to pay for performance. For 2011, the vast majority

• Awards to our named executive officers under our annual bonus program for fiscal year 2011 for their
on-target bonus amounts were made in the form of performance-based restricted stock unit awards that
help further align named executive officers’ interests with those of our stockholders because the
ultimate value of the awards is tied to the Company’s stock price. The executive could also earn an
additional cash bonus under the program if the Company’s performance exceeded certain targets
established in the Company’s 2011 operating plan approved by the Board of Directors. The
performance measures used to determine the payment of awards to our named executive officers are
Company-wide measures only, designed to encourage our named executive officers to make decisions
that are in the best long-term interests of the Company and our stockholders. As described below, the
named executive officers recommended, and the Compensation Committee approved, a reduction in
the executives’ bonus amounts under the program to be more consistent with the levels awarded to our
non-executive management employees.

• Awards to our named executive officers under our long-term equity incentive program in 2011

consisted of 55% performance-based restricted stock units and 45% time-based restricted stock units.
The value of restricted stock units is tied directly to our stock price to help further align our executives’
interests with those of our stockholders. As with the performance-based restricted stock units granted
under our annual bonus program, the performance awards granted under our long-term equity program
vest based on the achievement of Company-wide revenue and non-GAAP operating income targets in
addition to continued employment requirements for the executives and are intended to both provide a
retention incentive and enhance executives’ focus on specific financial goals considered important to
the Company’s long-term growth. Time-based grants under the program provide an additional retention
incentive for our executives as they are subject to three-year vesting schedules. Because these time-
based and performance-based awards will generally remain outstanding for a period of years, they help
ensure that executives always have significant value tied to delivering long-term stockholder value.

• Mr. Gecht owns approximately 2% of the Company’s outstanding common stock which significantly

aligns his interests with the stockholders’ interests.

The Company believes the compensation program for the named executive officers is instrumental in
helping the Company achieve its financial performance. In 2011, the Company’s revenue grew to approximately
$592 million, representing an increase of approximately $88 million or 17% over the prior year. As described
below, revenue is one of the metrics used to measure the Company’s performance for purposes of the executives’
annual bonus program and performance-based equity awards.

Compensation Objectives and Philosophy

The Company’s compensation objectives and philosophy provide the guiding principles for decisions made

by the Compensation Committee for compensation to be paid to the Company’s named executive officers. The
Compensation Committee believes that compensation paid to the named executive officers should be closely
aligned with the performance of the Company on both a short-term and long-term basis, and linked to specific,
measurable results intended to create value for stockholders. In establishing compensation programs for the
named executive officers for fiscal year 2011, the Compensation Committee considered the following principles
and objectives:

•

attract and retain individuals of superior ability and managerial talent;

help ensure compensation is closely aligned with the Company’s corporate strategies, business and
financial objectives and the long-term interests of the Company’s stockholders;

create incentives to achieve key strategic and financial performance goals of the Company by linking
executive incentive award opportunities to the achievement of these goals; and

help ensure that the total compensation is fair, reasonable and competitive.

The Compensation Committee of the Board of Directors

The Compensation Committee, serving under a charter adopted by the Board of Directors, is composed

entirely of outside directors who have never served as officers of the Company. Under the charter, the
Compensation Committee has responsibility for approving and evaluating matters relating to the overall
compensation philosophy, compensation plans, policies and programs of the Company. This includes
periodically reviewing and approving the Company named executive officers’ annual base salaries, incentive
bonus programs, equity compensation, employment agreements, severance arrangements, change in control
agreements or provisions, as well as any other benefits or compensation arrangements for the named executive
officers. In certain circumstances, the Compensation Committee may solicit input from the full Board of
Directors before making final decisions relating to compensation of the named executive officers (below also
referred to as “executive compensation”). In fulfilling its responsibilities, the Compensation Committee may
consider, among other things, industry and general best practices, benchmark data and marketplace
developments. Messrs. Cogan and Maydan served on the Compensation Committee during 2011 and continue to
serve as of the date of this Proxy Statement.

Role of Management in Assisting Compensation Decisions

Members of the executive management team of the Company, such as the named executive officers and the

Vice President of Human Resources (“Executive Management”), provide administrative assistance and support
for the Compensation Committee from time to time. Members of Executive Management also may provide
recommendations and information to the Compensation Committee to consider, analyze and review in
connection with any compensation proposal for the named executive officers. Members of Executive
Management do not have any final decision-making authority in regards to named executive officer
compensation. The Compensation Committee reviews any recommendations and information provided by
Executive Management, and approves the final executive compensation package. In 2011, the executives
recommended to the Compensation Committee that their base salaries for 2011 not be increased and that their
bonus amounts under the 2011 annual bonus program be reduced to be more consistent with the levels awarded
to our non-executive management employees.

The Role of Stockholder Say-on-Pay Votes

The Company provides its stockholders with the opportunity to cast an annual advisory vote to approve its

executive compensation program (referred to as a “say-on-pay proposal”). At the annual meeting of shareholders
held in May 2011, approximately 54% of the votes actually cast on the say-on-pay proposal at that meeting were
voted in favor of the proposal. Although the Company’s executive compensation program received a majority of
votes actually cast by stockholders, the Company would like to see greater support for its program from
stockholders and, as part of its ongoing stockholder outreach efforts, continues to seek feedback on the program
from certain of its institutional investors. The Compensation Committee also considers the voting results on the
Company’s say-on-pay proposals in making its decisions on executive compensation and believes that its
decision to emphasize equity compensation in 2011 that is subject to performance-based vesting (for example,
the use of restricted stock units as the primary vehicle for the executives’ annual bonus opportunities and the
decision to grant a majority of the executives’ annual equity awards for 2011 in the form of performance-based
stock units) will be viewed favorably by our stockholders. The Compensation Committee will continue to
consider the outcome of the Company’s say-on-pay proposals when making future compensation decisions for
the named executive officers.

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Use of Outside Advisors

The Compensation Committee may use consultants to assist in the evaluation of compensation for the
named executive officers. The Compensation Committee has the sole authority to retain and terminate any
compensation consultant engaged to perform these services. The Compensation Committee also has authority to
obtain advice and assistance from internal or external legal, accounting, or other advisers.

The Compensation Committee has retained Mercer (US) Inc. (“Mercer”) since 2007 to provide information,

analyses, and advice regarding executive and director compensation, as described below. The Compensation
Committee evaluates Mercer’s performance on an annual basis. In 2011, Mercer advised the Compensation
Committee on a variety of compensation-related issues, including:

•

compensation strategy;

peer group;

pay levels (base, short- and long-term incentive);

incentive plan design (short- and long-term); and

emerging compensation trends.

For 2011, Mercer also assisted the Compensation Committee in its assessment of the potential relationship
between the Company’s compensation program and risk-taking by management. For more information, see the
“Compensation Risk Assessment” section on page 46 of this Proxy Statement.

In the course of conducting its activities, Mercer attended meetings of the Compensation Committee and
presented its findings and recommendations for discussion. During the course of the year, Mercer worked with
management to obtain and validate data, review materials and recommend potential changes. Mercer received
approximately $87,500 in fees from the Company in connection with the Compensation Committee’s
determination of a variety of components of executive compensation during fiscal year 2011. In addition, in
2011, Mercer’s Health and Benefits division provided planning, management, analysis and support services to
the Company related to its employer sponsored health benefits plan. Mercer received approximately $187,490
from the Company for these services in 2011. Mercer is a subsidiary of Marsh & McLennan Companies, Inc.
(“MMC”), a diversified conglomerate of companies that provide insurance, security and human resources
consulting services. During 2011, affiliates of MMC other than Mercer received approximately $172,500 in fees
for their services. The decision to engage Mercer and other MMC affiliates to provide services other than
assisting the Compensation Committee with executive compensation matters was made by members of

management. Although the Compensation Committee did not specifically approve these engagements, the
Compensation Committee has reviewed the services provided by Mercer Health and Benefits and MMC affiliates
and has determined that these services do not prevent Mercer from being objective in its work for the
Compensation Committee.

Review of External Compensation Data

The Compensation Committee does not apply a formulaic approach to setting individual elements of the
named executive officers’ compensation or their total compensation amounts and does not set compensation
levels at any specific level or percentile against the peer group data described below (i.e., the Compensation
Committee does not “benchmark” the Company’s executive compensation levels). However, the Compensation
Committee periodically reviews market compensation levels to inform its decision-making process and to
determine whether the total compensation opportunities for the Company’s named executive officers are
appropriate in light of factors such as the compensation arrangements for similarly situated executives in the
market and may make adjustments when the Compensation Committee determines they are appropriate.

For 2010, the Compensation Committee, with assistance from Mercer, selected a peer group of companies
to help evaluate the Company’s executive compensation programs. The selection criteria implemented in 2010
included:

•

size of the organization: the reviewed companies were within a range of approximately 0.5x to 2x the
Company’s revenue, targeting a peer group with the median annual revenue of approximately $400
million;

relevant industries: Communications Equipment, Computer Storage & Peripherals, Office Electronics,
Systems Software; and

business model and characteristics: business to business, manufacturing capabilities, software products
and integrated solutions and services.

The companies in the 2011 peer group were the same as the companies included in the 2010 peer group and

consisted of the following:

Ariba, Inc.
Ciena Corporation
Commvault Systems, Inc.
Dot Hill Systems Corporation
Emulex Corporation
F5 Networks, Inc.
Hutchinson Technology Inc.
Intermec Inc.
MRV Communications Inc.

Netgear, Inc.
Powerwave Technologies, Inc.
Progress Software Corporation
QLogic Corporation
Quantum Corporation
Radiant Systems, Inc.
STEC, Inc.
Zebra Technologies Corporation

Executive Compensation Elements

For the 2011 fiscal year, the principal elements or components of compensation for the named executive

officers were: (1) base salary; (2) short-term incentives; and (3) long-term incentives.

During 2011, for each element of executive compensation, the Compensation Committee considered a
number of factors, such as the executive’s employment experience, performance of the executive during the year,
performance of the Company during the year, achievement of Company performance targets set by the Board of
Directors as identified below, potential to enhance long-term stockholder value, information relating to
marketplace competitiveness, executive compensation trends, current compensation levels and types within the
peer group, compensation history, prior equity awards and the economic environment.

Since there are no static or fixed policies regarding the amount and allocation for each component or
element of executive compensation, the determination and composition of total compensation is up to the
discretion of the Compensation Committee and is decided in its judgment on an annual basis. However, the
measurement or assessment of the Company’s performance for 2011 and the achievement of Company
performance targets was primarily quantitative with respect to the elements of incentive-based compensation, and
are addressed in greater detail below.

The difference in the levels of compensation between the named executive officers reflects consideration of

the executive’s roles and responsibilities, the executive’s tenure with the Company as well as the other factors
mentioned above. The Compensation Committee considers the value of the entire compensation package when
establishing the appropriate levels of compensation for each element.

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Base Salary

The Company provides the named executive officers with a base salary, which is comprised of a fixed
amount of annual cash compensation. In setting base salaries for the named executive officers, the Compensation
Committee considers a number of factors, including the executive’s prior salary history, current compensation
levels, individual and the Company’s performance and marketplace competitiveness for similarly situated named
executive officers. The Compensation Committee considers changes to base salaries for the named executive
officers on an annual basis. There are no formulaic increases; instead, the Compensation Committee exercises its
judgment and discretion when determining and approving increases to the annual base salary of each named
executive officer.

In February 2011, the Compensation Committee reviewed the base salary levels for Messrs. Gecht and
Rosenzweig. The executives recommended, and the Compensation Committee agreed, that no changes would be
made to these levels for 2011. The Compensation Committee considered the base salary levels for these
executives identified below to be appropriate in light of each executive’s experience and responsibilities with the
Company, as well as its review of the base salary data for similarly situated executives with the peer companies
identified above. Mr. Pilette’s base salary was established through negotiations with him prior to his
commencing employment with the Company in January 2011. As part of the negotiation process, the
Compensation Committee reviewed peer company chief financial officer compensation levels.

The base salaries of the named executive officers as in effect at the end of fiscal year 2011 are set forth in

the following table:

Named Executive Officer

Annual Salary Rate In
Effect at Fiscal 2011
Year-End

Guy Gecht . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fred Rosenzweig(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vincent Pilette . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$620,000
$530,000
$350,000

(1) As noted below, Mr. Rosenzweig retired as the Company’s President effective December 31, 2011 and
transitioned to employment with the Company on a part-time basis, followed by a consulting period of
approximately six months.

Short-Term Incentive Compensation

The Company believes that a significant portion of executive compensation should be directly related to the
Company’s overall financial performance, stock price performance and other relevant financial factors that affect
stockholder value. Accordingly, the Company sets goals designed to link executive compensation to the
Company’s overall performance and reserves the largest potential compensation awards for incentive-based

programs, which may include both cash and equity awards. The executive incentive program allows named
executive officers to receive short-term incentive compensation in the event certain specified corporate
performance measures are achieved. Payments under the executive incentive program are contingent upon the
executive’s continued employment, subject to the terms of their employment agreements, and are determined by
the Compensation Committee. The Compensation Committee believes that the payment of bonuses, whether in
cash or equity, provides incentives necessary to retain the named executive officers and reward them for short-
term Company performance.

The target short-term incentive for each of the named executive officers is calculated as a percentage of his
base salary. The Compensation Committee sets the percentage of base salary for each named executive officer’s
target bonus in its judgment based on its review of each executive’s total compensation package and
compensation at the Company’s peer group or emerging executive compensation trends, as the case may be, and
its assessment of the past and expected future contributions of the named executive officers.

In February 2011, the Compensation Committee approved the 2011 performance-based equity and cash
bonus program (the “2011 Program”) for the named executive officers and established their target short-term
incentive opportunities under the program as follows:

Named Executive Officer

Target Annual Incentive
(Percentage of
Base Salary)

Guy Gecht
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fred Rosenzweig . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vincent Pilette . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

105%
95%
70%

The target short-term incentive opportunity for the 2011 fiscal year remained unchanged from the prior

fiscal year for Messrs. Gecht and Rosenzweig. Mr. Pilette’s target bonus was established through negotiations
with him prior to his commencing employment with the Company. As described above, as part of the negotiation
process, the Compensation Committee reviewed peer company chief financial officer compensation levels. The
difference in short-term incentive percentages between Mr. Gecht, Mr. Rosenzweig and Mr. Pilette correlated
with their roles and level of responsibility within the Company.

Under the 2011 Program, each of the named executive officers was eligible to receive a bonus payable in

shares of the Company’s common stock, subject to achievement by the Company of certain financial
performance objectives established by the Compensation Committee. In execution of the program, the
Compensation Committee approved grants of performance-based awards of restricted stock units in February
2011 to each of the named executive officers, with the total number of stock units subject to the executive’s
award determined by dividing the executive’s target bonus by the closing price of the Company’s common stock
on the trading day immediately preceding the grant date. Sixty percent of the executive’s stock units were
eligible to vest based on the Company’s non-GAAP operating income for 2011 relative to the performance target
established by the Compensation Committee, and the remaining forty percent of the executive’s stock units were
eligible to vest based on the Company’s revenue relative to the performance target. However, in each case, the
vesting of these awards was also contingent on the Company’s achieving a minimum threshold for non-GAAP
operating income determined by the Compensation Committee and on the executive’s continued employment
with the Company through the vesting date (generally, the first anniversary of the grant date of the award or, if
later, the date the Compensation Committee determined the Company’s performance level for 2011).

The maximum number of restricted stock units that may vest under a 2011 Program award is 100% of the

units subject to the award. However, each named executive officer was provided with an opportunity to receive a
cash bonus if both the Company’s revenue and non-GAAP operating income for 2011 exceeded the performance
targets established by the Compensation Committee. If both of the performance targets were exceeded, the
executive could receive a cash bonus up to the amount of the executive’s target bonus under the 2011 Program.

As with the equity bonus opportunity, the cash bonus opportunity under the 2011 Program was based sixty
percent on the Company’s non-GAAP operating income for 2011 and forty percent on the Company’s revenue
for 2011 and was contingent on the executive’s continued employment with the Company through the vesting
date. The Compensation Committee believed that it was appropriate to grant this cash bonus opportunity to the
executives as for any cash bonus to be payable under the 2011 Program, the Company would need to achieve
performance above the Company’s 2011 operating plan for 2011 approved by the Board of Directors.

In determining that the 2011 Program would be structured to include awards in the form of restricted stock

units, the Compensation Committee intended to provide a further link between executive incentive compensation
and shareholder value. The Compensation Committee selected revenue and non-GAAP operating income as the
performance measures for the equity and cash components of the 2011 Program to create further incentives for
management to focus on the Company’s revenue growth and profitability because the Compensation Committee
believes these metrics are key to the Company’s long-term growth and success. For these purposes, non-GAAP
operating income is defined as operating income determined in accordance with GAAP adjusted to remove the
impact of recurring amortization of acquisition-related intangibles, stock-based compensation expense, as well as
restructuring related and non-recurring charges and gains and the tax effect of these adjustments, in each case as
specified in the Company’s annual and quarterly reports for the applicable fiscal year. The Compensation
Committee believes that these adjustments to operating income for this purpose produce a better measure of the
executives’ impact on the ongoing operating performance of the Company over the corresponding year.

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The performance targets selected by the Compensation Committee for the 2011 Program represented
financial goals for the Company, based on the Company’s operating plan approved by the Board of Directors,
and also taking into consideration the economic and industry environment at the time the 2011 Program was
established. The threshold and target performance levels for each of the restricted stock unit and cash bonus
components of the 2011 Program are set forth in the table below.

Goals

Weighting

RSU
Threshold

Revenue (in millions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(% of program component earned)
. . . . . . . . . . . . . . . . . . . . . .
Non-GAAP operating income (in millions) . . . . . . . . . . . . . . . .
(% of program component earned)
. . . . . . . . . . . . . . . . . . . . . .

40% $ 520
—
60% $45.0
—

RSU
Target

$ 560

Cash
Threshold

$ 560

Cash
Target

$ 600

0% 100%

$57.6

$71.2

0% 100%

With respect to the equity bonus component of the 2011 Program, the minimum threshold for non-GAAP
operating income for 2011 established by the Compensation Committee was $45 million. None of the restricted
stock units granted under the 2011 Program would vest if this minimum threshold for non-GAAP operating
income was not achieved. If this minimum level was achieved, the award would vest with respect to between 0%
and 100% of the units covered by the award, with 100% of the units vesting if the “RSU Target” levels for both
revenue and non-GAAP operating income in the table above were met or exceeded. The number of units vesting
for performance results for each metric between the threshold and target levels would be interpolated between the
points noted in the table. With respect to the cash bonus component of the 2011 Program, no cash bonus would
be paid unless the Company met or exceeded the “Cash Threshold” levels for both revenue and non-GAAP
operating income set forth above. If both of these threshold levels were achieved, the executive would be entitled
to a cash bonus of between 0% and 100% of his cash bonus opportunity, with the bonus amount being
interpolated between the applicable levels of the table above. In no event would any executive be entitled to vest
in more than 100% of the target number of restricted stock units subject to his award under the 2011 Program or
to receive payment of a cash bonus greater than 100% of his target cash bonus amount.

During the first quarter of 2012, the Compensation Committee reviewed the total 2011 fiscal year revenue
and non-GAAP operating income of the Company as compared to the respective total revenue and non-GAAP
operating income threshold and target amounts established by the Compensation Committee and determined that
the RSU Target levels were achieved for both performance measures. The Company’s revenue for 2011 was

$591.6 million, and the Company’s non-GAAP operating income was $72.1 million, prior to accounting for the
impact of the cash bonus. Accordingly, the restricted stock units granted to each of the named executive officers
under the 2011 Program with respect to achievement of Company’s financial targets vested 100% in accordance
with the terms of the program.

Based on the Company’s performance levels achieved for 2011, the named executive officers were also
entitled to a cash bonus equal to approximately 92% of their target bonus amounts for 2011. The executives
recommended, in consultation with the Compensation Committee, that they would each agree to a voluntary
reduction in the amount of this cash bonus to approximately 71% of the executive’s target bonus amount. The
executives believed that this voluntary reduction in their 2011 bonuses was appropriate so that their overall bonus
levels for 2011 (expressed as a percentage of their respective base salaries) would be consistent with the 2011
bonus levels awarded to certain non-executive management employees of the Company.

Long-Term Equity Incentive Program

As indicated by its performance-based approach to compensation, the Company believes that equity
ownership in the Company is important to closely align the interests of named executive officers with those of
Company stockholders and thereby promote incentives to achieve sustained, long-term revenue growth,
profitability and creation of stockholder value. The Company’s named executive officers may receive an annual
award of performance- or service-based stock options, restricted stock and/or restricted stock units at the
discretion of the Compensation Committee. The number of shares subject to awards granted to each executive
officer is determined and approved by the Compensation Committee in its judgment based upon several factors,
including the individual’s performance, the Company’s performance, the value of the award at the time of grant,
market compensation levels and the shares available for grant under our equity incentive plan.

In order to provide an incentive for continued employment, restricted stock units granted to named
executive officers under the long-term incentive program typically have a three-year annual vesting schedule,
and stock options granted to named executive officers typically have a three and a half year vesting schedule.
Stock options generally expire seven years from the date of the grant so as to incentivize long-term stock
appreciation and provide a reasonable time frame for the named executive officer to benefit from appreciation of
the Company’s stock price, while managing the potential dilution to stockholders more effectively, as compared
to a ten-year option term. The Company sets the per share exercise price of options granted under the Company’s
stock plans equal to 100% of the closing market price of a share of the Company’s common stock on the date of
grant of the award.

To provide additional incentives for performance, the Company also grants equity awards that vest based
upon the Company achieving specified levels of stock price appreciation relative to the stock price on or about
the grant date, as the case may be, or the achievement of pre-established financial performance goals. These
performance-based equity awards also assist in aligning the interests of the named executive officers with those
of stockholders. As described above, the annual bonus opportunities for the named executive officers for fiscal
year 2011 were structured as performance-based restricted stock unit awards payable only if the Company
achieved pre-established financial performance goals.

2011 Awards

In August 2011, the Compensation Committee approved the grant of restricted stock unit awards to each of

Messrs. Gecht and Pilette under the Company’s 2009 Equity Incentive Award Plan, as amended (the “2009
Equity Plan”), as set forth in the following table:

Type of Security

Type of Vesting

Vesting Schedule

Restricted Stock Unit

Performance-based

Restricted Stock Unit

Time-based

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This award will vest as follows:
One-third of the award will vest if, for any period
of four consecutive fiscal quarters ending no later
than the fourth quarter of fiscal year 2012, the
Company’s revenue exceeds its revenue level for
2010 by at least 21% and its non-GAAP
operating income exceeds its non-GAAP
operating income level for 2010 by at least 12%.
One-third of the award will vest if, over a period
of four consecutive fiscal quarters ending no later
than the second quarter of fiscal year 2013, the
Company’s revenue exceeds its revenue level for
2010 by ate least 30% and its non-GAAP
operating income exceeds its non-GAAP
operating income level for 2010 by at least 13%.
One-third of the award will vest if, over a period
of four consecutive fiscal quarters ending no later
than the second quarter of fiscal year 2014, the
Company’s revenue exceeds its revenue level for
2010 by at least 40% and its non-GAAP
operating income exceeds its non-GAAP
operating income level for 2010 by at least 15%.

This award will vest in annual installments over a
three-year period after the date of grant.

The Compensation Committee believes that each of these grants further align the interests of executives
with those of our stockholders. The performance-based restricted stock units are structured to help drive growth
in the revenue and profitability of the Company over both the short- and long-term. The vesting requirements
described above provide incentives to achieve substantial growth by the end of 2012 and then to sustain high
levels of growth rates over a multi-year period. The performance-based and time-based grants also create further
incentives for executives to help maintain and increase our stock price (as the value of the grant depends on the
value of our stock) and provide a retention incentive as the vesting of the grant in each case is contingent on the
executive’s continued employment with the Company through the vesting date.

As indicated in the Grants of Plan-Based Awards Table on page 39 of this Proxy Statement, the

Compensation Committee allocated approximately 55% of the total grant-date value (determined in accordance
with generally accepted accounting principles) of each executive’s equity award for 2011 to restricted stock units
that vest based on the Company’s achievement of the performance goals identified above and approximately 45%
of the total grant-date value of each executive’s equity award to restricted stock units that vest based on the
executive’s continued service with the Company. The Compensation Committee determined the value of each
named executive officer’s total equity award in its judgment, taking into consideration its subjective assessment
of the executive’s individual performance, the retention value of these grants and the executives’ prior long-term
equity incentive grants, certain equity award ranges provided by Mercer based on comparisons against market
benchmarks, the number of shares remaining under the 2009 Equity Plan and their planned use for purposes other
than executive compensation, and the Company’s philosophy that long-term equity incentives should constitute a
substantial portion of each executive’s total direct compensation.

As described in the Company’s Proxy Statement for the 2011 annual meeting, the Compensation Committee

believed that it was appropriate to focus on the retention of the executive team in approving its equity grants
during 2010, and each of the annual equity grants made to named executive officers for 2010 was subject only to
time-based vesting. For 2011, the Compensation Committee determined that a majority of the total award granted
to each executive would vest based on the Company’s performance (in addition to continued employment
requirements) in order to enhance the executives’ focus on the achievement of specific performance goals
considered important to the Company’s long-term growth. The Compensation Committee selected revenue and
non-GAAP operating income as the performance measures for these awards for the same reasons these measures
were used to measure performance under the executive annual bonus program as described above.

In connection with his commencing employment with the Company, in December 2010, the Compensation

Committee also approved two grants of restricted stock units to Mr. Pilette, which became effective on January 5,
2011. The first award consisted of 60,000 restricted stock units, which are scheduled to vest in three annual
installments. The second award consisted of 90,000 restricted stock units, the vesting of which will be
determined based on the increase in stock price over the average of the per-share closing price of the Company’s
common stock over a period of 20 consecutive trading days preceding the approval date (the “Determination
Price”) and will be as follows: 28,000 shares will vest on the date the average of the per-share closing price of the
Company’s common stock over a period of 20 consecutive trading days equals or exceeds 125% of the
Determination Price; 31,000 shares will vest on the date the average of the per-share closing price of the
Company’s common stock over a period of 20 consecutive trading days equals or exceeds 150% of the
Determination Price; 31,000 shares will vest on the date the average of the per-share closing price of the
Company’s common stock over a period of 20 consecutive trading days equals or exceeds 175% of the
Determination Price. The grant levels and vesting terms of these awards were negotiated with Mr. Pilette, and
consistent with the Compensation Committee’s determination to emphasize performance-based vesting for equity
awards granted in 2011, a larger percentage of the overall grant-date value of the award was allocated to
performance-based restricted stock units. The Compensation Committee also determined that it would be
appropriate to use appreciation in the price of the Company’s common stock to determine vesting of this grant to
further align Mr. Pilette’s interests with those of our stockholders and to provide an incentive similar to that
created for Messrs. Gecht and Rosenzweig by the performance-based options granted to them in 2009 as
described below. The first tranche of this award (covering 28,000 shares) vested during 2011.

2009 Performance Based Awards

As previously disclosed in the Company’s 2009 proxy statement, the Company granted each of Messrs

Gecht and Rosenzweig two performance-based option grants during 2009 that would vest based upon the
achievement of performance goals established by the Compensation Committee. The vesting of one
performance-based option grant is to be determined based on the price of the Company’s common stock, as
measured by the average per share closing price over a period of 20 consecutive trading days (the “average stock
price”), attaining specified levels of appreciation over the per share closing stock price on the date of grant, or
$10.77 (the “grant date stock price”), according to the following schedule: 25% of these options will vest when
the average stock price equals or exceeds $16.16 (150% of the grant date stock price); 25% of these options will
vest when the average stock price equals or exceeds $18.85 (175% of the grant date stock price); 25% of these
options will vest when the average stock price equals or exceeds $21.54 (200% of the grant date stock price); and
25% of these options will vest when the average stock price equals or exceeds $24.23 (225% of the grant date
stock price). The first tranche of each option (representing 25% of the total grant) vested and was certified by the
Compensation Committee in February 2012.

The vesting of the other performance-based option granted in 2009 is to be determined based on the

Company’s annual return on equity percentage, on a non-GAAP basis, (the “Annual ROE Percentage”), as
compared with the issuer’s annual return on equity percentage for its 2008 fiscal year, which was 7.1% (the
“2008 ROE Percentage”) according to the following schedule: 20% of these options will vest when the Annual
ROE Percentage is equal to or greater than two percentage points more than the 2008 ROE Percentage; 20% of

these options will vest when the Annual ROE Percentage is equal to or greater than four percentage points more
than the 2008 ROE Percentage; 20% of these options will vest when the Annual ROE Percentage is equal to or
greater than six percentage points more than the 2008 ROE Percentage; 20% of these options will vest when the
Annual ROE Percentage is equal to or greater than eight percentage points more than the 2008 ROE Percentage;
and 20% of these options will vest when the Annual ROE Percentage is equal to or greater than ten percentage
points more than the 2008 ROE Percentage. For these purposes, non-GAAP return on equity is defined as
non-GAAP net income divided by stockholders’ equity. Non-GAAP net income is defined as net income
determined in accordance with GAAP adjusted to remove the impact of recurring amortization of acquisition-
related intangibles, stock-based compensation expense, as well as restructuring related and non-recurring charges
and gains and the tax effect of these adjustments, in each case as specified in the Company’s annual and quarterly
reports for the applicable fiscal year. The first tranche of each option (representing 20% of the total grant) vested
and was certified by the Compensation Committee in February 2012.

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Severance Arrangements

Each of the named executive officers is a party to an employment agreement with the Company which

provides for severance benefits under certain events, such as a termination without cause or the executive
resigning for good reason. Because the Company believes that a resignation by an executive for good reason (or
constructive termination) is conceptually the same as an actual termination by the Company without cause, the
Company believes it is appropriate to provide severance benefits following such a constructive termination of the
executive’s employment.

The employment agreements are designed to promote stability and continuity of senior management. In
addition, the Company recognizes that the possibility of a change of control may exist from time to time, and that
this possibility, and the uncertainty and questions it may raise among management, may result in the departure or
distraction of management personnel to the detriment of the Company and its stockholders. Accordingly, the
Compensation Committee has determined that appropriate steps should be taken to encourage the continued
attention and dedication of members of the Company’s management to their assigned duties without the
distraction that may arise from the possibility of a change of control. As a result, the employment agreements
include provisions relating to the payment of severance benefits under certain circumstances in the event of a
change of control. Under the change of control provisions, in order for severance benefits to be triggered, an
executive must be involuntarily terminated without cause or the executive must leave for good reason within 24
months after a change of control.

Information regarding the severance benefits for each of the named executive officers under their
employment agreements is provided under the headings “Employment Agreements” and “Potential Payments
upon Termination or Change of Control” on pages 42 through 45 of this Proxy Statement.

Other Elements of Compensation and Perquisites

There are no other material elements of compensation that the named executive officers receive. The named

executive officers may not defer any component of any annual incentive bonus earned and do not participate in
another deferred compensation plan. Likewise, the Company does not maintain any defined benefit pension plans
for its employees. However, named executive officers are eligible to participate in the Company’s 401(k) savings
plan on the same terms and conditions as other Company employees. In addition, the named executive officers
are eligible to participate in the Company’s group health and welfare plans on the same terms and conditions as
other Company employees.

Rosenzwieg Retirement and Transition Agreement

In July 2011, Mr. Rosenzweig informed the Company that he would retire as President effective
December 31, 2011. Mr. Rosenzweig continued as an employee of the Company on a part-time basis until
February 29, 2012, when his retirement as an employee became effective. Mr. Rosenzweig agreed to continue to

provide services to the Company as a consultant until August 31, 2012. The Compensation Committee
determined that these arrangements were appropriate to help with the transition of Mr. Rosenzweig’s duties with
the Company. The terms of Mr. Rosenzweig’s retirement and transition agreement with the Company are
described below under “Employment Agreements” on page 42 of this Proxy Statement.

Pilette Employment Agreement

In late 2010, the Company appointed Mr. Pilette as its Chief Financial Officer, effective January 1, 2011.

The terms of Mr. Pilette’s compensation arrangements were negotiated with Mr. Pilette and are described above
under the applicable sections of this Compensation Discussion and Analysis.

Subsequent Committee Actions

In February 2012, the Compensation Committee approved the 2012 performance-based equity and cash

bonus program (the “2012 Program”) for Messrs. Gecht and Pilette. The structure of the 2012 Program is
substantially the same as the 2011 Program described above. Subject to achievement by the Company of certain
financial performance objectives, each of these executives is eligible to be paid an equity bonus based on a target
percentage of the executive’s current annual base salary based upon the Company’s financial performance
relative to targets established by the Compensation Committee. In execution of the program, the Compensation
Committee approved grants of performance-based awards of restricted stock units in February 2012 to each
executive, with the total number of stock units subject to the executive’s award determined by dividing the
executive’s target bonus by the closing price of the Company’s common stock on February 1, 2012. In addition,
each executive has an opportunity to receive a cash bonus up to the executive’s target bonus amount if the
Company achieves financial results above the Company’s 2012 operating plan approved by the Board of
Directors. Each of the equity and cash target bonus amounts for Messrs Gecht and Pilette were set at 105% and
70%, respectively, of the executive’s base salary, the same target bonus levels that were in effect for the 2011
Program. The performance metrics under the 2012 Program will once again be the Company’s revenue and
non-GAAP operating income, although the bonus opportunity will be weighted 50% for each metric under the
2012 Program (as opposed to a weighting of 60% for non-GAAP operating income and 40% for revenue under
the 2011 Program).

Tax Considerations

As part of its performance-based compensation program, the Company aims to compensate the named
executive officers in a manner that is tax effective for the Company. Section 162(m) of the Internal Revenue
Code generally disallows a tax deduction to public corporations for compensation over $1 million paid for any
fiscal year to each of the corporation’s named executive officers, other than the chief financial officer, as of the
end of the fiscal year. However, Section 162(m) exempts qualifying performance-based compensation from the
deduction limit if certain requirements are met. Although the Compensation Committee considers the impact of
Section 162(m) when developing and implementing executive compensation programs, the Compensation
Committee believes that it is important and in the best interests of stockholders to preserve flexibility in
designing compensation programs. Accordingly, the Compensation Committee has not adopted a policy that all
compensation must qualify as deductible under Section 162(m). In practice, a significant portion of the
compensation awarded under the Company’s incentive programs (including the Company’s grants of stock
options and performance-based restricted stock unit awards under the executive incentive program for fiscal year
2010 described above) are intended to qualify as performance-based compensation exempt from Section 162(m)
of the Internal Revenue Code. The Compensation Committee has from time to time approved, and may in the
future approve, compensation arrangements for certain named executive officers that are not fully deductible.
Further, because of ambiguities and uncertainties as to the application and interpretation of Section 162(m) and
the regulations issued thereunder, no assurance can be given, notwithstanding the Compensation Committee’s
efforts, that compensation intended to satisfy the requirements for deductibility under Section 162(m) does in fact
do so.

Stock Ownership Policy

In February 2011, the Board of Directors adopted a Stock Ownership Policy for the Company’s directors.
The Stock Ownership Policy applies to Mr. Gecht in his role as director of the Company. The policy was adopted
to further align the interests of our shareholders and directors. According to the policy, included in the Board of
Directors’ Guidelines, directors are required to hold at least 10,000 shares of the Company’s common stock
within the later of three years of first becoming a director or three years of the date of adoption of the stock
ownership policy, and continue holding such required minimum as long as they continue serving as directors. In
determining whether the stock ownership requirements were met, the Board of Directors shall take into account a
director’s beneficial ownership, including shares of common stock held by the director, shares of common stock
held in trust for the benefit of the director or his or her immediate family members, vested or unvested restricted
stock and vested or unvested restricted stock units. The Nominating and Governance Committee may extend in
its discretion the deadline for attainment of such stock ownership level.

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Compensation Committee Interlocks and Insider Participation

None of the members of the Compensation Committee has at any time been one of the Company’s named

executive officers or employees or had any relationships requiring disclosure by the Company under the SEC
rules requiring disclosure of certain relationships and related party transactions. None of the Company’s named
executive officers currently serves, or in the past fiscal year has served, as a member of the board of directors or
compensation committee of any entity that has one or more named executive officers serving on the Board of
Directors or Compensation Committee.

COMPENSATION COMMITTEE REPORT

The Compensation Committee of the Company has reviewed and discussed the Compensation Discussion

and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and
discussions, the Compensation Committee recommended to the Board of Directors that the Compensation
Discussion and Analysis be included in this Proxy Statement.

COMPENSATION COMMITTEE

Gill Cogan
Dan Maydan

Compensation of Executive Officers

Summary Compensation for 2011

The compensation paid by the Company to named executive officers for the fiscal years ended

December 31, 2011, 2010 and 2009 is summarized as follows:

Name and principal
position
(a)

Guy Gecht,

Year
(b)

Salary
(c)(1)

Bonus
(d)(1)(4)

Stock
awards
(e)(2)(3)

Option
awards
(f)(2)(3)

Change in
pension value
and
nonqualified
deferred
compensation
earnings
(h)

Non-equity
incentive
plan
compensation
(g)(1)(4)

All other
compensation
(i)(1)(5)

Total
(j)

Chief Executive
Officer . . . . . . . 2011 $620,000

$ — $2,611,393 $

2010
2009

542,500 —
554,125 —

2,024,909
836,829

— $464,903
—
—

555,815
1,546,708

Fred Rosenzweig,

Former
President(6) . . . 2011
2010
2009

Vincent Pilette,

Chief Financial
Officer(7) . . . . . 2011

530,000 —
463,750 —
473,687 —

505,509
1,021,070
304,253

—
192,397
562,349

359,568
—
—

350,000 —

2,929,079

—

174,963

$ —
—
—

—
—
—

—

$ 8,685
9,335
28,714

$3,704,981
3,132,559
2,966,376

8,685
9,110
29,139

1,403,762
1,686,327
1,369,428

6,118

3,460,160

(1) All cash compensation earned by each named executive officer for the fiscal years of 2011, 2010 and 2009 is reflected in
the “Salary,” “Bonus,” or “All Other Compensation” columns of this table. There were no deferred salaries or other
compensation in 2011, 2010, or 2009. The amounts reported in the “Salary” column for 2010 and 2009 reflect voluntary
salary reductions for the named executive officers effective April 2009, which were reinstated effective November 2010.
(2) The amounts reported in the “Stock Awards” and “Option Awards” columns represent the aggregate grant date fair value

determined in accordance with ASC 718 of equity-based awards granted during the applicable year. See Note 12 of the
consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2011 regarding
assumptions underlying the valuation of equity awards.

(3) The amounts reported in the “Stock Awards” and “Option Awards” columns of the table above include the grant date fair
value of performance-based awards granted to the named executive officers in each of these years based on the probable
outcome (determined as of the grant date) of the performance-based conditions applicable to the awards. The probable
grant date fair value was determined assuming that the highest level of performance conditions would be achieved with
respect to the portion of these awards attributable to our named executive officers.

(4) As a result of Company and individual performance and economic conditions during fiscal year 2009, no bonuses were
payable to the named executive officers under the executive bonus programs. For fiscal year 2010, named executive
officer bonuses awarded under our executive bonus program were paid in shares of stock. These awards are reflected in
the “Stock Awards” column of the table above. For fiscal year 2011, the named executive officer bonuses that were
awarded under our executive bonus program are payable in cash and shares of stock. These awards are reflected in the
“Non-equity Incentive Plan Compensation” and “Stock Awards” columns of the table above and in the “2011 Grants of
Plan-Based Awards Table” below.

(5) For fiscal year 2011, “All Other Compensation” includes 401(k) employer matching contributions and life insurance

premiums as follows:

401(k) matching contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Life insurance premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total

Guy
Gecht

$4,900
3,785
$8,685

Fred
Rosenzweig

$4,900
3,785
$8,685

Vincent
Pilette

$2,333
3,785
$6,118

(6) Fred Rosenzweig resigned as President and his position on the Board of Directors effective December 31, 2011.
(7) Vincent Pilette was appointed Chief Financial Officer of the Company effective January 1, 2011.

2011 Grants of Plan-Based Awards

Equity awards granted and estimated future payouts under equity incentive plans during the fiscal year

ended December 31, 2011 to each of the Company’s named executive officers were are follows:

Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards(1)

Estimated Future Payouts
Under Equity Incentive Plan
Awards(1)

Grant Type

Threshold
($)

Target
($)

Maximum
($)

Threshold
(#)

Target
(#)

Maximum
(#)

Name and
Grant Date

Guy Gecht

All
Other
Stock
Awards:
Number
of
Shares
of Stock
or Units
(#)

All
Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)

2/9/2011(3) Performance-based RSUs
2/9/2011(4) Performance-based RSUs —
2/9/2011(5) Cash Accelerator
—
8/15/2011(6) Performance-based RSUs —
—
8/15/2011(7) Restricted Stock Units

$— $ — $ —
—
651,000 651,000

—

— 17,383 17,383
— 26,074 26,074
—
—

—

—
—

— 23,833 71,500 71,500
—

—

—
—
—
—
—
—
—
—
— 58,500 —

Exercise
or Base
Price of
Option
Awards
($/
Share)

Grant
Date
Value of
Stock and
Option
Awards
($)(2)

— $ 261,440
— $ 392,153
— $
— $1,076,790
— $ 881,010

—

y
x
o
r
P

Fred Rosenzweig

2/9/2011(3) Performance-based RSUs —
2/9/2011(4) Performance-based RSUs —
—
2/9/2011(5) Cash Accelerator

—
—

—
—
503,500 503,500

— 13,444 13,444
— 20,167 20,167
—
—

—

—
—
—

— $ 202,198
— $ 303,312
— $

—

Vincent Pilette

1/5/2011(7) Restricted Stock Units
—
1/5/2011(8) Performance-based RSUs —
2/9/2011(3) Performance-based RSUs —
2/9/2011(4) Performance-based RSUs —
2/9/2011(5) Cash Accelerator
—
8/15/2011(6) Performance-based RSUs —
—
8/15/2011(7) Restricted Stock Units

—

—
—
—
—

—
— 28,000 90,000 90,000
6,542
— 6,542
—
9,813
— 9,813
—
—
—
245,000 245,000

—

—
—

— 8,250 24,750 24,750
—

—

— 60,000 —
—
—
—
—
—
—
—
—
—
—
— 20,250 —

— $ 879,000
— $1,126,400
98,392
— $
— $ 147,587
— $
— $ 372,735
— $ 304,965

—

(1) “Threshold,” “Target,” and “Maximum” columns in the “Estimated Future Payouts Under Non-Equity Incentive Plan Awards” and

“Estimated Future Payouts Under Equity Incentive Plan Awards” columns, which were granted in February 2011, represent amounts
payable under our 2011 annual target bonus program. Threshold achievement results in no bonus payout, while Target and Maximum
achievement results in 100% bonus payout, with pro rata payouts for achievement between these levels.

(2) Grant Date Fair Value of Stock and Option Awards represents the grant date fair value of the applicable award calculated in accordance

with ASC 718. See Note 12 of the consolidated financial statements in our Annual Report on Form 10-K for the year ended
December 31, 2011 regarding assumptions underlying the valuation of equity awards.

(3) These RSUs vest based on achievement of 2011 revenue targets with pro rata vesting between the threshold of $520 million (0% vesting)
and the target of $560 million (100% vesting). These RSUs fully vested on December 31, 2011, and were certified by the Compensation
Committee on February 9, 2012 based on actual 2011 revenues of $592 million.

(4) These RSUs vest based on achievement of 2011 non-GAAP operating income targets with pro rata vesting between the threshold of $45
million (0% vesting) and the target of $57.6 million (100% vesting). These RSUs fully vested on December 31, 2011, and were certified
by the Compensation Committee on February 9, 2012, based on actual 2011 non-GAAP operating income of $72 million, prior to
accounting for the impact of certain cash bonuses. Non-GAAP operating income is defined as operating income determined in
accordance with GAAP, adjusted to remove the impact of certain expenses, and the tax effects of these adjustments.

(5) The cash accelerator is payable based on a weighting of 40% toward achievement of 2011 revenue targets with pro rata vesting between

the threshold of $560 million (0% vesting) and the target of $600 million (100% vesting) and 60% toward achievement of 2011
non-GAAP operating income targets with pro rata vesting between the threshold of $57.6 million (0% vesting) and the target of $71.2
million (100% vesting). The cash accelerator vested as to 92% of the award on December 31, 2011, based on actual 2011 revenue and
non-GAAP operating income of $592 million and $72 million, respectively, prior to accounting for the impact of certain cash bonuses, as
certified by the Compensation Committee on February 9, 2012. As discussed in the Compensation Discussion and Analysis above, on the
recommendation of the named executive officers and approved by the Compensation Committee, the vesting of the cash accelerator was
reduced to 71% to be more consistent with the levels awarded to non-executive management employees.

(6) These RSUs vest by one-third upon achieving 21% revenue growth and 12% non-GAAP operating income growth during any four

consecutive quarters between the first quarter of 2011 and the fourth quarter of 2012. These RSUs vest by an additional one-third upon
achieving 30% revenue growth and 13% non-GAAP operating income growth during any four consecutive quarters between the first
quarter of 2011 and the second quarter of 2013. These RSUs vest by an additional one-third upon achieving 40% revenue growth and
15% non-GAAP operating income growth during any four consecutive quarters between the first quarter of 2011 and the second quarter
of 2014. These RSUs are forfeited to the extent that any of these performance criteria are not achieved. Non-GAAP operating income is
defined as operating income determined in accordance with GAAP, adjusted to remove the impact of certain expenses, and the tax
effects of these adjustments.

(7) Each restricted stock unit award vests with respect to one-third of the units on the first, second, and third anniversaries of the date of

grant.

(8) These RSUs vest with respect to 28,000, 31,000, and 31,000 shares when the average closing stock price over a period of 20 consecutive

trading days equals or exceeds $17.65, $21.17, and $24.70, respectively.

Description of Plan-Based Awards

Equity Incentive Plan Awards. Each of the equity incentive awards reported in the above table was granted

under, and is subject to, the terms of the Company’s 2009 Equity Incentive Award Plan (the “2009 Plan”). The
2009 Plan is administered by the Compensation Committee. The Compensation Committee has authority to
interpret the plan provisions and make all required determinations under the plan. Awards granted under the plan
are generally only transferable to a beneficiary of a named executive officer upon his death or, in certain cases, to
family members for tax or estate planning purposes.

Under the terms of the 2009 Plan, if there is a change in control of the Company, each named executive
officer’s outstanding awards granted under the plan will generally become fully vested and exercisable, in the
case of options, unless the Compensation Committee provides for the substitution, assumption, exchange or other
continuation of the outstanding awards. Any options that become vested in connection with a change in control
generally must be exercised prior to the change in control, or they will be cancelled in exchange for the right to
receive a cash payment in connection with the change in control transaction.

In addition, each named executive officer may be entitled to accelerated vesting of his outstanding equity-
based awards upon certain terminations of his employment with the Company and/or a change in control of the
Company. The terms of this accelerated vesting are described in the “Potential Payments upon Termination or
Change in Control” section below.

Restricted Stock Units. Grants of time-based restricted stock units made in 2011 to the named executive
officers are reported in the table above under the heading “All Other Stock Awards: Number of Shares of Stock
or Units.” The vesting requirements applicable to each award granted to the named executive officers in 2011 are
described in the footnotes to the table above and in the “Long-Term Equity Incentive Program” section of the
Compensation Discussion and Analysis. Restricted stock units are payable on vesting in an equal number of
shares of the Company’s common stock. The named executive officer does not have the right to vote or dispose
of the restricted stock units and does not have any dividend rights with respect to the restricted stock units.

Performance Awards under Bonus Program. As described above, the named executive officers’ 2011
bonus opportunities were granted in the form of restricted stock unit awards, supplemented by a cash accelerator,
under our annual bonus program. These awards were granted in February 2011 and are reported in the table
above under the headings “Estimated Future Payouts Under Non-Equity Incentive Plan Awards” and “Estimated
Future Payouts Under Equity Incentive Plan Awards.” The material terms of these awards reported in the above
table are described in the Compensation Discussion and Analysis section above under the heading “Short-Term
Incentive Compensation.”

Other Performance Awards. As described above, the named executive officers were granted performance

awards in the form of restricted stock unit awards, which vest based on long-term revenue and non-GAAP
operating income targets. These awards were granted in August 2011 and are reported in the table above under
the heading “Estimated Future Payouts Under Equity Incentive Plan Awards.” The material terms of these
awards reported in the above table are described in the Compensation Discussion and Analysis section above
under the heading “Long-Term Equity Incentive Program.”

Market-based Awards Granted to our Chief Financial Officer. As described above, we granted 90,000
market-based restricted stock units to our Chief Financial Officer. This award is reported in the table above under
the heading “Estimated Future Payouts Under Equity Incentive Plan Awards.” The material terms of this award
reported in the above table are described in the Compensation Discussion and Analysis section above under the
heading “Long-Term Equity Incentive Program.”

Outstanding Equity Awards at 2011 Fiscal Year-End

Certain information with respect to unexercised options and unvested stock awards granted to named

executive officers as of the fiscal year end December 31, 2011 is as follows:

Option Awards

Stock Awards

Number of
securities
underlying
unexercised
options
(#)
exercisable
(b)

Number of
securities
underlying
unexercised
options
(#)
unexercisable
(c)

Equity
incentive
plan
awards:
Number of
securities
underlying
unexercised
options
(#)
(d)

Option
exercise
price
per
share
($)
(e)

Option
expiration
date
(f)

Number
of
shares
or units
of stock
that
have
not
vested
(#)
(g)

Market
value of
shares or
units of
stock that
have not
vested
($)
(h)

Name
(a)

Grant
Date

Equity
incentive
plan
awards:
market
or
payout
value of
unearned
shares,
units or
other
rights
that have
not
vested
($)
(j)

Equity
incentive
plan
awards:
number
of
unearned
shares,
units or
other
rights
that have
not
vested
(#)
(i)

y
x
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Guy Gecht

. . . . . . . . . . . 4/11/2005(1)
2/26/2008(2)
8/28/2009(4)
8/28/2009(5)
8/28/2009(6)
8/28/2009(3)
8/20/2010(6)
8/20/2010(3)
2/9/2011(7)
2/9/2011(8)
8/15/2011(9)
8/15/2011(3)
Fred Rosenzweig . . . . . . 4/25/2002(1)
4/11/2005(1)
2/26/2008(2)
8/28/2009(4)
8/28/2009(5)
8/28/2009(6)
8/28/2009(3)
8/20/2010(6)
8/20/2010(3)
2/9/2011(7)
2/9/2011(8)
1/5/2011(10)
1/5/2011(3)
2/9/2011(7)
2/9/2011(8)
8/15/2011(9)
8/15/2011(3)

Vincent Pilette . . . . . . . .

197,639
350,000
43,707
3,885
75,757
—
45,500
—
—
—
—
—
51,866
166,667
154,575
15,891
1,413
2,121
—
15,750
—
—
—
—
—
—
—
—
—

—
—
—
—
40,793
—
84,500
—
—
—
—
—
—
—
—
—
—
14,832
—
29,250
—
—
—
—
—
—
—
—
—

43,707
3,885

15,891
1,413

—

—
—
—
—
—

— $17.00 4/11/2012 — $
— $15.88 2/26/2015 —
$10.77 8/28/2016 —
$10.77 8/28/2016 —
— $10.77 8/28/2016 —
—
— $11.40 8/20/2017 —
—
—
—
—
—
— $17.50 4/24/2012 —
— $17.00 4/11/2012 —
— $15.88 2/26/2015 —
$10.77 8/28/2016 —
$10.77 8/28/2016 —
— $10.77 8/28/2016 —
—
— $11.40 8/20/2017 —
—
—
—
—
—
—
—
—
—

—
—
—
—
—
— 25,900 $ 369,075
—
— 80,000 $1,140,000
— 17,383 $ 247,708
— 26,074 $ 371,555
—
— 58,500 $ 833,625
—
—
—
—
—
—
— 9,416 $ 134,178
—
— 30,000 $ 427,500
— 13,444 $ 191,577
— 20,167 $ 287,380
—
— 60,000 $ 855,000
— 6,542 $
93,224
— 9,813 $ 139,835
—
— 20,250 $ 288,563

— $ —
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— 23,833 $339,620
—
—
—
—
—
—
—
—
—
—
—
—
— 31,000 $441,750
—
—
—
— 8,250 $117,563
—

—
—
—
—
—
—
—
—
—
—
—
—

—
—
—
—
—
—
—
—
—

—
—
—

—

(1) Each option vests with respect to 25% of the shares subject thereto on January 31, 2006 and then at a rate of 2.5% of the total number of

shares subject to the option per month over the next thirty months.

(2) Each option vests with respect to 33% of the shares subject thereto on the first anniversary of the date of grant and thereafter with respect

to an additional 2.23% of the shares each month, with full vesting in 42 months from the date of grant.

(3) Each restricted stock unit award vests with respect to one-third of the restricted stock units on the first, second and third anniversary of

the date of grant.

(4) Each option vests with respect to 25% of the shares subject thereto when the average closing stock price over a period of 20 consecutive
trading days equals or exceeds $16.16, $18.85, $21.54, and $24.23, respectively. The threshold performance goal requiring that an
average stock price of $16.16 be realized for 20 consecutive trading days was achieved on April 27, 2011, resulting in the vesting of
43,707 and 15,891 shares for Mr. Gecht and Mr. Rosenzweig, respectively. The number of securities underlying unexercised options
shown in column (d) above is based on achieving the next performance level, which requires that an average stock price of $18.85 is
realized for 20 consecutive trading days.

(5) Each option vests with respect to 20% of the shares subject thereto when non-GAAP return on equity for the year then ended exceeds

non-GAAP return on equity for the year ended December 31, 2008 by 2, 4, 6, 8, and 10 percentage points, respectively. Non-GAAP
return on equity is defined as non-GAAP net income divided by stockholders’ equity. Non-GAAP net income is defined as net income
determined in accordance with GAAP, adjusted to remove the impact of certain expenses, and the tax effects of these adjustments.The
threshold performance goal requiring that non-GAAP return on equity exceed non-GAAP return on equity for the year ended
December 31, 2008 by 2 percentage points was achieved on December 31, 2011, and certified by the Compensation Committee on

February 9, 2012, resulting in the vesting of 3,885 and 1,413 shares for Mr. Gecht and Mr. Rosenzweig, respectively. The number of
securities underlying unexercised options shown in column (d) above is based on achieving the next performance level, which requires
that non-GAAP return on equity exceed non-GAAP return on equity for the year ended December 31, 2008 by four percentage points.

(6) Each option vests with respect to 25% of the shares subject thereto on the first anniversary of the date of grant and then at a rate of

2.5% of the total number of shares subject to the option per month over the next thirty months.

(7) These RSUs vest based on achievement of 2011 revenue targets with pro rata vesting between the threshold of $520 million (0% vesting)
and the target of $560 million (100% vesting). These RSUs fully vested on December 31, 2011, and were certified by the Compensation
Committee on February 9, 2012, based on actual 2011 revenues of $592 million.

(8) These RSUs vest based on achievement of 2011 non-GAAP operating income targets with pro rata vesting between the threshold of $45
million (0% vesting) and the target of $58 million (100% vesting). These RSUs fully vested on December 31, 2011, and were certified by
the Compensation Committee on February 9, 2012, based on actual 2011 non-GAAP operating income of $72 million, prior to
accounting for the impact of certain cash bonuses. Non-GAAP operating income is defined as operating income determined in
accordance with GAAP, adjusted to remove the impact of certain expenses, and the tax effects of these adjustments.

(9) These RSUs vest by one-third upon achieving 21% revenue growth and 12% non-GAAP operating income growth during any four

(10) These RSUs vest with respect to 28,000, 31,000, and 31,000 shares when the average closing stock price over a period of 20 consecutive
trading days equals or exceeds $17.65, $21.17, and $24.70, respectively. The threshold performance goal requiring that an average stock
price of $17.65 be realized for 20 consecutive trading days was achieved on January 10, 2011, resulting in the vesting of 28,000 shares.
The number of securities underlying unvested RSUs shown in column (i) above is based on achieving the next performance level, which
requires that an average stock price of $21.17 is realized for 20 consecutive trading days.

Option Exercises and Stock Vested in 2011

Options exercised and restricted stock awards vested by the named executive officers during the fiscal year

ended December 31, 2011 were as follows:

Name
(a)

Option Awards

Stock Awards

Number of
shares
acquired
on exercise
(#)(b)

Value
realized
on exercise
($)(c)(1)

Number of
shares
acquired
on vesting
(#)(d)

Value
realized
on vesting
($)(e)(2)

Guy Gecht . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fred Rosenzweig . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vincent Pilette . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—
70,847
—

— 194,179
115,702
28,000

1,236,956
—

$2,791,390
1,682,839
528,920

(1) The dollar amounts shown in Column (c) above for option awards are determined by multiplying (i) the
number of shares to which the exercise of the option related by (ii) the difference between the per-share
price of our common stock on the date of exercise and the exercise price of the options.

(2) The dollar amounts shown in Column (e) for stock awards are determined by multiplying the number of
shares or units, as applicable, that vested by the per-share price of our common stock on the vesting date.

Pension Benefits

The Company does not provide Pension Benefits to its employees.

Nonqualified Deferred Compensation

The Company historically has not provided nonqualified deferred compensation to its employees.

Employment Agreements

The Company has entered into employment agreements with each of its named executive officers. The
employment agreements for each of Mr. Gecht and Mr. Rosenzweig were effective as of August 1, 2006, have an

y
x
o
r
P

initial term of three years and automatically renew for additional one year periods unless terminated by either
party upon sixty days written notice prior to the expiration of the agreement. The employment agreement for
Mr. Pilette was effective as of January 1, 2011. Each named executive officer’s employment with the Company
is at-will, and either party may terminate the employment relationship at any time for any reason, with or without
cause and with or without notice.

Each employment agreement provides, among other things, that:

•

the named executive officer shall be provided with a base salary and will be eligible for bonuses under
the annual management bonus program as approved by the Compensation Committee;

the named executive officer is eligible to receive stock options and other equity awards based on the
named executive officer’s performance;

in the event that the Company terminates the named executive officer’s employment without cause or
the named executive officer voluntarily terminates his employment for good reason, the named
executive officer is eligible for severance benefits consisting of salary continuation, a pro-rata bonus
(in the case of Mr. Gecht and Mr. Rosenzweig, based on salary levels prior to the voluntary salary
reduction instituted in April 2009), employer subsidized health benefit continuation under COBRA,
and outplacement services;

if the named executive officer becomes entitled to receive severance, the vesting of the named
executive officer’s outstanding and unvested stock options and other equity awards shall be either
partially or fully accelerated, performance conditions waived, and the post-termination exercise period
for stock options shall be extended;

in the case of Mr. Gecht and Mr. Rosenzweig, if the named executive officer is required to pay tax
penalties under Section 409A of the Internal Revenue Code in connection with his receipt of severance
benefits, the Company shall pay the named executive officer a gross up payment to hold the named
executive officer harmless, on an after-tax basis, for any such penalties; and

the named executive officer is subject to a non-solicitation covenant during his employment and for
one year following termination of employment.

For more information on the severance provisions of these employment agreements, please see the

severance tables and related footnotes in the section below.

As noted above, Mr. Rosenzweig resigned as the Company’s President effective December 31, 2011. In July

2011, the Company entered into a retirement and transition agreement with Mr. Rosenzweig, as amended on
January 11, 2012. The agreement, as amended, provides that the terms of Mr. Rosenzweig’s employment
agreement apply through his resignation as President on December 31, 2011, that he will remain employed by the
Company on a part-time basis from January 1, 2012 through February 29, 2012, and that he will provide
consulting services thereafter to the Company at a rate of $220 per hour through August 31, 2012.
Mr. Rosenzweig’s equity awards that are subject to time-based vesting, as well as his performance-based
restricted stock units granted on February 9, 2011, will continue to vest in accordance with their terms through
August 31, 2012, subject to his continued service to the Company. The agreement also contains a release of
claims by Mr. Rosenzweig and certain restrictive covenants in favor of the Company.

Potential Payments upon Termination or Change of Control

Potential payments that may be made to the Company’s named executive officers upon a termination of
employment or a change of control, pursuant to their employment agreements or otherwise, are set forth below.
As indicated herein, Mr. Rosenzweig resigned as the Company’s President effective December 31, 2011. No
payments described below in this section were triggered as a result of his resignation.

Quantitative benefits that would have accrued to each of the Company’s named executive officers employed
by the Company on December 31, 2011 are estimated below. These estimates of quantitative benefits assume that
the termination of employment and/or change in control triggering payment of these benefits occurred on the last
business day of 2011, with benefits being valued using the closing sales price of the Company’s common stock
on such date ($14.25). Receipt of these benefits is subject to the Company’s receipt of an executed separation
agreement and full release of all claims from the named executive officer. The executive’s actual benefits upon a
termination or change of control may be different from those described below if such event were to occur on any
other date or at any other price, or if any assumption is not factually correct.

Name

Lump sum
severance
payment
($)(1)

Outplacement
benefits
($)(2)

Guy Gecht . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fred Rosenzweig . . . . . . . . . . . . . . . . . . . . . .
Vincent Pilette . . . . . . . . . . . . . . . . . . . . . . . .

$2,324,179
1,633,532
933,024

$35,000
35,000
35,000

Continued
health
care
coverage
benefits
($)(3)

$31,440
31,539
10,662

Value of
accelerated
vesting of
stock options
and restricted
stock units
($)(4)

Total ($)

$1,130,541
331,300
483,906

$3,521,160
2,031,371
1,462,592

(1) The amount shown is the lump sum severance payment that consists of 24 months of base salary for

Mr. Gecht and 18 months for Mr. Rosenzweig and Mr. Pilette, plus an amount equal to the value of the
bonus that the named executive officer would have earned in 2011 based upon the level of performance
targets applicable to the bonus that were attained. If the named executive officer is terminated during the
year by the Company without cause or by the executive for good reason, the bonus is prorated for the
portion of the year that the named executive officer was with the Company

(2) Messrs. Gecht, Rosenzweig, and Pilette would be entitled to outplacement services up to a maximum of

$35,000.

(3) Messrs. Gecht, Rosenzweig, and Pilette would be entitled to premium reimbursement for health insurance

coverage under Part 6 of Title I of ERISA (COBRA) for up to 18 months.

(4) Other than restricted stock unit awards related to the 2011 executive bonus program which would be treated
as described above in Note 1, Messrs. Gecht, Rosenzweig and Pilette would be entitled to accelerated
vesting of options and restricted stock unis with respect to that number of shares that would otherwise have
vested during the six month period following the termination date without giving any consideration to
performance conditions. For options and restricted stock units that vest on an annual basis, credit is given as
if the vesting accrued monthly. The value of the accelerated options and restricted stock units is calculated
based on the Company’s closing stock price at December 31, 2011 of $14.25 per share, less the exercise
price with respect to accelerated options. The number of stock options and restricted stock units subject to
acceleration for each named executive officer if a termination by the Company without cause or by the
named executive officer for good reason had occurred on December 31, 2011, were as follows:

Name

Guy Gecht
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fred Rosenzweig . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vincent Pilette . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Stock
Options
(#)

36,983
13,107
—

Restricted
Stock
Units
(#)

71,167
20,347
33,958

The table below sets forth potential payments to the company’s named executive officers upon termination

without cause by the company or upon termination for good reason by the named executive officers, within 24
months following a change of control as follows:

Name

Lump sum
severance
payment
($)(1)

Outplacement
benefits
($)(2)

Guy Gecht
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Fred Rosenzweig . . . . . . . . . . . . . . . . . . . . . .
Vincent Pilette . . . . . . . . . . . . . . . . . . . . . . . .

$3,130,276
2,042,464
1,178,061

$35,000
35,000
35,000

Value of
accelerated
vesting of
stock options
and restricted
stock units
($)(4)

Total ($)

$4,254,729
882,213
2,379,750

$7,451,445
2,991,216
3,603,473

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Continued
health care
coverage
benefits
($)(3)

$31,440
31,539
10,662

(1) The amount shown is the lump sum severance payment that consists of 36 months of base salary for

Mr. Gecht and 24 months for Mr. Rosenzweig and Mr. Pilette, plus an amount equal to the value of the
bonus that the named executive officer would have earned in 2011 assuming that 100% of any performance
targets applicable to the bonus were attained.

(2) Messrs. Gecht, Rosenzweig, and Pilette would be entitled to outplacement services up to a maximum of $35,000.
(3) Messrs. Gecht, Rosenzweig, and Pilette would be entitled to premium reimbursement for health insurance

coverage under Part 6 of Title I of ERISA (COBRA) for up to 18 months.

(4) Messrs. Gecht, Rosenzweig, and Pilette would be entitled to accelerated vesting on 100% of all unvested
options and restricted stock units as of their termination date without giving consideration to performance
conditions, if any. The value of the accelerated options and restricted stock units is calculated based on the
Company’s closing stock price at December 31, 2011 of $14.25 per share, less the exercise price with
respect to accelerated options. The number of stock options and restricted stock units subject to acceleration
for each named executive officer if a termination by the Company without cause or by the executive for
good reason had occurred on December 31, 2011 (assuming such termination was within 24 months after a
change of control) are as follows:

Name

Guy Gecht
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fred Rosenzweig . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vincent Pilette . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Stock
Options
(#)

271,951
97,403
—

Restricted
Stock
Units
(#)

235,900
39,416
167,000

Securities Authorized for Issuance Under Equity Compensation Plans

The following table sets forth information as of December 31, 2011 concerning securities that are authorized

under the Company’s equity compensation plan.

Plan category

Equity compensation plans approved by

Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights

Weighted-average
exercise price of
outstanding options,
warrants and rights

Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
reflected in column 1)

stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4,956,171(1)

$14.67(2)

3,561,762(3)

Equity compensation plans not approved by

stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4,956,171

—

$14.67

—

3,561,762

(1)

Includes options outstanding as of December 31, 2011, representing 3,222 shares with an average exercise
price of $27.39 per share that were assumed in connection with business combinations.

(2) Calculated without taking into account 2,502,936 shares of RSUs that will become issuable as those units

vest without any cash consideration or other payment required for such shares.
Includes 2,012,534 shares available under the 2009 Plan and 1,549,228 shares available under the ESPP.

(3)

Compensation Risk Assessment

The Company does not believe that its compensation programs encourage unnecessary risk-taking that could

have a material adverse effect on the Company as a whole. In 2012, the Compensation Committee, with the
assistance of Mercer, has reviewed the elements of (i) the Company’s compensation programs and practices for
all employees and (ii) of executive compensation for fiscal year 2011 to determine whether any portion of the
program encouraged excessive risk taking. Following that review, the Compensation Committee does not believe
that the Company’s compensation programs and practices applicable to employees create risks that are
reasonably likely to have a material adverse effect on the Company.

The Compensation Committee also believes that the mix and design of the elements of our executive
compensation program do not encourage management to take excessive risks, based on the following factors:

• Compensation is allocated among base salaries and short and long-term compensation in a way as to

not encourage excessive risk taking. The base salaries are fixed in order to provide the executives with
a stable cash income, which allows them to focus on the Company’s issues and objectives as a whole.
The short and long-term compensation are designed to both reward Company’s overall performance
and align the named executive officers’ interest with those of our stockholders;

• Our annual bonus program is intended to balance risk and encourage our named executive officers to
focus on specific short-term goals important to our success. While our annual bonus program is based
on achievement of annual goals, and annual goals could encourage the taking of short-term risks at the
expense of long-term results, our named executive officers’ annual bonus awards are determined based
on a combination of objective corporate performance criteria as described above. In addition, threshold
and target levels of performance, payouts at multiple levels of performance, and evaluation of
performance based on objective measures are intended to assist in mitigating excessive risk taking.
Finally, the awards payable under our annual bonus program are subject to a maximum number of
shares with respect to the RSU portion of the award and a maximum cash payout with respect to the
cash portion of the award, which limit the overall payout potential;

ultimate value of the awards is tied to the Company’s stock price. The performance measures used to
determine the payment of awards to our named executive officers are Company-wide measures only, as
opposed to measures linked to the performance of a particular business segment. Applying Company-
wide performance measures is designed to encourage our named executive officers to make decisions
that are in the best long-term interests of the Company and our stockholders;

• Awards to our named executive officers under our long-term equity incentive program in 2011

consisted of 55% performance-based restricted stock units and 45% time-based restricted stock units.
The value of restricted stock units is tied directly to our stock price to help further align our executives’
interests with those of our stockholders. As with the performance-based restricted stock units granted
under our annual bonus program, the performance awards granted under our long-term equity program
vest based on the achievement of Company-wide performance measures in addition to continued
employment requirements and are intended to both provide a retention incentive and enhance
executives’ focus on specific financial goals considered important to the Company’s long-term growth.
Because these time-based and performance-based awards will generally remain outstanding for a
period of years, they help ensure that executives always have significant value tied to delivering long-
term stockholder value.

• Mr. Gecht owns approximately 2% of the Company’s outstanding common stock which significantly

aligns his interests with the stockholders’ interests.

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AUDIT COMMITTEE REPORT

As more fully described in its Charter, the Audit Committee oversees the accounting and financial reporting

processes of the Company and audits of the financial statements of the Company and assists the Board of
Directors in oversight and monitoring of the integrity of the Company’s financial statements, the Company’s
compliance with legal and regulatory requirements, the independent auditor’s qualifications, independence and
performance, and the Company’s systems of internal controls.

In the performance of its oversight function, the Audit Committee has reviewed the Company’s audited
financial statements for the fiscal year ended December 31, 2011, included in the Company’s Annual Report on
Form 10-K for that year.

The Audit Committee has reviewed and discussed these audited financial statements and overall financial

reporting process, including the Company’s system of internal controls, with management of the Company.

The Audit Committee has discussed with the Company’s independent registered public accounting firm,

PricewaterhouseCoopers LLP (“PwC”), the matters required to be discussed by SAS 61 (Codification of
Statements on Auditing Standards, AU Section 380) as amended, as adopted by the Public Company Accounting
Oversight Board (“PCAOB”) in Rule 3200T, which includes, among other items, matters related to the conduct
of the audit of the Company’s financial statements.

The Audit Committee has received the written disclosures and the letter from PwC required by PCAOB
Rule 3526, “Communication with Audit Committees Concerning Independence,” as amended, and has discussed
with PwC the independence of PwC from the Company.

Based on the review and discussions referred to above in this Report, the Audit Committee recommended to

the Company’s Board of Directors that the audited financial statements be included in the Company’s Annual
Report on Form 10-K for the year ended December 31, 2011 for filing with the SEC.

AUDIT COMMITTEE

Eric Brown
Richard A. Kashnow
Thomas Georgens

NO INCORPORATION BY REFERENCE

In the Company’s filings with the SEC, information is sometimes “incorporated by reference.” This means

that the Company is referring you to information that has previously been filed with the SEC and the information
should be considered as part of the particular filing. As provided under SEC regulations, the “Audit Committee
Report” and the “Compensation Committee Report” contained in this Proxy Statement specifically are not
incorporated by reference into any other filings with the SEC and shall not be deemed to be “Soliciting
Material.” In addition, this Proxy Statement includes several website addresses. These website addresses are
intended to provide inactive, textual references only. The information on these websites is not part of this Proxy
Statement.

OTHER MATTERS

The Company knows of no other matters to be submitted at the meeting. If any other matters properly come
before the meeting, it is the intention of the persons named in the enclosed form of proxy to vote the shares they
represent as the Board of Directors may recommend.

By Order of the Board of Directors

/s/ BRYAN KO
Bryan Ko
Secretary

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Dated: April 5, 2012

[THIS PAGE INTENTIONALLY LEFT BLANK]

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549

FORM 10-K

(Mark One)
È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2011
‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 000-18805

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ELECTRONICS FOR IMAGING, INC.

(Exact name of registrant as specified in its charter)

Delaware
(State or other Jurisdiction of
incorporation or organization)

94-3086355
(I.R.S. Employer
Identification No.)

303 Velocity Way, Foster City, CA 94404
(Address of principal executive offices) (Zip Code)
(650) 357-3500
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Common Stock, $.01 Par Value

Name of Exchange on which Registered

The NASDAQ Stock Market LLC

None

Securities registered pursuant to Section 12(g) of the Act:
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ‘ No È
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ‘ No È
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject
to such filing requirements for the past 90 days. Yes È No ‘
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for
such shorter period that the registrant was required to submit and post such files). Yes È No ‘
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. È
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ‘
Non-accelerated filer ‘

È
Accelerated filer
Smaller reporting company ‘
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ‘ No È
The aggregate market value of the voting and non-voting common stock held by non-affiliates computed by reference to the price at which the
common stock was last sold on June 30, 2011 was $657,043,599.**
The number of shares outstanding of the registrant’s common stock, $.01 par value per share, as of February 1, 2012 was 45,959,220.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement to be delivered to stockholders in connection with the 2012 Annual Meeting of Stockholders are
incorporated by reference into Part III hereof.
** Based on the last trade price of the registrant’s common stock reported on The NASDAQ Global Select Market on June 30, 2011, the last
business day of the registrant’s second quarter of the 2011 fiscal year. Excludes 8,146,155 shares of common stock held by directors, executive
officers and holders known to the registrant to hold 10% or more of the registrant’s outstanding common stock in that such persons may be
deemed to be affiliates. This determination of executive officer or affiliate status is not necessarily a conclusive determination for other purposes.
Exclusion of shares held by any person should not be construed to indicate that such person possesses the power, direct or indirect, to direct or
cause the direction of the management or policies of the registrant, or that such person is controlled by or under common control with the
registrant.

TABLE OF CONTENTS

PART I

ITEM 1
ITEM 1A
ITEM 1B
ITEM 2
ITEM 3
ITEM 4

Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mine Safety Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART II

ITEM 5

ITEM 6
ITEM 7
ITEM 7A
ITEM 8
ITEM 9
ITEM 9A
ITEM 9B

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management’s Discussion and Analysis of Financial Condition and Results of Operations . . .
Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . .
Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART III

ITEM 10
ITEM 11
ITEM 12

ITEM 13
ITEM 14

Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . .
Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART IV

Exhibits, Financial Statement Schedules and Reports on Form 10-K . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ITEM 15
Signatures
EXHIBIT INDEX
EXHIBIT 10.31
EXHIBIT 12.1
EXHIBIT 21
EXHIBIT 23.1
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 101

2
16
32
32
33
35

36
38
39
80
83
147
147
148

149
149

149
150
150

151
157

FORWARD-LOOKING STATEMENTS

Certain of the information contained in this Annual Report on Form 10-K, including, without limitation,
statements made under this Part I, Item 1, “Business,” Part II, Item 7, “Management’s Discussion and Analysis
of Financial Condition and Results of Operations,” and Part II Item 7A, “Quantitative and Qualitative
Disclosures about Market Risk,” which are not historical facts, may include “forward-looking statements”
within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E
of the Securities Exchange Act of 1934, as amended (“Exchange Act”), and is subject to risks and uncertainties
and actual results or events may differ materially. When used herein, the words “anticipate,” “believe,”
“estimate,” “expect,” “intend,” “will,” “may,” “should,” “plan,” “potential,” “seek,” “continue,” and similar
expressions as they relate to the Company or its management are intended to identify such statements as
“forward-looking statements.” Such statements reflect the current views of the Company and its management
with respect to future events and are subject to certain risks, uncertainties, and assumptions. Should one or more
of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, the Company’s
actual results, performance, or achievements could differ materially from the results expressed in, or implied by,
these forward-looking statements. Important factors that could cause the Company’s actual results to differ
materially from those included in the forward-looking statements made herein include, without limitation, those
factors discussed in Item 1, “Business,” in Item 1A, “Risk Factors,” and elsewhere in this Annual Report on
Form 10-K and in the Company’s other filings with the Securities and Exchange Commission (“SEC”), including
the Company’s most recent Quarterly Report on Form 10-Q and Current Reports on Form 8-K, and any
amendments thereto. The Company assumes no obligation to revise or update these forward-looking statements
to reflect actual results, events, or changes in factors or assumptions affecting such forward-looking statements.

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PART I

This Annual Report on Form 10-K includes certain registered trademarks, trademarks, and trade names of
Electronics For Imaging, Inc., its subsidiaries, and others. Electronics For Imaging, the EFI logo, Fiery, the Fiery
logo, PrintMe, Inkware, Jetrion, VUTEk, PrintFlow, PrintSmith, and Digital StoreFront are registered trademarks
of the Company in the U.S. and/or certain other countries. EFI, Rastek, the APPS logo, Hagen, PSI, Logic, Pace,
Radius, PrintStream, and Prism are trademarks of the Company in the U.S. and/or certain other countries. All
other terms and product names may be trademarks or registered trademarks of their respective owners, and are
hereby acknowledged. References to “EFI,” the “Company,” “we,” “us,” and “our” mean Electronics For
Imaging, Inc. and its subsidiaries, unless the context means otherwise.

Item 1: Business

Filings

We file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy
statements, and other documents with the SEC under the Exchange Act. The public may read and copy any
materials that we file with the SEC at the SEC’s Public Reference Room at Room 1580, 100 F Street,
N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference
Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an internet website that contains reports,
proxy statements, information statements, and other information regarding issuers, including EFI, that file
electronically with the SEC. The public can obtain any documents that we file with the SEC at http://
www.sec.gov.

We also make available free of charge through our internet website (http://www.efi.com) our Annual Reports on
Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements, and if applicable,
amendments to those reports filed or furnished pursuant to the Exchange Act as soon as reasonably practicable
after we electronically file such material with, or furnish it to, the SEC. None of the information on our website is
incorporated by reference into our reports filed with, or furnished to, the SEC.

General

EFI was incorporated in Delaware in 1988 and commenced operations in 1989. Our initial public offering of
common stock was effective in 1992. Our common stock is traded on The NASDAQ Global Select Market under
the symbol EFII. Our corporate offices are located at 303 Velocity Way, Foster City, California 94404.

We are a world leader in customer-focused digital printing innovation focused on the transformation of the
printing and packaging industries from the use of traditional analog based presses to digital on-demand printing.

Our products include color digital print controllers, industrial super-wide, wide format, and label and packaging
digital inkjet printers that utilize our digital ink, and business process automation solutions. Our award-winning
business process automation solutions are integrated from creation to print and are vertically integrated with our
digital industrial inkjet printers and digital ultra-violet (“UV”) ink, of which we are the largest world-wide
manufacturer. Our product portfolio includes Fiery digital color print servers (“Fiery”); industrial Inkjet products
(“Inkjet”) including VUTEk super-wide and Rastek wide format digital industrial inkjet printers, Jetrion label
and packaging digital inkjet printing systems, and ink for each of these printers; and Advanced Professional Print
Software (“APPS”) consisting of print production workflow and business process automation software, which
provides corporate printing solutions, label and packaging solutions, and mailing and fulfillment solutions for the
printing industry. Our integrated solutions and award-winning technologies are designed to automate print and
business processes, streamline workflow, provide profitable value-added services, and produce accurate digital
output.

Products and Services

Fiery

Our Fiery brand consists of print servers, controllers, and digital front ends (“DFEs”), which transform digital
copiers and printers into high performance networked printing devices. Once networked, Fiery-powered printers
and copiers can be shared across workgroups, departments, the enterprise, and the internet to quickly and
economically produce high-quality color documents. We have a direct relationship with several leading printer
manufacturers, which we previously referred to as original equipment manufacturers (“OEMs”). We work
closely together to design, develop, and integrate Fiery controller and software technology to maximize the
capability of each print engine. The printer manufacturers act as distributors and sell Fiery products to end
customers through reseller channels. End customer and reseller channel preference for the Fiery controller and
software solutions drives demand for Fiery products through the printer manufacturers.

Fiery products are comprised of (i) stand-alone print controllers and servers connected to digital copiers and
other peripheral devices, (ii) embedded and design-licensed solutions used in digital copiers and multi-functional
devices, (iii) optional software integrated into our controller solutions such as Fiery Central and MicroPress,
(iv) Entrac, our self-service and payment solution, (v) PrintMe, our mobile printing application, and (vi) stand-
alone software-based solutions such as our proofing and scanning solutions.

Our main controller platforms, primary printer manufacturer customers, and end user environments are as
follows:

Platform

Printer Manufacturers or Customers

User Environments

Fiery external print servers

Canon, Fuji Xerox,
Konica Minolta,
OKI Data, Ricoh, Toshiba, Xerox,
Kyocera Mita

Fiery embedded and design-licensed
solutions

Canon, Fuji Xerox, Konica
Minolta, OKI Data, Ricoh,
Toshiba, Xerox Kyocera Mita

Fiery Central, MicroPress

Canon, Konica Minolta, Ricoh

Entrac

Fedex Office
Staples

PrintMe Mobile

Enterprise mobile print solution

Proofing software: ColorProof XF,
Fiery XF, ColorProof eXpress, and
Xflow

Digital color proofing and inkjet
production print solutions offering
fast, flexible workflow, power, and
expandability

Print for Pay, Corporate
Reprographic Departments, Graphic
Arts, Advertising Agencies,
Transactional & Commercial
Printers

Office Environments, Print for Pay,
and Quick Printers

Corporate Reprographic
Departments, Commercial Printers,
and production workflow solutions

ExpressPay self-service and
payment solutions for retail copy
and print stores, hotel business
centers, and convention centers.

Mobile printing from any mobile
device to any network printer

Digital, commercial and hybrid
printers, prepress providers,
publishers, creative agencies and
photographers, and super-wide &
wide format print providers

Inkjet

Our industrial inkjet products address the high-growth segments of digital inkjet, where significant conversion to
production digital inkjet printing is occurring.

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Our industry-leading VUTEk super-wide format digital industrial inkjet printers and ink are used by billboard
graphics printers, commercial photo labs, large sign shops, graphic screen printers, specialty commercial printers,
and digital graphics providers serving the fast-growing out-of-home advertising and industrial specialty print
segments by printing point of purchase displays, signage, banners, fleet graphics, building wraps, art exhibits,
customized architectural elements, and other large graphic displays. We introduced the GS series of high-speed,
high-resolution super-wide format printers in 2009 with follow-on models introduced in 2010 and 2011. VUTEk
printers primarily use UV curable ink, of which we are the largest world-wide manufacturer, although our solvent
ink printers remain in use in the field. Our Rastek hybrid and flatbed entry level production UV wide format
inkjet printers are developed, manufactured, and marketed to the mid-range industrial inkjet printer market.

Our Jetrion products specialize in label and packaging digital inkjet printing and provide a wide array of label
and packaging digital inkjet systems, custom high-performance integration solutions, and specialty digital UV
ink to the label, packaging, and converting industries. In 2008, we launched our Jetrion 4000 Full Color Digital
Label printer focused on short run, on-demand, color label printing with follow-on models in 2009 and 2011.

We are the largest world-wide manufacturer and marketer of digital UV ink used in our industrial inkjet printers
and were first to market with digital UV ink cured by LED for use in high-end production wide format inkjet.
Our ink is customized for each of our printers to provide optimum performance and the highest output quality.
Our ink provides a recurring revenue stream generated from sales to our existing customer base of installed
printers.

Some of our digital industrial inkjet printers and their related features are as follows:

Printer Type

Models

Capabilities

Application Examples

VUTEk

Rastek

GS Series Printers
QS Series Printers
UltraVU UV Ink
PressVU UV Ink

Printing widths of 2 to 5 meters;
6, 7, and 8 colors, plus white;
Flexible and rigid substrates; UV
curable inks

H family of hybrid
printers T family of
flatbed printers

Speeds up to 44.5 square meters
per hour and up to 1,200 dpi;
Handles media of thicknesses up
to 5 centimeters

Super-wide format Banners,
Billboards, Signage, Building
Wraps, Flags, Point of purchase
and exhibition signage, Backlit
displays, and Photo-quality
graphics

Wide format Indoor and outdoor
graphics with photographic
image quality, Mid-range market

Jetrion

4000 Series

Print resolutions up to 1000 dpi;
4 or 5 colors; Precise color-color
registration

Primary and secondary label
applications, Industrial label or
flexible packaging markets

APPS

To provide our customers with solutions to manage and streamline their printing operations, we have developed
technology that enhances printing workflow and makes printing operations more powerful, productive, and easier
to manage. Most of our software solutions have been developed with the express goal of automating print
processes and streamlining workflow via open, integrated, and interoperable EFI products, services, and
solutions. The APPS operating segment includes our business process automation software, including Monarch
(formerly Hagen), PSI, Logic, PrintSmith, and PrintFlow; Pace, our business process automation software that is
available in a cloud-based environment; Digital StoreFront, our cloud-based e-commerce solution that allows
print service providers to accept, manage, and process printing orders over the internet; Radius, our business
process automation software for label and packaging printers; PrintStream, our business process automation
software for mailing and fulfillment services in the printing industry; Prism, our business process automation
software for the printing and packaging industry; and Alphagraph, which includes business process automation
solutions for the graphic arts industry.

We sell PrintSmith to small print-for-pay and small commercial print shops; Pace to medium and large
commercial print shops, display graphics providers, in-plant printing operations, and government printing
operations; Monarch to large commercial, publication, direct mail, and digital print shops; Radius to the label and
packaging industry; Digital StoreFront to customers desiring e-commerce and web-to-print solutions, and
PrintStream to Pace and Monarch customers that provide fulfillment services to their end customers.

Our enterprise resource planning and collaborative supply chain business process automation software solutions
are designed to enable printers and print buyers to improve productivity and customer service while reducing
costs. Web-to-print applications for print buyers and print producers facilitate web-based collaboration across the
print supply chain. Customers recognize that business process automation is essential to improving their business
practices and profitability. We are focused on making our business process automation solutions the global
industry standard.

We provide consulting and support services, as well as warranty support for our software products. We typically
sell an annual full service maintenance agreement with each license sold that provides warranty protection from
date of shipment. The sale and renewal of annual maintenance agreements provide a recurring revenue stream.

Our primary software offerings include:

Product Name

Description

User

Business process automation
software: Monarch (formerly Hagen),
PSI, Logic, PrintSmith, PrintFlow,
Radius, PrintStream, Prism, and
Alphagraph

Cloud-based business process
automation software: Pace

Collect, organize, and present
business process information to
improve productivity and customer
service while reducing costs.

Commercial, publishing, digital,
in-plant, print for pay, large
format, and specialty printing and
packaging companies

Software modules for: estimating,
scheduling, print production,
accounting, e-commerce, and web-
to-print

Commercial, digital, display
graphics, in- plant, and print for
pay

Cloud-based order entry and order
management systems: Digital
StoreFront, PrinterSite, and
PrintSmith Site

Procurement applications for print
buyers and print producers
facilitate cloud-based collaboration
across the supply chain.

Commercial, publishing, digital,
in-plant, print for pay, large
format, and specialty printers

Sales, Marketing, and Distribution

We have assembled, internally and through acquisitions, an experienced team of technical support and sales and
marketing personnel with backgrounds in color reproduction, digital pre-press, image processing, business
process automation systems, networking, and software and hardware engineering, as well as market knowledge
of enterprise printing, graphic arts, and commercial printing. By applying our expertise in these areas, we expect
to continue to expand the scope and sophistication of our products and gain access to new markets and channels
of distribution.

Fiery

The primary distribution channel for our Fiery products is through our direct relationship with several leading
printer manufacturers. We work closely together to design, develop, and integrate Fiery controller and software
technology to maximize the capability of each print engine. The printer manufacturers act as distributors and sell
Fiery products to end customers through reseller channels. End customer and reseller channel preference for our
Fiery controller and software solutions drives demand for Fiery products through the printer manufacturers.

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Although end customer and reseller channel preference for Fiery products drives demand, most Fiery revenue
relies on these significant printer manufacturer / distributors to design, develop, and integrate Fiery technology
into their print engine as described above. See Item 1A— We have a direct relationship with several leading
printer manufacturers and work closely with them to design, develop, and integrate Fiery controller and software
technology to maximize the capability of their print engines. These manufacturers act as distributors and sell
Fiery products to end customers through reseller channels. End customer and reseller channel preference for the
Fiery controller and software solutions drives demand for Fiery products through the printer manufacturers.
Consequently, we do not typically have long-term purchase contracts with these printer manufacturer customers.
They have in the past reduced or ceased, and could at any time in the future reduce or cease, to purchase
products from us, thereby harming our operating results and business.

We are aligned with the following significant printer manufacturers: Canon, Epson, Fuji Xerox, Konica Minolta,
Kyocera Mita, OKI Data, Ricoh, Toshiba, and Xerox. Kyocera Mita was added as a new Fiery distributor in
2011.

Our proofing products are sold primarily to authorized distributors, dealers and resellers who in turn sell the
solutions to end users either stand-alone or bundled with other solutions they offer. Primary customers with
whom we have established distribution agreements include Canon, Xerox, Heidelberg, Hewlett-Packard, and
other sales companies. There can be no assurance that we will continue to successfully distribute our products
through these channels.

Inkjet

Our industrial Inkjet products are sold primarily through our direct sales force augmented by some select
distributors in North America and Europe and by distributors world-wide. Any interruption of either of these
distribution channels could negatively impact us in the future. We added a new Inkjet distributor in 2011 as
Heidelberg will distribute the GS series of super-wide format digital industrial inkjet printers in Canada.

We promote our industrial Inkjet products through public relations, direct mail, advertising, promotional
material, trade shows, and ongoing customer communication programs. The majority of sales leads for our inkjet
printer sales are generated from trade shows. Any interruption in our trade show participation could materially
impact our revenue and profitability. There were approximately 1,000 customers in attendance at our annual EFI
Connect trade show, which generates leads for the Inkjet and APPS operating segments and generates end user
demand for the Fiery segment.

APPS

Our enterprise resource planning and collaborative supply chain business process automation software solutions
within our APPS portfolio are primarily sold directly to end users by our direct sales force in North America and
Europe. An additional distribution channel for our APPS software products is through direct sale to a mix of
distributors consisting of authorized distributors, dealers, and resellers who in turn sell the software solutions to
end users either stand-alone or bundled with other solutions they offer. Primary customers with whom we have
established distribution agreements include Canon, Ricoh, Konica Minolta, Oce, xpedx, and other sales
companies. Xerox began selling our Digital StoreFront cloud-based e-commerce and web-to-print solution in
2011. In addition, there are a number of small private resellers of our business process automation software in
different geographic regions throughout the world where a direct sales force is not cost-effective. There can be no
assurance that we will continue to successfully distribute products through these channels.

Growth and Expansion Strategies

The growth and expansion of our revenue will be derived from product innovation, increasing market coverage,
and expanding the addressable market. We plan to continue to introduce new generations of Fiery digital print
controllers. We expect to expand and improve our offerings in Inkjet and APPS, including new product lines

related to digital printing, workflow, and print management. Our primary goal is to offer best of breed solutions
that are interoperable and conform to open standards, which will allow customers to configure the most efficient
solution for their business by establishing enterprise coherence and leveraging industry standardization.

Product Innovation

We achieve product innovation through internal research and development efforts, as well as by acquiring
businesses that own technology that is synergistic with our product lines and may be attractive to our customers.
We explore acquisition possibilities as a means of expanding our product lines and customer base. Although
there can be no assurance that acquisitions will be successful, acquisitions have allowed us to broaden our
product lines. Examples include the Streamline Development, LLC (“Streamline”), Prism Group Holdings
Limited (“Prism”), alphagraph team GmbH (“Alphagraph”), and Radius Solutions Incorporated (“Radius”)
acquisitions in the APPS operating segment in 2011 and 2010 and the Entrac Technologies, Inc. (“Entrac”)
acquisition in the Fiery operating segment in 2011.

Fiery. We internally develop new digital print controllers that are “scalable,” which means they meet the
changing needs of the user as their business grows. Our products offer a broad range of features and functionality
when connected to, or integrated with, digital color copiers. We intend to continue our development of platform
enhancements that advance the performance and usability of our software applications to provide cohesive and
integrated solutions for our customers.

As 2011 marks the 20 year anniversary of the first Fiery digital print server, we launched the next generation
Fiery platform, “Fiery System 10”. The new platform has accelerated document delivery, updated system
calibration technology to improve color consistency, tightened integration with the printer’s finishing options,
and increased the level of flexibility and control. We also launched the latest version of the Fiery® Command
WorkStation® print job management and user interface software in 2011, with improved image quality, color
output, usability, and workflow. We also continued to upgrade and introduce new print engines within our printer
manufacturer relationships.

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We launched various upgrades to our Fiery product line in 2010, including the next generation Fiery platform
with new color tools, support of the Adobe® PDF Print Engine v2 for pure PDF workflows, and improved Job
Definition Format (“JDF”) integration.

In 2010, we launched PrintMe Connect, which is a software application that enables direct printing from Apple®
iPad®, iPhone®, and iPod touch® iOS 4.2-enabled devices to EFI Fiery-driven printers or multi-function
peripherals. PrintMe was the world’s first cloud-based printing platform that enabled mobile workers to upload
their documents to the PrintMe cloud and securely print them on any PrintMe-enabled printer. In 2011, we
launched PrintMe Mobile, an enterprise solution that lets business users print directly from Apple, Android, and
Blackberry tablets and smartphones to any networked printer.

In 2011, EFI acquired Entrac, a leading provider of self-service and payment solutions that allow service
providers to offer access to business machines including printers, copiers, computers/internet access, fax
machines, and photo printing kiosks.

Inkjet. Product innovation in the Inkjet operating segment has been entirely through internal development,
subsequent to the Raster Printers, Inc. (“Raster”) acquisition in 2008. In 2009, we introduced the GS series of
super-wide format printers. The GS2000 is a 2-meter printer that delivers photorealistic quality at high speeds.
The GS3200 is a 3.2 meter printer, which also delivers photorealistic quality and higher speed while expanding
the reach of the super-wide format printer into new industries and innovative applications. The GS5000r printer
was launched in 2010 and offers higher quality and speed that focuses on markets that demand
point-of-purchase-quality graphics.

In 2011, we introduced the GS3250LX UV-curing digital inkjet printer incorporating “cool cure” LED
technology and increased productivity to facilitate faster and more efficient job production, the GS3250r, which
is a dedicated roll-fed machine developed to bring the cost savings and flexibility of solvent-based inks to a
UV-curable platform while offering the highest print quality in its class, and the TX3250r, which was developed
for the textile printing market.

We also launched the Fiery XF ProServer in 2011, which is a high-performance production solution for the
complete line-up of VUTEk super-wide format UV digital inkjet printers.

The purchase of the Raster business in 2008 enabled us to sell Rastek wide format hybrid and flatbed printers. In
2009, the launch of the H650 and T660 Rastek wide format printers offered high image quality to mid-size print
companies. This was followed by the increased speed of the H652 and flexibility of the T1000 wide format
printers, which were launched in 2010.

In 2009, we added the Jetrion 4830 UV Inkjet System with a wider web width (8.3 inches) and faster linear
speeds. The 4830 increases throughput compared to the market leading Jetrion 4000. In 2011, we launched the
Jetrion 4900, a UV digital inkjet printing system combining digital printing with in-line laser finishing for label
converters.

Subsequent to year end, on January 10, 2012, we acquired privately held Cretaprint S.L. (“Cretaprint”),
headquartered in Castellon, Spain. Cretaprint is a leading developer and supplier of inkjet printers for ceramic
tiles.

APPS. With the exception of the launch of a new version of our Radius business process automation packaging
software targeted at the small-to-medium business segment and new version releases of each of our software
products, there were no other significant internally developed new software products in the APPS operating
segment in 2011. The Prinstream fulfillment software module will be integrated with the Pace and Monarch
business process automation software products in early 2012,

We have announced an intention to continue to explore additional acquisition opportunities in the APPS
operating segment to further consolidate the business process automation and web-based order entry and order
management software industries in both the Americas and world-wide. In 2011, we acquired Streamline, which
provides PrintStream business process automation software for mailing and fulfillment services in the printing
industry; Prism, which provides business process automation software for shop floor management and work in
progress tracking in the printing and packaging industry; and Alphagraph, which provides business process
automation solutions for the graphic arts industry. Alphagraph’s software solutions are used in over 6,000
facilities in 15 countries.

Increasing Market Coverage

Fiery. We have a direct relationship with several leading printer manufacturers and copier industry companies.
We work closely together to design, develop, and integrate Fiery controller and software technology to maximize
the capability of each print engine. The printer manufacturers act as distributors to sell Fiery products to end
customers through reseller channels. End customer and reseller channel preference for the Fiery controller and
software solutions drives demand for Fiery products through the printer manufacturers.

Our relationships with the leading printer and copier industry companies are one of our most important assets.
We have established relationships with leading printer and copier industry companies, including Canon, Epson,
Fuji Xerox, Konica Minolta, Kyocera Mita, OKI Data, Ricoh, Toshiba, and Xerox.

These relationships are based on business relationships that have been established over time. Our agreements
with these customers generally do not require them to make any future purchases from us. They are generally
free to purchase and offer products from our competitors, or build their own products for sale to the end
customer, or cease purchasing our products at any time, for any reason, or no reason.

PrintMe was the world’s first cloud-based printing platform that enabled mobile workers to upload their
documents to the PrintMe cloud and securely print them on any PrintMe-enabled printer. Significant distributors
and resellers of our PrintMe Connect software application include Xerox and Canon. Office workers can now
print from virtually any mobile device to Xerox’s multifunction printers with PrintMe®. Canon’s
imageRUNNER ADVANCE lineup of color and black & white office systems utilizing Fiery-based imagePASS
and ColorPASS controllers now support our direct mobile printing solution.

Inkjet and APPS. Our Inkjet and APPS products are sold through our direct sales force and via distribution
arrangements to all sizes of print providers. The acquisition of Prism and Alphagraph in 2011 and Radius in 2010
have led to an increased international presence for our APPS business including an expansion of our direct sales
force.

We have established relationships with many leading distribution companies in the graphic arts and commercial
print industries such as Nazdar, Heidelberg, 3M, xpedx, as well as significant printer manufacturing companies
including Ricoh, Canon, Oce, and Konica Minolta. We have also established global relationships with many of
the leading print providers, such as R.R. Donnelley, Fedex Office, and Staples. These direct sales relationships,
along with dealer arrangements, are important for our understanding of the end markets for our products and
serve as a source of future product development ideas. In many cases, our products are customized for the needs
of large customers, yet maintain the common intuitive interfaces that we are known for around the world.

Expanding Addressable Market

Fiery. The Fiery addressable market consists of commercial print, medium print-for-pay, and quick print
businesses. The compound annual growth rate for the production color digital print market has been 2.9% since
2010, according to InfoTrends U.S. Print On Demand Market Forecast. Our strategy is to grow the Fiery business
in the high-end commercial print market with our digital engines, continue to gain share in the light production
medium print-for-pay market via innovation and support, and expand into the enterprise quick print business by
leveraging the cloud through our PrintMe technology. Fiery is gaining market share in the Americas and Europe,
Middle East, and Africa (“EMEA”) in the light production and high end commercial print segments.

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Inkjet. The Inkjet addressable market is best measured through the growth of the signage market. We believe the
printed (analog) signage market is expected to grow at a compound annual growth rate of 2% annually, according
to internal market estimates. We expect the digital signage market to grow more rapidly at a compound annual
growth rate of 15% annually, according to internal market estimates. We are helping to accelerate this transition
from analog to digital printing technology through our introduction of high speed and high performance digital
industrial inkjet printers.

The industrial inkjet market consists primarily of the super-wide format longer production run printer market,
which we address via our VUTEk digital industrial inkjet product line, the wide format medium production run
printer market, which we address via our Rastek digital industrial inkjet product line, and the label and packaging
digital inkjet printer market, which we address via our Jetrion label and packaging digital inkjet product line. The
addressable label and packaging digital inkjet market growth can be measured through growth in the label and
packaging digital inkjet printing market and U.S. label demand (15.7% and 5.1% compound annual growth rates,
respectively, since 2009, according to internal market estimates). Despite the growth in the digital industrial
inkjet market, we estimate that digital inkjet is currently only 10% of the market, with analog comprising the
remaining 90%, which is indicative of a significant opportunity to expand the addressable digital industrial inkjet
market.

The addressable Inkjet market growth is also driven by the transition from solvent-based printing to UV curable-
based printing and the transition from UV curing to UV/LED curing. Our product innovations are a key driver in
this transition. We are the largest manufacturer of digital UV ink in the world.

APPS. The addressable APPS market consists primarily of business process automation and e-commerce
software for the printing industry. We estimate that our business process automation market share of new
software licenses is approximately 70% in the Americas, while our e-commerce market share is approximately
25% in the Americas. This market consists of small print-for-pay and small commercial print shops, medium and
large commercial print shops, display graphics providers, in-plant printing operations, government printing
operations, large commercial, publication, direct mail, and digital print shops, and the packaging industry. We
are the largest provider of print business process automation software as measured in terms of revenue and
number of installations world-wide.

The addressable APPS market is growing primarily through the opportunity for our customers to develop a more
efficient, integrated, and profitable business. We help drive our customers’ business success with a scalable
digital product solution and service portfolio that increases their profits, reduces cost, improves productivity, and
optimizes their performance on every job from creation to print. Our growth in this market is being generated
both externally, through our Streamline, Prism, and Alphagraph acquisitions in 2011 and our Radius acquisition
in 2010, and internally through our sales efforts with respect to our legacy software products, and by converting
our legacy software customers to our current product offerings of PrintSmith, Pace, Monarch, and Radius.

Further growth in the addressable markets for Fiery, Inkjet, and APPS has been driven by our development of an
integrated VUTEk / Fiery / APPS production workflow.

Establish Enterprise Coherence and Leverage Industry Standardization

In developing new products and platforms, we establish coherence across our product lines by designing products
that provide a consistent “look and feel” to the end user. We believe cross-product coherence creates higher
productivity levels as a result of shortened learning curves. We believe the integrated coherence that end users
can achieve using our products for all of their digital printing and imaging needs leads to a lower total cost of
ownership. We advocate open architecture utilizing industry-established standards to provide interoperability
across a range of digital printing devices and software applications, ultimately providing end users more choice
and flexibility in their selection of products. For example, integration between our cloud-based Digital StoreFront
application, our Monarch business process automation application, and our Fiery XF Production Color RIP
including integration to our Fiery or VUTEk product lines, is achieved by leveraging the industry standard JDF.

We received our tenth JDF certification from Printing Industries of America, and one of the first for digital
printing, for our Pace product during 2011.

Significant Relationships

We have established and continue to build and expand relationships with the leading printer manufacturers and
distributors of digital printing technology in order to benefit from their products, distribution channels, and
marketing resources. Our customers include domestic and international manufacturers, distributors, and sellers of
digital copiers and wide format printers. We work closely with the leading printer manufacturers to develop
solutions that incorporate leading technology and work optimally in conjunction with their products. The top
revenue-generating printer manufacturers, in alphabetical order, that we sold products to in 2011 were Canon,
Epson, Fuji Xerox, Konica Minolta, Kyocera Mita, OKI Data, Ricoh, Toshiba, and Xerox. Together, sales to
Xerox and Ricoh accounted for approximately 26% of our 2011 revenue, with sales to each of these two
customers accounting for more than 10% of our revenue. Because sales of our printer and copier-related products
constitute a significant portion of our Fiery revenue and there are a limited number of printer manufacturers
producing copiers and printers in sufficient volume to be attractive customers for us, we expect to continue to
depend on a relatively small number of printer manufacturers for a significant portion of our revenue in future
periods. Although end customer and reseller channel preference for Fiery products drives demand, most Fiery
revenue relies on the leading printer manufacturer / distributors to design, develop, and integrate Fiery

technology into the their print engines. Accordingly, if we experience reduced sales or lose an important printer
manufacturing customer, we will have difficulty replacing the revenue traditionally generated from that customer
with sales to new or existing customers and our revenue may decline.

We customarily enter into development and distribution agreements with our significant printer manufacturer
customers. These agreements can be terminated under a range of circumstances and often on relatively short
notice. The circumstances under which an agreement can be terminated vary from agreement to agreement and
there can be no assurance that these significant printer manufacturers will continue to purchase products from us
in the future, despite such agreements. Our agreements with the leading printer manufacturers generally do not
commit such customers to make future purchases from us. They could decline to purchase products from us in
the future and could purchase and offer products from our competitors, or build their own products for sale to the
end customer. We recognize the importance of, and work hard to maintain, our relationships with the leading
printer manufacturers. Relationships with these companies are affected by a number of factors including, among
others: competition from other suppliers, competition from their own internal development efforts, and changes
in general economic, competitive, or market conditions including changes in demand for our products, changes in
demand for the printer manufacturers’ products, industry consolidation, or fluctuations in currency exchange
rates. There can be no assurance that we will continue to maintain or build the relationships we have developed
to date. See Item 1A— We face competition from other suppliers as well as the leading printer manufacturers,
which are also our customers. If we are not able to compete successfully, our business may be harmed.

We have a continuing relationship pursuant to a license agreement with Adobe Systems, Inc. (“Adobe”). We
license PostScript® software from Adobe for use in many of our Fiery solutions under the OEM Distribution and
License Agreement entered into in September 2005. Under our agreement with Adobe, we have a non-exclusive,
non-transferable license to use the Adobe deliverables (including any software, development tools, utilities,
software development kits, fonts, drivers, documentation, or related materials). The scope of additional licensing
terms varies depending on the type of Adobe deliverable. The initial term of the agreement was five years, unless
either party gave written notice of termination for cause at least 180 days prior to September 19, 2010.
Thereafter, the agreement renews automatically on each anniversary date for additional one year periods and can
be terminated by either party for any or no cause upon 120 days prior written notice. All royalties due to Adobe
under the agreement are payable within 45 days after the end of each calendar quarter.

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Each Fiery solution requires page description language software to operate as provided by Adobe. Adobe’s
PostScript® software is widely used to manage the geometry, shape, and typography of hard copy documents.
Adobe is a leader in providing page description software. Adobe can terminate our current PostScript® software
license agreement without cause. Although to date we have successfully obtained licenses to use Adobe’s
PostScript® software when required, Adobe is not required to, and we cannot be certain that Adobe will, grant
future licenses to Adobe PostScript® software on reasonable terms, in a timely manner, or at all. In addition, to
obtain licenses from Adobe, Adobe requires that we obtain quality assurance approvals from them for our
products that use Adobe software. If Adobe does not grant us such licenses or approvals, if the Adobe licenses
are terminated, or if our relationship with Adobe is otherwise materially impaired, we would likely be unable to
sell products that incorporate Adobe PostScript® software. If that occurred, we would have to license, acquire,
develop, or re-establish our own competing software as a viable alternative for Adobe PostScript® and our
financial condition and results of operations could be significantly harmed for a period of time.

Our industrial inkjet printers are constructed with inkjet print heads, which are manufactured by a limited number
of suppliers. If we experience difficulty obtaining print heads, our inkjet printer production would be limited and
our revenue would be harmed. In addition, we manufacture ink for use in our printers and rely on a limited
number of suppliers for certain pigments used in our ink. Our ink sales would decline significantly if we were
unable to obtain the pigments as needed. See Item 1A— We depend on a limited group of suppliers for key
components in our products. The loss of any of these suppliers, the inability of any of these suppliers to meet our
requirements, or delays or shortages of supply of these components could adversely affect our business.

Human Resources

As of December 31, 2011, we employed 2,142 full time employees. Approximately 583 were in sales and
marketing (including 188 in customer service), 267 were in general and administrative, 348 were in
manufacturing, and 944 were in research and development. Of the total number of employees, we had
approximately 1,344 employees located in the Americas (primarily the U.S.) and 798 employees located outside
of the Americas.

Research and Development

Research and development expense was $115.9, $105.8, and $110.8 million for the years ended December 31,
2011, 2010, and 2009, respectively. As of December 31, 2011, 944 of our 2,142 full-time employees were
involved in research and development. We believe that development of new products and enhancement of
existing products are essential to our continued success. We intend to continue to devote substantial resources to
research and new product development. We expect to make significant expenditures to support research and
development in the foreseeable future.

We are developing products to support additional printing devices including high-end color copiers and multi-
functional devices. We are developing new software applications designed to maximize workflow efficiencies
and meet the needs of the graphic arts and commercial print professional, including proofing and business
process automation solutions. We expect to continue to develop new platforms for industrial inkjet print
technologies as the industry continues and accelerates its transition from analog to digital technology and from
solvent-based printing to UV curable ink printing. We have research and development sites in 12 U.S. locations,
as well as in India, Japan, Canada, and Europe. Please refer to “Growth and Expansion Strategies—Product
Innovation” above. Substantial additional expense is required to complete and bring to market each of the
products currently under development.

Manufacturing

We utilize subcontractors to manufacture our Fiery products and, to a lesser extent, our Inkjet products. These
subcontractors work closely with us to promote low cost and high quality while manufacturing our products.
Subcontractors purchase components needed for our products from third parties. We are completely dependent
on the ability of our subcontractors to produce the products sold by us. Although we supervise our
subcontractors, there can be no assurance that such subcontractors will perform efficiently or effectively. We
have outsourced our Fiery production with Avnet, Inc. (“Avnet”) and formulation of certain solvent ink with
Nazdar Company, Inc. (“Nazdar”). Production of our wide format printers and certain super-wide format printer
sub-assemblies are outsourced as well.

Should our subcontractors experience inability or unwillingness to manufacture or deliver our products, then our
business, financial condition, and operations could be harmed. Since we generally do not maintain long-term
agreements with our subcontractors and such agreements may be terminated with relatively short notice, any of
our subcontractors could terminate their relationship with us and/or enter into agreements with our competitors
that might restrict or prohibit them from manufacturing our products or could otherwise lead to an inability or
unwillingness to fill our orders in a timely manner or at all. See Item 1A— We are dependent on a limited
number of subcontractors, with whom we do not have long-term contracts, to manufacture and deliver products
to our customers. The loss of any of these subcontractors could adversely affect our business.

Our VUTEk printers are primarily manufactured at our Meredith, New Hampshire facility. Meredith is not
located in a major metropolitan area. We have encountered difficulties in hiring and retaining adequate skilled
labor and management. Most components used in manufacturing the printers and ink are available from multiple
suppliers, except for inkjet print heads and certain key ingredients (primarily pigments and photoinitiators) for
our ink. Although typically in low volumes, many key components are sourced from single vendors. If we were
unable to obtain the print heads currently used, we would be required to redesign our printers to use different

print heads. If we were unable to obtain the pigments, we would be required to reformulate the ink and test the
new ink formulation. In two of our locations, we use hazardous materials to formulate digital UV ink. The
storage, use, and disposal of those materials must meet the requirements of various environmental regulations.
See Item 1A—If we are not able to hire and retain skilled employees, we may not be able to develop products, or
meet demand for our products, in a timely fashion; We depend on a limited group of suppliers for key
components in our product. The loss of any of these suppliers, the inability of any of these suppliers to meet our
requirements, or delays or shortages of supply of these components, could adversely affect our business; and We
may be subject to environmental-related liabilities due to our use of hazardous materials and solvents.

A significant number of the components necessary for manufacturing our products are obtained from a sole
supplier or a limited group of suppliers. We depend largely on the following sole and limited source suppliers for
our components and manufacturing services:

Supplier

Intel
Toshiba

Open Silicon
Altera
Tundra
Avnet
Nazdar
Columbia Tech
Roberts Tool
SEI, S.p.A
Shenzen Runtianzhi Tech
Seiko
Fuji
Xaar
Dimatix
Progress Software

Components

Central processing units (“CPUs”); chip sets
Application-specific integrated circuits (“ASIC”) &
Inkjet print heads
ASICs
ASICs & Programmable devices
Chip sets
Contract manufacturing (Fiery)
Contract manufacturing (solvent ink)
Inkjet sub-assemblies
Inkjet sub-assemblies
Inkjet sub-assemblies and laser finishing
Inkjet sub-assemblies
Inkjet print heads
Inkjet print heads
Inkjet print heads
Inkjet print heads
Monarch and Radius operating system

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We generally do not maintain long-term agreements with our component suppliers. We primarily conduct
business with such suppliers solely on a purchase order basis. If any of our sole or limited source suppliers were
unwilling or unable to supply us with the components for which we rely on them, we may be unable to continue
manufacturing our products utilizing such components.

The absence of agreements with most of our suppliers also subjects us to pricing fluctuations, which is a factor
we believe is partially offset by the desire of our suppliers to sell us as many components as possible. Many of
our components are similar to those used in personal computers; consequently, the demand and price fluctuations
of personal computer components could affect our component costs. In the event of unanticipated volatility in
demand for our products, we may be unable to manufacture certain products in quantities sufficient to meet end
user demand or we may hold excess quantities of inventory due to their long lead times. We maintain an
inventory of components for which we are dependent on sole or limited source suppliers and of components with
prices that fluctuate significantly. We cannot ensure that at any given time we will have sufficient inventory to
enable us to meet demand for our products, which would harm our financial results. See Item 1A—We depend on
a limited group of suppliers for key components in our products. The loss of any of these suppliers, the inability
of any of these suppliers to meet our requirements, or delays or shortages of supply of these components could
adversely affect our business.

Competition

Competition in our markets is intense and involves rapidly changing technologies and frequent new product
introductions. To maintain and improve our competitive position, we must continue to develop and introduce
new products and features on a timely and cost effective basis to keep pace with the evolving needs of our
customers. The principal competitive factors affecting the market for our Fiery solutions include, among others,
customer service and support, product reputation, quality, performance, price, and product features such as
functionality, scalability, ease of use, and ability to interface with products produced by the significant printer
manufacturers. We believe we have generally competed effectively against product offerings of our competitors
on the basis of such factors; however, there can be no assurance that we will continue to compete effectively in
the future based on these or any other competitive factors.

Although we have a direct relationship with each of the leading printer manufacturers and work closely together
with them to design, develop, and integrate Fiery controller and software technology into their print engines to
maximize their quality and capability, our primary competitors for third party stand-alone color controllers,
embedded controllers, and design-licensed solutions are these same leading printer manufacturing companies.
They each maintain substantial investments in research and development. Some of this investment is targeted at
integrating products and technology that we have designed and some of this investment is targeted at developing
products and technology that compete with our Fiery brand. Our market position, vis-à-vis internally developed
controllers, is small; however, we are the largest third party controller vendor. We believe that our advantages
include our continuously advancing technology, short time-to-market, brand recognition, end user loyalty, sizable
installed base, number of products supported, price driven by lower development costs, and market knowledge.
We intend to continue to develop new digital print controllers with capabilities that meet the changing needs of
the printer manufacturers’ product development roadmaps. Although we do not directly control the distribution
channels, we provide a variety of features as well as unique “look and feel” to the printer manufacturers’
products to differentiate our customers’ products from those of their competitors. Ultimately, we believe that end
customer and reseller channel preference for the Fiery controller and software solutions drives demand for Fiery
products through the printer manufacturers.

The VUTEk line of super-wide format digital industrial inkjet printers competes with printers produced by Agfa,
Durst, Hewlett-Packard, Oce, and Inca throughout most of the world. There are Chinese and Korean printer
manufacturers in the marketplace, but their products are typically sold in their domestic markets and are not
perceived as alternatives in most other markets. Although we recommend that our ink be used in our VUTEk
printers, users can purchase ink from other ink manufacturers. Third party ink is typically priced at a lower price
than our proprietary ink; however, third party ink may not provide the same quality. In addition, the use of third
party ink with our printer products may void the ink delivery system warranty on the printer. We believe that our
broad product line and leading technology provide a competitive advantage.

Our APPS operating segment, which includes our business process automation and cloud-based order entry and
order management systems, faces competition from software application vendors that specifically target the
printing industry. These vendors are typically small, privately-owned companies. We also face competition from
larger vendors that currently offer, or are seeking to develop, printer-focused enterprise resource planning
products. We believe the principal competitive factor affecting our markets is the market acceptance rates for
new printing technology. There can be no assurance that we will be able to continue to advance our technology
and products or compete effectively against other companies’ product offerings. Any failure to do so could have
a material adverse affect on our business, operating results, and financial condition.

Sale of Building and Land

On January 29, 2009, we sold a portion of our Foster City campus to Gilead Sciences, Inc. (“Gilead”) for $137.3
million. The property sold included an approximately 163,000 square foot building at 301 Velocity Way, Foster
City, California, approximately 30 acres of land, and certain other assets related to the property. We retain
ownership of the remaining approximately five acres of land and remain obligated under a synthetic lease with

respect to the office building at 303 Velocity Way, Foster City, California, where our headquarters are
located. As more fully disclosed in Note 8—Commitments and Contingencies of the Notes to Consolidated
Financial Statements, both buildings were subject to synthetic lease agreements. The 301 Velocity Way synthetic
lease agreement was terminated in conjunction with the sale. The 303 Velocity Way synthetic lease agreement
remains outstanding as of December 31, 2011.

Intellectual Property Rights

We rely on a combination of patent, copyright, trademark, and trade secret laws; non-disclosure agreements; and
other contractual provisions to establish, maintain, and protect our intellectual property rights. Although we
believe that our intellectual property rights are important to our business, no single patent, copyright, trademark,
or trade secret is solely responsible for the development and manufacturing of our products.

We are currently pursuing patent applications in the U.S. and certain foreign jurisdictions to protect various
inventions. Over time, we have accumulated a portfolio of patents issued in these jurisdictions. We own or have
rights to the copyrights to the software code in our products and the rights to the trademarks under which our
products are marketed. We have registered certain trademarks in the U.S. and certain foreign jurisdictions and
will continue to evaluate the registration of additional trademarks as appropriate.

Certain of our products include intellectual property licensed from our customers. We have also granted and may
continue to grant licenses under our intellectual property, when and as we deem appropriate.

For a discussion of risks relating to our intellectual property, see Item 1A— We may be unable to adequately
protect our proprietary information and may incur expenses to defend our proprietary information.

Goodwill and Long-Lived Asset Impairment

We perform our annual goodwill impairment analysis in the fourth quarter of each year according to the
provisions of Accounting Standards Codification (“ASC”) 350-20-35, Goodwill—Intangibles and Other—
Subsequent Measurement. A two-step impairment test of goodwill is required. In the first step, the fair value of
each reporting unit is compared to its carrying value. If the fair value exceeds carrying value, goodwill is not
impaired and further testing is not required. If the carrying value exceeds fair value, then the second step of the
impairment test is required to determine the implied fair value of the reporting unit’s goodwill. The implied fair
value of goodwill is calculated by deducting the fair value of all tangible and intangible net assets of the
reporting unit, excluding goodwill, from the fair value of the reporting unit as determined in the first step. If the
carrying value of the reporting unit’s goodwill exceeds its implied fair value, then an impairment loss must be
recorded equal to the difference.

Our goodwill valuation analysis is based on our respective reporting units (Fiery, Inkjet, and APPS), which are
consistent with our operating segments identified in Note 15—Segment Information, Geographic Data, and
Major Customers of the Notes to Consolidated Financial Statements. We determined the fair value of our
reporting units as of December 31, 2011 by equally weighting the market and income approaches. Under the
market approach, we estimated fair value based on market multiples of revenue or earnings of comparable
companies. Under the income approach, we estimated fair value based on a projected cash flow method using a
discount rate determined by our management to be commensurate with the risk inherent in our current business
model. Based on our valuation results, we have determined that the fair values of our reporting units exceed their
carrying values. Fiery, Inkjet, and APPS fair values are $288, $212, and $127 million, respectively, which exceed
carrying value by 163%, 60%, and 50%, respectively.

Please see Note 5—Goodwill and Long-Lived Asset Impairment of the Notes to Consolidated Financial
Statements.

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Financial Information about Foreign and Domestic Operations and Export Sales

See Note 15—Segment Information, Geographic Data, and Major Customers and Note 11—Income Taxes of the
Notes to Consolidated Financial Statements. See also Item 1A— We face risks from our international operations
and We face risks from currency fluctuations.

Item 1A: Risk Factors

We have a direct relationship with several leading printer manufacturers and work closely with them to
design, develop, and integrate Fiery controller and software technology to maximize the capability of their
print engines. These manufacturers act as distributors and sell Fiery products to end customers through
reseller channels. End customer and reseller channel preference for the Fiery controller and software
solutions drives demand for Fiery products through the printer manufacturers. Consequently, we do not
typically have long-term purchase contracts with these printer manufacturer customers. They have in the
past reduced or ceased, and could at any time in the future reduce or cease, to purchase products from us,
thereby harming our operating results and business.

Although end customer and reseller channel preference for Fiery products drives demand, most Fiery revenue
relies on printer manufacturers to design, develop, and integrate Fiery technology into their print engines as
described above. A significant portion of our revenue is, and has been, generated by sales of our Fiery printer and
copier related products to a relatively small number of leading printer manufacturers. Xerox and Ricoh each
provided more than 10% of our revenue individually and together accounted for 26% of our revenue for the year
ended December 31, 2011. Xerox and Canon each contributed over 10% of our revenue and together accounted
for approximately 27% and 26% of our revenue for the years ended December 31, 2010 and 2009, respectively.
Because sales of our printer and copier-related products constitute a significant portion of our revenue and there
are a limited number of printer manufacturers producing copiers and printers in sufficient volume to be attractive
customers for us, we expect that we will continue to depend on a relatively small number of printer
manufacturers for a significant portion of our Fiery controller revenue in future periods. Accordingly, if we lose
or experience reduced sales to one of these printer manufacturer customers, we will have difficulty replacing that
revenue with sales to new or existing customers and our Fiery revenue will likely decline significantly.

With the exception of certain minimum purchase obligations, we typically do not have long-term volume
purchase contracts with our significant printer manufacturer customers, including Xerox, Konica Minolta, Ricoh,
and Canon, and they are not obligated to purchase products from us. Accordingly, our printer manufacturer
customers could at any time reduce their purchases from us or cease purchasing our products altogether. In the
past, these printer manufacturer customers have elected to develop products on their own for sale to the end
customer, incorporated technologies developed by other companies into their products, and have directly sold
third party competitive products, rather than rely solely or partially on our products. We expect that these printer
manufacturer customers will continue to make such elections in the future.

Many of the products and technologies we are developing require that we coordinate development, quality
testing, marketing, and other tasks with these printer manufacturers. We cannot control their development efforts
or the timing of these efforts. We rely on these printer manufacturers to develop new printer and copier solutions,
applications, and product enhancements utilizing our Fiery controller technologies in a timely and cost-effective
manner. Our continued success in the controller industry depends on the ability of these printer manufacturers to
utilize our technologies to develop the right solutions with the right features to meet ever changing customer
requirements and responding to emerging industry standards and other technological changes. If our printer
manufacturer customers fail to meet customer and market requirements, or delay the release of their products, our
revenue and results of operations may be adversely affected.

These printer manufacturers work closely with us to develop products that are specific to each of their copiers
and printers. Coordinating with them may cause delays in our own product development efforts that are outside
of our control. If these printer manufacturers delay the release of their products, our revenue and results of

operations may be adversely affected. Our revenue and results of operations may also be adversely affected if we
cannot meet the product needs of the printer manufacturers for their specific copiers and printers, as well as
successfully manage the additional engineering and support effort and other risks associated with a wide range of
products.

Because our printer manufacturer customers incorporate our products into products they manufacture and sell,
any decline in demand for copiers or laser printers or any other negative developments affecting our major
customers or the computer industry in general, including especially reduced end user demand, would likely harm
our results of operations. Certain printer manufacturer customers have in the past experienced serious financial
difficulties, which led to a decline in sales of our products. If any significant customers face such difficulties in
the future, our operating results could be harmed through, among other things, decreased sales volume, write-off
of accounts receivable, and write-off of inventories related to products we have manufactured for these
customers’ products.

A significant portion of our operating expenses are fixed in advance based on projected sales levels and margins,
our forecasts of end user demand, sales forecasts from our significant customers, and product development
programs. A substantial portion of our shipments are scheduled for delivery within 90 days or less and our
customers may cancel orders and change volume levels or delivery times for product they have ordered from us
without penalty. Accordingly, if sales are below expectations in any given quarter, the adverse impact of the
shortfall in revenue on operating results may be, and has been in the past, increased by our inability to adjust
expenses in the short-term to compensate for this shortfall.

We face competition from other suppliers as well as the leading printer manufacturers, which are also our
customers. If we are not able to compete successfully, our business may be harmed.

The industrial digital inkjet printing marketplace is highly competitive and characterized by rapid technological
change. We compete against a number of suppliers of imaging products and technologies, including the leading
printer manufacturers, which are also our customers. Although we attempt to develop and support innovative
products that end users demand, products or technologies developed by competing suppliers, including the
leading printer manufacturers, could render our products or technologies obsolete or noncompetitive.

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The leading printer manufacturers internally develop and sell products that compete directly with our current
products. They have significant investments in their existing solutions and have substantial resources that may
enable them to develop or improve, more quickly than us, technologies similar to ours that are compatible with
their own products. They have marketed in the past, and likely will continue to market in the future, their own
internal technologies and solutions in addition to ours, even when their technologies and solutions are less
advanced, have lower performance, or are more expensive than our products. Given the significant financial,
marketing, and other resources of our larger printer manufacturer customers and other significant printer
manufacturers in the imaging industry who are not our customers, we may not be able to successfully compete
selling similar products that they develop internally. If we cannot compete successfully against their internally
developed products, we may lose sales and market share in those areas where they choose to compete and our
business may be harmed.

While many of the leading printer manufacturers incorporate our technologies into their end products on an
exclusive basis, we do not have any formal agreements that prevent them from offering alternative products to
the end customer that do not incorporate our technologies. If, as has occurred in the past, they offer products
incorporating technologies from alternative suppliers instead of, or in addition to, products incorporating our
technologies, our market share could decrease, which would likely reduce our revenue and adversely affect our
financial results.

The market for our super-wide and wide format printers is very competitive.

The printing equipment industry is extremely competitive. Our VUTEk products compete against several
companies that market industrial digital inkjet printing systems based on electrostatic, drop-on-demand, and
continuous drop-on-demand inkjet, and other technologies and printers utilizing UV curable ink including Agfa,
Durst, Hewlett-Packard, Oce, and Inca. Certain competitors have greater resources to develop new products and
technologies and market those products, as well as acquire or develop critical components at lower costs, which
would provide them with a competitive advantage. They could also exert downward pressure on product pricing
to gain market share.

We have witnessed the recent growth of local Chinese and Korean markets where local competitors are
developing, manufacturing, and selling inexpensive printers, mainly to the local Chinese and Korean markets.
These Chinese and Korean manufacturers have begun penetrating the international market and have partnered
with other super-wide format printer manufacturers. Our ability to compete depends on factors both within and
outside of our control, including the price, performance, and acceptance of our current printers and any products
we develop in the future.

We also face competition from existing conventional super-wide and wide format digital inkjet printing methods,
including screen printing and offset printing. Our competitors could develop new products, with existing or new
technology, that could be more competitive in our market than our printers. We cannot assure you that we can
compete effectively with any such products.

We face strong competition in our APPS operating segment.

We believe the principal competitive factor affecting our markets is the market acceptance rates for new printing
technology. There can be no assurance that we will continue to successfully advance our technology and products
or compete effectively against other product offerings. Any failure to do so could have a material adverse affect
on our business, operating results, and financial condition.

We face strong competition in the market for printing supplies such as ink.

We compete with independent manufacturers in the ink market. We cannot guarantee we will be able to remain
the principal ink supplier for our printers. We could experience an overall price reduction within the ink market,
which would also adversely affect our gross profit. The loss of ink sales or price reduction in our printer installed
base could adversely impact our revenue and gross profit.

We sell our products to distributors and, with respect to some regions and products, directly to end users.
If we are unable to effectively manage a direct sales force, revenue could decline.

We sell our Inkjet and APPS products to both distributors and directly to end users. Our Inkjet products are sold
by a direct sales force in North America and Europe and by distributors world-wide. Our APPS products are
primarily sold directly to end users by our direct sales force in North America and Europe. The acquisition of
Prism and Alphagraph in 2011 and Radius in 2010 have led to an increased international direct sales force.

If we are unable to effectively manage our direct sales force and develop marketing programs that reach end
users, we are likely to see a decline in revenue from those products.

Price reductions for all of our products may affect our revenue in the future.

We have made, and may in the future make, price reductions for our products to drive demand and remain
competitive. Depending on the price-elasticity of demand for our products, the pricing and quality of competitive
products, and other economic and competitive conditions, such price reductions may have an adverse impact on
our revenue and profit. If we are not able to compensate for lower gross profit that may result from price
reductions with an increased volume of sales, our results of operations could be adversely affected.

Ongoing economic uncertainty has negatively affected our business in the past and may negatively affect
our business in the future.

The revenue and profitability of our business depends significantly on the overall demand for information
technology products that enable printing of digital data, which in turn depends on a variety of macro-and micro-
economic conditions. In addition, revenue growth and profitability in our Inkjet operating segment depends on
demand and spending for advertising and marketing products and programs, which also depends on a variety of
macro-and micro-economic conditions.

Uncertainty about current global economic conditions, especially in Europe, poses a risk as our customers may
delay purchases of our products in response to tighter credit, negative financial news, and/or declines in income
or asset values. Any financial turmoil affecting the banking system and financial markets and the possibility that
financial institutions may consolidate or terminate their activities have resulted in a tightening in the credit
market, a low level of liquidity in many financial markets, and extreme volatility in fixed income, credit,
currency, and equity markets. There could be a number of follow-on effects from the credit crisis on our
business, including insolvency of key suppliers resulting in product delays; inability of customers and
distributors to obtain credit to finance purchases of our products and/or customer and distributor insolvencies;
increased difficulty in managing inventories; and other financial institutions negatively impacting our treasury
operations.

Our financial performance could vary materially from expectations depending on gains or losses realized on the
sale or exchange of financial instruments or cash equivalents, impairment charges on our assets, gains or losses
related to equity and other investments, and interest rates. Continuing volatility in the financial market and
overall economic uncertainty increases the risk that actual amounts realized in the future on our financial
instruments could differ significantly from the fair values currently assigned to them.

Sustained uncertainty about current global economic conditions together with delays or reductions in information
technology spending could cause a decline in demand for our products and services and consequently harm our
business, operating results, financial condition, and prospects, which could increase the volatility of our stock
price.

Economic uncertainty is particularly acute in Europe currently. We have no European sovereign debt
investments. Our European debt investments consist of non-sovereign corporate debt included within money
market funds of $20.4 million, which represents 40% of our money market funds at December 31, 2011. Our
European debt investments are with corporations domiciled in the northern or central European countries of the
U.K., Sweden, Germany, Netherlands, Switzerland, Norway, and France. We have no exposure in southern
Europe where the greater risk resides. Nevertheless, we do have some exposure due to the interdepencies among
the European Union countries.

Since Europe is composed of varied countries and regional economies, our European risk profile is somewhat
more diversified due to the varying economic conditions among the countries. Approximately 29% of our
receivables are with European customers. Of this amount, 13% of our European receivables (4% of consolidated
net receivables) are in the higher risk southern European countries (mostly Italy and Spain). If the ongoing
economic uncertainty continues in southern Europe and spreads among all the European Union countries, we
may experience some difficulty collecting receivables from our European customers.

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Our operating results may fluctuate based on many factors, which could adversely affect our stock price.

Stock prices of high technology companies such as ours tend to be volatile as a result of various factors,
including variations in operating results and, consequently, fluctuations in our operating results could adversely
affect our stock price. Factors that have caused our operating results and stock price to fluctuate in the past and
that may cause future fluctuations include:

•

varying demand for our Fiery products from the leading printer manufacturing companies due to their
product development and marketing efforts, financial and operational condition, inventory management
practices, and general economic conditions;

shrinking number of significant printer manufacturers due to business consolidation in the industry;

shifts in customer demand to lower cost products;

success and timing of new product introductions by the leading printer manufacturing companies and
us;

success and timing of new Inkjet product introductions;

the performance of our products generally;

volatility in foreign exchange rates, changes in interest rates, and/or financing credit to consumers of
digital copiers and printers;

price reductions by our competitors and us, which may be exacerbated by competitive pressures caused
by economic conditions;

substitution of third party ink for our ink products by users of our industrial inkjet printers;

delay, cancellation, or rescheduling of orders or projects;

delays or shortages of supply of our key components including, without limitation, inkjet print heads,
ink components, and inability of our suppliers to meet our requirements;

availability of key components and licenses, including possible delays in deliveries from suppliers, the
performance of third party subcontract manufacturers, and the status of our relationships with key
suppliers;

potential excess or shortage of employees;

potential excess or shortage of research and development center locations;

shrinking customer base in our Inkjet and APPS operating segments due to business consolidations and
shrinking installed base due to print shops ceasing operations;

acquisitions and integration of new businesses;

potential reduction in acquired company customer base due to lack of customer acceptance of our
legacy products or perceived inadequate support of the acquired product line;

changes in our product mix from higher gross profit products to lower gross profit products such as:

•

shifts within the Fiery operating segment from stand-alone products to lower gross profit
embedded products;

shifts within the Inkjet operating segment from super-wide format to wide format printers;

shifts within the APPS operating segment from license revenue to higher gross profit maintenance
or professional services;

shifts between the higher gross profit Fiery and APPS operating segments to the lower gross profit
Inkjet operating segment;

•

costs associated with complying with any applicable governmental regulations;

•

cost associated with possible SEC and regulatory actions;

costs related to our entry into new markets;

general economic conditions, such as the current economic uncertainty, especially in Europe;

commencement of litigation or adverse results in pending litigation; and

other risks described herein.

Entry into new markets or distribution channels could result in higher operating expenses that may not be
offset by increased revenue.

We continue to explore opportunities to develop or acquire additional product lines, such as print management
business process automation software, document scanning solutions, and industrial inkjet printers. We expect to
continue to invest funds to develop new distribution and marketing channels for these and additional new
products and services, which will increase our operating expenses.

We do not know if we will be successful in developing these channels, or whether the market will accept any of
our new products or services, or if we will generate sufficient revenue from these activities to offset the
additional operating expenses we incur. Even if we are able to introduce new products or services, if customers
do not accept these new products or services, or if we are not able to price such products or services
competitively, our results of operations will likely be adversely affected.

We license software used in most of our Fiery products and certain APPS products from Adobe and the
loss of these licenses would prevent shipment of these products.

Many of our current products include software that we must license from Adobe. Specifically, we are required to
obtain separate licenses from Adobe for the right to use Adobe PostScript® software in each type of copier or
printer used with a Fiery controller, and other Adobe software for certain APPS products. Although to date we
have successfully obtained licenses to use Adobe PostScript® and other Adobe software when required, Adobe is
not required to, and we cannot be certain that Adobe will, grant future licenses to Adobe PostScript® and other
Adobe software on reasonable terms, in a timely manner, or at all. To obtain licenses from Adobe, Adobe
requires that we obtain quality assurance approvals from them for our products that use Adobe software.
Although to date we have successfully obtained such quality assurance approvals from Adobe, we cannot be
certain they will grant us such approvals in the future. If Adobe does not grant us such licenses or approvals, if
the Adobe licenses are terminated, or if our relationship is otherwise materially impaired, we would likely be
unable to sell products that incorporate Adobe PostScript® or other Adobe software and our financial condition
and results of operations would be significantly harmed.

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We depend on a limited group of suppliers for key components in our products. The loss of any of these
suppliers, the inability of any of these suppliers to meet our requirements, or delays or shortages of supply
of these components could adversely affect our business.

Certain components necessary for the manufacture of our products are obtained from a sole supplier or a limited
group of suppliers. These include CPUs, chip sets, ASICs, and other related semiconductor components; inkjet
print heads for our super-wide and wide format printers, and certain key ingredients (primarily pigments and
photoinitiators) for our digital UV ink. We generally do not maintain long-term agreements with our component
suppliers and conduct business with such suppliers solely on a purchase order basis. If we are unable to continue
to procure these sole or limited sourced components from our current suppliers in the required quantities, we will
have to qualify other sources, if possible, or redesign our products. If we were unable to obtain the print heads
currently used, we would be required to redesign our printers to use different print heads. If we were unable to
obtain the pigments, we would be required to reformulate the ink and test the new ink formulation. These
suppliers may be concentrated within similar industries or geographic locations, which could potentially

exacerbate these risks. We cannot provide assurance that other sources of these components exist or will be
willing to supply us on reasonable terms or at all, or that we will be able to design around these components. Any
unavailability, delays, or shortages of these components or any inability of our suppliers to meet our
requirements, could harm our business.

Because the purchase of certain key components involves long lead times, in the event of unanticipated volatility
in demand for our products, we have in the past been, and may in the future be, unable to manufacture certain
products in a quantity sufficient to meet demand. Further, as has occurred in the past, in the event that anticipated
demand does not materialize, we may hold excess quantities of inventory that could become obsolete. To meet
projected demand, we maintain an inventory of components for which we are dependent on sole or limited source
suppliers and components with prices that fluctuate significantly. As a result, we are subject to risk of inventory
obsolescence, which could adversely affect our operating results and financial condition.

Market prices and availability of certain components, particularly memory subsystems and Intel-designed
components, which collectively represent a substantial portion of the total manufactured cost of our products,
have fluctuated significantly in the past. Such fluctuations could have a material adverse effect on our operating
results and financial condition including reduced gross profit.

We are dependent on a limited number of subcontractors, with whom we do not have long-term contracts,
to manufacture and deliver products to our customers. The loss of any of these subcontractors could
adversely affect our business.

We subcontract with other companies to manufacture our products and we generally do not have long-term
agreements with these subcontractors. While we closely monitor our subcontractors’ performance, we cannot be
assured that such subcontractors will continue to manufacture our products in a timely and effective manner. In
the past, a weakened economy led to the dissolution, bankruptcy, or consolidation of some of our subcontractors,
which decreased the available number of subcontractors. If the available number of subcontractors were to
decrease in the future, it is possible that we would not be able to secure appropriate subcontractors to fulfill our
demand in a timely manner, or at all, particularly if demand for our products increases.

The existence of fewer subcontractors may reduce our negotiating leverage, thereby potentially resulting in
higher product costs. Financial problems resulting in the inability of our subcontractors to make or ship our
products, or fix quality problems, or other difficulties, could harm our business, operating results, and financial
condition. If we change subcontractors, we could experience delays in finding, qualifying, and commencing
business with new subcontractors, which would result in delay in delivery of our products and potentially the
cancellation of orders for our products.

A high concentration of Fiery controllers has been manufactured at a single subcontractor location, Avnet in San
Jose, California. Certain solvent ink is formulated by Nazdar. Certain Inkjet sub-assemblies are manufactured by
two subcontractors. Should our subcontractors experience any inability, or unwillingness, to manufacture or
deliver our products, then our business, financial condition, and operations could be harmed. Since we generally
do not maintain long-term agreements with our subcontractors, any of our subcontractors could enter into
agreements with our competitors that might restrict or prohibit them from manufacturing our products or could
otherwise lead to an inability to fill our orders in a timely manner. In such event, we may not be able to find
suitable replacement subcontractors, in which case our financial condition and operations would likely be
harmed.

The natural disaster in Japan could reduce our sales and profitability.

Although we do not have manufacturing facilities in Japan, some of the components sourced for our products are
manufactured in Japan, certain of our subcontractors have significant operations in Japan, and many of our
printer manufacturer customers are headquartered or have significant operations in Japan, including the
development and manufacturing of digital copiers and printers, which are sold with our Fiery controllers. As a

result of the natural disaster that occurred in Japan in March 2011, some of the leading printer manufacturers
with operations in Japan have reduced their orders of products from us as a result of interruptions in their
businesses, and may continue to reduce their orders. Our sales to Japan have decreased by 15% in 2011 as
compared with the prior year, partially due to this impact.

We may find it difficult to procure components that are currently sourced directly or indirectly from Japanese
suppliers, either of which could adversely impact our business. A significant reduction in the supply of some
components of our products could prevent us from manufacturing products that require components sourced in
Japan or increase our expenses as we are forced to find alternative sources of supply. Should such reduced
demand and tightened supply conditions arise and continue over an extended period of time, our results of
operation and financial condition could be significantly impacted.

We may face increased risk of inventory obsolescence, excess, or shortages related to our super-wide
format inkjet printers and ink.

We procure raw materials and internally manufacture our super-wide format printers and digital UV ink based on
our sales forecasts. If we do not accurately forecast demand for our products, we may produce or purchase excess
inventory, which may result in our inventory becoming obsolete. We might not produce the correct mix of
products to match actual demand if our sales forecast is not accurate, resulting in lost sales. If we have excess
printers, ink, or other products, we may need to lower prices to stimulate demand.

Our ink products have a defined shelf life. If we do not sell the ink before the end of its shelf life, it will have to
be written off. We have also experienced UV ink shortages in the past and may continue to experience such
shortages in the future. UV ink shortages may require that we incur additional costs to respond to increased
demand and overcome such shortages.

If we are not able to hire and retain skilled employees, we may not be able to develop products, or meet
demand for our products, in a timely fashion.

We depend on skilled employees, such as software and hardware engineers, quality assurance engineers, and
other technical professionals with specialized skills. We are headquartered in the Silicon Valley and additionally
have research and development offices in India. Competition in both locations has historically been intense
among companies hiring engineering and technical professionals. In times of professional labor imbalances, it
has in the past and is likely in the future, to be difficult to locate and hire qualified engineers and technical
professionals and to retain these employees. There are many technology companies located near our corporate
offices in the Silicon Valley and our operations in India that may attempt to hire our employees.

Our VUTEk printers are manufactured at our Meredith, New Hampshire facility, which is not located in a major
metropolitan area. We have encountered difficulties in hiring and retaining adequate skilled labor and
management at this location.

The movement of our stock price may also impact our ability to hire and retain employees. If we do not offer
competitive compensation, we may not be able to recruit or retain employees, which may have an adverse effect
on our ability to develop products in a timely fashion, which could harm our business, financial condition, and
operating results.

We offer a broad-based equity compensation plan based on granting stock options and restricted stock from
stockholder-approved plans to remain competitive in the labor market. Any difficulty in obtaining stockholder
approval of equity compensation plans could limit our ability to grant equity awards to employees in the future.
If we cannot offer equity awards, when necessary, in order to provide compensation that is competitive with
other companies seeking the same employees, it may be difficult to hire and retain skilled employees.

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Growing market share in the APPS and Inkjet operating segments increases the possibility that we will
experience additional bad debt expense.

The leading printer manufacturers, which comprise the majority of the customer base in our Fiery operating
segment, are typically large profitable customers with little credit risk to us. Our APPS and Inkjet operating
segments sell primarily through a direct sales force to a broader base of customers than Fiery. Many of the APPS
and Inkjet customers are smaller and potentially less creditworthy.

Furthermore, if we increase the percentage of APPS and Inkjet products that are sold internationally, it may be
challenging to enforce our legal rights should collection issues arise.

Due to these and other factors, growing Inkjet and APPS market share may cause us to experience an increase in
bad debt expense.

Acquisitions may result in unanticipated accounting charges or otherwise adversely affect our results of
operations and result in difficulties assimilating and integrating operations, personnel, technologies,
products, and information systems of acquired companies or businesses.

We seek to develop new technologies and products from both internal and external sources. We have also
purchased companies and businesses for the primary purpose of acquiring their customer base. As part of this
effort, we have in the past made, and will likely continue to make, acquisitions of other companies or other
companies’ assets.

Acquisitions involve numerous risks, such as:

•

equity securities issued in connection with an acquisition may be dilutive to our existing stockholders;
alternatively, acquisitions made entirely or partially for cash will reduce cash reserves (as was the case
with respect to each of our 2011 acquisitions);

difficulties integrating operations, employees, technologies, or products and the related diversion of
management attention, time, and effort to accomplish successful integration;

risk of entering markets in which we have little or no prior experience, or entering markets where
competitors have stronger market positions;

possible write-downs of impaired assets;

possible restructuring of head count or leased facilities;

potential loss of key employees of the acquired company;

possible overruns (compared to expectations) relative to the expense levels and cash outflows of the
acquired business;

adverse reactions by customers, suppliers, or parties transacting business with the acquired company or
us;

risk of changes in ratings by stock analysts;

potential litigation surrounding transactions or the prior actions of the acquired company or any
administrative proceedings;

inability to protect or secure technology rights;

possible overruns of direct acquisition and integration costs; and

increased operating costs.

Mergers and acquisitions of companies are inherently risky. We cannot provide assurance that previous or future
acquisitions will be successful or will not harm our business, operating results, financial condition, or stock price.

We face risks relating to the potential impairment of goodwill and long-lived assets.

We complete a review of the carrying value of our assets annually and, based on a combination of factors (i.e.,
triggering events), we may be required to perform an interim analysis. During the fourth quarter of 2008, our
market capitalization declined significantly as a result of declining world-wide economic conditions caused by
the tightening of the global credit market, which resulted in a degradation of our revenue forecast. We concluded
that an impairment had occurred relating to the Inkjet reporting unit resulting in a non-cash impairment charge of
$111.9 million during 2008 related to goodwill and other long-lived assets. Additional asset impairment charges
of $0.7 and $3.2 million were recognized during 2010 and 2009, respectively, resulting primarily from equipment
and non-cancellable purchase orders relating to a planned product that was cancelled, a facility closure, and the
write-off of a private minority investment. Additional goodwill impairment charges have not been required based
on the results of the goodwill impairment assessments completed during 2011, 2010, and 2009.

Given the uncertainty of the economic environment and its potential impact on our business, there can be no
assurance that our estimates and assumptions regarding the duration of the ongoing economic downturn, or the
period or strength of recovery, made for purposes of our goodwill impairment testing at December 31, 2011 will
prove to be accurate predictions of the future. If our assumptions regarding forecasted revenue or gross profit
rates are not achieved, we may be required to record additional goodwill impairment charges in future periods
relating to any of our reporting units, whether in connection with the next annual impairment testing in the fourth
quarter of 2012 or prior to that, if an interim triggering event has occurred. It is not possible to determine if any
such future impairment charge would result or, if it does, whether such charge would be material.

While a non-cash impairment charge does not impact reported cash flows, it does impact the Consolidated
Statements of Operations. Consequently, no assurance can be given that any future impairments would not affect
our financial performance and valuation of assets and, as a result, harm our business, operating results, financial
condition, or stock price.

We face risks from currency fluctuations.

Approximately $246.3(42%), $210.3 (42%), and $171.8 (43%) million of revenue for the years ended
December 31, 2011, 2010, and 2009, respectively, shipped to locations outside the Americas, primarily to EMEA
and Asia Pacific. We expect that sales shipped outside the Americas will continue to represent a significant
portion of total revenue. The majority of our revenue is invoiced in U.S. dollars.

Given the significance of non-U.S. sales to our total revenue, we face a continuing risk from the fluctuation of
the U.S. dollar versus foreign currencies. Although the majority of our receivables are invoiced and collected in
U.S. dollars, we have exposure from non-U.S. dollar-denominated sales (consisting of the Euro, British pound
sterling, Japanese yen, Australian dollar, and New Zealand dollar).

We have a substantial number of international employees, resulting in material operating expenses denominated
in foreign currencies. We have exposure from non-U.S. dollar-denominated operating expenses in foreign
countries (primarily the Euro, British pound sterling, Japanese yen, Indian rupee, and Australian dollar). Changes
in exchange rates, and in particular a weakening of the U.S. dollar, may adversely affect our consolidated
operating expenses and operating income (loss) as expressed in U.S. dollars. We hedge our operating expense
exposure in Indian rupees. The notional amount of our Indian rupee cash flow hedge was $3.5 million at
December 31, 2011. As of December 31, 2011, we had not entered into hedges against any other currency
exposures, but we may consider hedging against movements in other currencies as well as adjusting the hedged
portion of our Indian rupee exposure in the future.

Our efforts to reduce risk from our international operations and from fluctuations in foreign currencies or interest
rates may not be successful, which could harm our financial condition and operating results.

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We face risks from our international operations.

We are subject to certain risks because of our international operations. Changes to and compliance with a variety
of foreign laws and regulations may increase our cost of doing business. Our inability or failure to obtain
required approvals could harm our international and domestic sales. Trade legislation in either the U.S. or other
countries, such as a change in the current tariff structures, export compliance laws, or other trade policies, could
adversely affect our ability to sell or manufacture in international markets. Some of our sales to international
customers are made under export licenses that must be obtained from the U.S. Department of Commerce
(“DOC”) and certain transactions require prior approval of the DOC or other governmental agencies. Changes in
governmental regulation and our inability or failure to obtain required approvals, permits, or registrations could
harm our international and domestic sales and adversely affect our revenue, business, and operations. Any
violations could result in fines and penalties, including prohibiting us from exporting our products to one or more
countries, and could materially adversely affect our business.

Local laws and customs in many countries differ significantly from those in the U.S. We incur additional legal
compliance costs associated with our international operations and could become subject to legal penalties in
foreign countries if we do not comply with local laws and regulations, which may be substantially different from
those in the U.S. In many foreign countries, particularly those with developing economies, it may be common to
engage in business practices that are prohibited by U.S. regulations such as the Foreign Corrupt Practices Act.
Although we implement policies and procedures designed to ensure compliance with these laws, there can be no
assurance that all of our employees, contractors, and agents, as well as companies to which we outsource
business operations, including those based in or from countries where practices that violate such U.S. laws may
be customary, will not take actions in violation of our policies. Furthermore, there can be no assurance that
employees, contractors, and agents of acquired companies did not take actions in violation of such laws and
regulations prior to the date they were acquired by us, although we perform due diligence procedures to endeavor
to discover any such actions prior to the acquisition date. Any such violation, even if prohibited by our policies,
could have a material adverse effect on our business.

Other risks include political and economic conditions in a specific country or region. Specifically, if the
European economy continues to weaken, the credit markets may be impacted making it difficult for our
customers to finance the purchase of our equipment. Marketing spending may be impacted if the European
economy remains weak, which could reduce demand for our products.

Many countries in which we derive revenue do not have comprehensive and highly developed legal systems,
particularly with respect to the protection of intellectual property rights, which, among other things, can result in
a prevalence of infringing products and counterfeit goods in certain countries, which could harm our business and
reputation.

We may be unable to adequately protect our proprietary information and may incur expenses to defend
our proprietary information.

We rely on copyright, patent, trademark, and trade secret protection, in addition to nondisclosure agreements,
licensing, and cross-licensing arrangements to establish, maintain, and protect our intellectual property rights, all
of which afford only limited protection. We have patents and pending patent applications in the U.S. and various
foreign countries. There can be no assurance that patents will issue from our pending applications or from any
future applications, or that, if issued, any claims allowed will be sufficiently broad to protect our technology.
Any failure to adequately protect our proprietary information could harm our financial condition and operating
results. We cannot be certain that any patents that have been, or may in the future be issued to us, or which we
license from third parties, or any other proprietary rights will not be challenged, invalidated, or circumvented. In
addition, we cannot be certain that any rights granted to us under any patents, licenses, or other proprietary rights
will provide adequate protection of our proprietary information.

As different areas of our business change or mature, from time to time we evaluate our patent portfolio and
decide to either pursue or not pursue specific patents and patent applications related to such areas. Choosing not
to pursue certain patents, patentable applications, and failing to file applications for potentially patentable
inventions, may harm our business by, among other things, enabling our competitors to more effectively compete
with us, reducing potential claims we can bring against third parties for patent infringement, and limiting our
potential defenses to intellectual property claims brought by third parties.

Litigation has been, and may continue to be, necessary to defend and enforce our proprietary rights. Such
litigation, whether or not concluded successfully, could involve significant expense and the diversion of our
attention and other resources, which could harm our financial condition and operating results.

We face risks from third party claims of infringement and potential litigation.

Third parties have claimed in the past, and may claim in the future, that our products infringe, or may infringe,
their proprietary rights. Such claims have resulted in lengthy and expensive litigation in the past and could have a
similar result in the future. Such claims and any related litigation, whether or not we are successful in the
litigation, could result in substantial costs and diversion of our resources, which could harm our financial
condition and operating results. Although we may seek licenses from third parties covering intellectual property
that we are allegedly infringing, we cannot assure you that any such licenses could be obtained on acceptable
terms, if at all.

We are subject to numerous federal and state employment laws and may face claims in the future under
such laws.

We are subject to numerous federal and state employment laws and from time to time face claims by our
employees and former employees under such laws. Although there are no material claims pending or threatened
against us under federal and state employment laws, we cannot assure you that material claims under such laws
will not be made in the future against us, nor can we predict the likely impact of any such claims on us, or that, if
asserted, we would be able to successfully resolve any such claims without incurring significant expense.

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We may be subject to risk of loss due to fire because certain materials we use in our ink manufacturing
process are flammable.

We use flammable materials in the ink manufacturing process. Therefore, we may be subject to risk of loss
resulting from fire. The risk of fire associated with these materials cannot be completely eliminated. We own
certain facilities that manufacture our ink, which increases our exposure to such risk. We maintain insurance
policies to cover losses caused by fire, including business interruption insurance. If one or more of these facilities
is damaged or otherwise ceases operations as a result of fire, it would reduce our digital UV ink manufacturing
capacity, which may reduce revenue and adversely affect our business.

The location and concentration of our facilities subjects us to risk of earthquakes, floods, or other natural
disasters.

Our corporate headquarters, including a significant portion of our research and development facilities, are located
in the San Francisco Bay Area, which is known for seismic activity. This area has also experienced flooding in
the past. Many of the components necessary for our products are purchased from suppliers based in areas that are
subject to risk from natural disasters including the San Francisco Bay Area, Taiwan, and Japan and are therefore
subject to risk from natural disasters. A significant natural disaster, such as an earthquake, flood, tsunami,
hurricane, typhoon, or other business interruptions due, for example, to power shortages and other interruptions
could harm our business, financial condition, and operating results.

We may be subject to environmental-related liabilities due to our use of hazardous materials and solvents.

Our business operations involve the use of certain hazardous materials at two separate locations. At these
facilities, we formulate and store UV and solvent ink. The formulation and storage of solvent ink also requires
the use of solvents; however, our formulation of solvent ink is limited as we have primarily outsourced solvent
ink formulation. The hazardous materials and solvents that we use are subject to various governmental
regulations relating to their transfer, handling, packaging, use, and disposal. We store ink at warehouses world-
wide, including Europe and the U.S., and shipping companies distribute ink at our direction. We face potential
liability for problems such as large spills or fires that may arise at ink manufacturing locations. While we
customarily obtain insurance coverage typical for this kind of risk, such insurance may not be sufficient. If we
fail to comply with these laws or an accident involving our ink waste or chemicals occurs, or if our insurance
coverage is not sufficient, then our business and financial results could be harmed.

Future sales of our hardware products could be limited if we don’t comply with current and future
environmental/chemical content regulation in electrical and electronic equipment.

We believe that our products are currently compliant with RoHS, WEEE, REACH, and other regulations for the
European Union as well as with China RoHS, and other applicable international, U.S., state, and local
environmental regulations. We monitor environmental compliance regulations to ensure that our products are
fully compliant prior to the implementation of any potential new requirements. However, new unforeseen
legislation could require us to reengineer our products, complete costly analyses, or perform supplier surveys,
which could harm our business and negatively impact our financial results. We could also incur additional costs,
sanctions, and liabilities in connection with non-compliant product recalls, regulatory fines, and exclusion of
non-compliant products from certain markets.

Our products may contain errors or defects, which are not discovered until after shipping, which could
subject us to warranty claims in excess of our warranty reserves.

Our products consist of hardware and software developed by ourselves and others, which may contain undetected
errors. We have in the past discovered software and hardware errors or defects in certain of our products after
their introduction, resulting in warranty expense and other expenses incurred in connection with rectifying such
errors or defects or, in certain circumstances, replacing the defective product, which may damage our
relationships with our customers. Errors or defects could be found in new versions of our products after
commencement of commercial shipment and any such errors could result in a loss or delay in market acceptance
of such products and thus harm our reputation and revenue. Errors or defects in our products (including errors in
licensed third party software) detected prior to new product releases could result in delays in the introduction of
new products and the incurrence of additional expense, which could harm our operating results. We generally
provide a twelve month hardware limited warranty from date of shipment for certain Fiery controller and Inkjet
printer products, which may cover both parts and labor. Our standard warranties contain limits on damages and
exclusions, including but not limited to alteration, modification, misuse, mishandling, and storage or operation in
improper environments. While we record an accrual for estimated warranty costs when estimable and probable,
based on historical experience, we may incur additional costs of revenue and operating expenses if our warranty
provision does not reflect adequately the cost to resolve errors or defects in our products or if our liability
limitations are declared enforceable, which could harm our business, financial condition, and operating results.

Actual or perceived security vulnerabilities in our products could adversely affect our revenue.

Maintaining the security of our software and hardware products is an issue of critical importance to our
customers and for us. There are individuals and groups who develop and deploy viruses, worms, and other
malicious software programs that could attack our products. Although we take preventative measures to protect
our products, and we have a response team that is notified of high risk malicious events, these procedures may
not be sufficient to mitigate damage to our products. Actual or perceived security vulnerabilities in our products
could lead some customers to seek to return products, reduce or delay future purchases, or purchase competitive

products. Customers may also increase their expenditures to protect their computer systems from attack, which
could delay or reduce purchases of our products. Any of these actions or responses by customers could adversely
affect our revenue.

System failures, or system unavailability, could harm our business.

We rely on our network infrastructure, internal technology systems, and internal and external websites for our
development, marketing, operational, support, and sales activities. Our hardware and software systems related to
such activities are subject to damage from malicious code released into the public internet through vulnerabilities
in popular software programs. These systems are also subject to acts of vandalism and potential disruption by
actions or inactions of third parties. Any event that causes failures or interruption in our hardware or software
systems could harm our business, financial condition, and operating results.

We are partially self-insured for certain losses related to employee medical and dental coverage. Our self-
insurance reserves may not be adequate to cover our medical and dental claim liabilities.

Beginning in 2011, we are partially self-insured for certain losses related to employee medical and dental
coverage, excluding employees covered by health maintenance organizations. We generally have an individual
stop loss deductible of $125,000 per enrollee unless specific exposures are separately insured. We have accrued a
contingent liability of $1.6 million as of December 31, 2011, which is not discounted, based on an examination
of historical trends, industry claims experience, actuarial analysis, and estimates. The primary estimates used in
the development of our accrual at December 31, 2011 include total enrollment, employee contributions,
population demographics, and historical claims costs incurred. Although we do not expect that we will ultimately
pay claims significantly different from our estimates, self-insurance reserves could be affected if future claims
experience differs significantly from our historical trends and assumptions. While we believe these estimates are
reasonable based on the information currently available, if actual trends, including the severity of claims and
medical cost inflation, differ from our estimates, our consolidated financial position, results of operations, or cash
flows could be impacted.

The value of our investment portfolio is subject to interest rate volatility.

We maintain an investment portfolio of fixed income debt securities classified as available-for-sale securities. As
a result, our investment portfolio is subject to counterparty risk and volatility if market interest rates fluctuate.
We attempt to limit our exposure to interest rate risk by investing in securities with maturities of less than three
years; however, we may be unable to successfully limit our risk to interest rate fluctuations. This may cause
volatility in our investment portfolio value.

Our stock price has been volatile historically and may continue to be volatile.

The market price for our common stock has been and may continue to be volatile. During the twelve months
ended December 31, 2011, the price of our common stock as reported on The NASDAQ Global Select Market
ranged from a low of $12.71 to a high of $19.17. We expect our stock price to be subject to fluctuations as a
result of a variety of factors, including factors beyond our control. These factors include:

•

actual or anticipated variations in our quarterly or annual operating results;

ability to initiate or complete stock repurchase programs;

announcements of technological innovations or new products or services by our competitors or by us;

announcements relating to strategic relationships, acquisitions, or investments;

announcements by our customers regarding their businesses or the products in which our products are
included;

changes in financial estimates or other statements by securities analysts;

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•

any failure to meet security analyst expectations

changes in the securities analysts’ rating of our securities;

terrorist attacks and the affects of military engagements or natural disasters;

commencement of litigation or adverse results of pending litigation;

changes in the financial performance and/or market valuations of other software and high technology
companies; and

changes in general economic conditions.

Because of this volatility, we may fail to meet the expectations of our stockholders or of securities analysts from
time to time and the trading prices of our securities could decline as a result. The stock market has experienced
significant price and volume fluctuations that have particularly affected the trading prices of equity securities of
many high technology companies, impacted by the continuing uncertainty in our economy. These fluctuations
have often been unrelated or disproportionate to the operating performance of these companies. Any negative
change in the public’s perception of high technology companies could depress our stock price regardless of our
operating results.

Our stock repurchase program could affect our stock price and add volatility.

In February 2011, our Board of Directors authorized a $30 million repurchase of our outstanding common stock.
In August 2011, our Board of Directors authorized an additional $30 million repurchase of our outstanding
common stock. Any repurchases pursuant to our stock repurchase program could affect our stock price and add
volatility. There can be no assurance that repurchases will be made at the best possible price. Potential risks and
uncertainties also include, but are not necessarily limited to, the amount and timing of future stock repurchases
and the origin of funds used for such repurchases. The existence of a stock repurchase program could also cause
our stock price to be higher than it would be in the absence of such a program and could potentially reduce the
market liquidity for our stock. Depending on market conditions and other factors, these repurchases may be
commenced or suspended from time to time. Any such suspension could cause the market price of our stock to
decline.

Under regulations required by the Sarbanes-Oxley Act of 2002, our internal controls over financial
reporting may be deemed to be ineffective and this could have a negative impact on our stock price.

Section 404 of the Sarbanes-Oxley Act of 2002 requires that we establish and maintain an adequate internal
control structure and procedures for financial reporting and assess on an ongoing basis the design and operating
effectiveness of our internal control structure and procedures for financial reporting. Although no known material
weaknesses are believed to exist at this time, it is possible that material weaknesses could be identified. If we are
unable to remediate the weaknesses, our management would be required to conclude and disclose that our
internal controls over financial reporting were not effective. In addition to their inherent limitations, internal
controls over financial reporting may not prevent or detect misstatements, errors, omissions, or fraud.

Our remaining synthetic lease arrangement may adversely affect our cash flow.

As of December 31, 2011, we were a party to a synthetic lease (“Lease”) covering our facility located at 303
Velocity Way, Foster City, California. The Lease provides a cost effective means of providing adequate office
space for our corporate offices. The Lease is scheduled to expire in July 2014. The Lease includes an option to
purchase the facility for the amount expended by the lessor to purchase the facility.

the financed amount of the building if we default on our covenants. We were in compliance with all such
financial and merger-related covenants as of December 31, 2011. We have assessed our exposure in relation to
the first loss guarantees under the Lease and have determined there is no deficiency to the guaranteed value at
December 31, 2011. If there is a decline in value, we will record a loss associated with the residual value
guarantee. The $56.9 million pledged under the Lease is in LIBOR-based interest bearing accounts as of
December 31, 2011 and is restricted as to withdrawal at all times. As of December 31, 2011, we are treated as the
owner of this building for federal income tax purposes. In conjunction with the Lease, we leased the land on
which the building is located to the lessor of the building. This separate ground lease is for approximately 30
years. The Lease is scheduled to expire in 2014.

Our synthetic lease arrangement could have significant negative consequences. For example, it could:

•

increase our vulnerability to general adverse economic and industry conditions, as we are required to
maintain compliance with financial covenants regardless of external conditions;

limit our ability to obtain additional financing due to covenants and the existing leverage;

require the dedication of funds to comply with the financial covenants, thereby reducing the
availability of cash and/or ability to obtain financing to fund our growth strategy, working capital,
capital expenditures, and other general corporate purposes; and

limit our flexibility in planning for, or reacting to, changes in our business and our industry by
restricting funds available to address such changes; and place us at a competitive disadvantage relative
to our competitors.

Our profitability may be affected by unanticipated changes in our tax provisions, the adoption of new U.S.
or foreign tax legislation, or exposure to additional income tax liabilities.

We are subject to income taxes in the U.S. and many foreign countries. The amounts we charge for intercompany
transactions can impact our tax liabilities. We are potentially subject to tax audits in various countries and tax
authorities may disagree with our intercompany charges or other matters and assess additional taxes. We
regularly review the likely outcomes of these audits to determine whether our tax provisions are sufficient.
However, there can be no assurance that we will accurately predict the outcomes of these audits, and the final
assessments of these audits can have a material impact on our net income.

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Our effective tax rate in the future may be impacted by changes in the mix of earnings in countries with differing
statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in tax laws, and new
information discovered during the preparation of our tax returns. U.S. and foreign tax legislative proposals could
adversely affect our effective tax rate, if enacted. Any of these changes could negatively impact our net income.

We make estimates and assumptions in connection with the preparation of our consolidated financial
statements. Any changes to those estimates and assumptions could adversely affect our results of
operations.

In connection with the preparation of our consolidated financial statements, we use certain estimates and
assumptions based on historical experience and other factors. Our most critical accounting estimates and
assumptions are described in “Critical Accounting Policies” within “Management’s Discussion and Analysis of
Financial Condition and Results of Operations”. Our critical accounting estimates and assumptions are related to
revenue recognition, bad debts, inventories and purchase commitments, warranty obligations, litigation,
restructuring activities, self-insurance, fair value of financial instruments, stock-based compensation, income
taxes, intangible assets and goodwill, business combinations, and contingencies. While we believe these
estimates and assumptions are reasonable under the circumstances, they are subject to significant uncertainties,
some of which are beyond our control. Should any of these estimates and assumptions change or prove to have
been incorrect, it could adversely affect our results of operations.

Certain provisions contained in our amended and restated certificate of incorporation, our amended and
restated bylaws, and under Delaware law could delay or impair a change in control.

Certain provisions in our amended and restated certificate of incorporation and amended and restated bylaws could
have the effect of rendering more difficult or discouraging an acquisition of the Company deemed undesirable by our
Board of Directors. Our amended and restated certificate of incorporation allows the Board of Directors to issue
preferred stock, which may include powers, preferences, privileges, and other rights superior to our common stock,
thereby limiting our stockholders’ ability to transfer their shares and may affect the price they are able to obtain. Our
amended and restated bylaws do not allow stockholders to call special meetings and include, among other things,
procedures for advance notification of stockholder nominations and proposals, which may have the effect of delaying
or impairing attempts by our stockholders to remove or replace management, to commence proxy contests, or to effect
changes in control or hostile takeovers of the Company.

As a Delaware corporation, we are subject to Delaware law, including Section 203 of the Delaware General
Corporation Law, which imposes restrictions on certain transactions between a corporation and certain significant
stockholders. These provisions could also have the effect of delaying or impairing the removal or replacement of
management, proxy contests, or changes in control. Any provision of our amended and restated certificate of
incorporation and amended and restated bylaws that has the effect of delaying or impairing a change in control of the
Company could limit the opportunity for our stockholders to receive a premium for their shares of our common stock
and could affect the price that certain investors may be willing to pay for our common stock.

Item 1B: Unresolved Staff Comments

None.

Item 2: Properties

As of December 31, 2011 we owned or leased a total of approximately 0.9 million square feet world-wide. The
following table sets forth the location, size, and use of our principal facilities (square footage in thousands):

Location

Square
Footage

Percent
Utilized

Leased or
Owned

Operating Segment

Principal Uses

Foster City, California

295

100% Leased* Corporate & Fiery Corporate offices, design engineering,

(303 Velocity Way) . . . . . . . .

Meredith, New Hampshire . . . . .

176

100% Owned

Inkjet

100% Leased

All

Inkjet

product testing, sales, customer service

Manufacturing (Inkjet printers), design
engineering, sales, customer service

Design engineering, sales, administrative

Manufacturing (ink), design engineering,

sales, customer service

Bangalore, India . . . . . . . . . . . . .

Ypsilanti, Michigan . . . . . . . . . .

Norcross, Georgia . . . . . . . . . . . .

Minneapolis, Minnesota . . . . . . .

Scottsdale, Arizona . . . . . . . . . . .

Ratingen, Germany . . . . . . . . . . .

Pittsburgh, Pennsylvania . . . . . .

Brussels, Belgium . . . . . . . . . . . .

100% Leased

Fiery & APPS

Design engineering, sales, customer

service, quality assurance, and software
engineering

100% Owned

Fiery & APPS

Design engineering, customer service,

software engineering

58%** Leased

Fiery & APPS

Administrative, customer service

100% Leased

Fiery

Software engineering, sales, customer

service

100% Leased

APPS

Inkjet

Software engineering, sales

Sales, customer service

Location

Square
Footage

Percent
Utilized

Leased or
Owned

Operating
Segment

Principal Uses

Schiphol-Rijk, The

Netherlands . . . . . . . . . . . . . . .

Richmond Hill, Ontario,

Canada . . . . . . . . . . . . . . . . . .

Parsippany, New Jersey . . . . . . .
Lebanon, New Hampshire . . . . .
Essen, Germany . . . . . . . . . . . . .

Jacksonville, Florida . . . . . . . . . .
Shanghai, China . . . . . . . . . . . . .
Auckland, New Zealand . . . . . . .

Dronnfield, United Kingdom . . .

Colchester, United Kingdom . . .

12
9
9

8
7
5

100% Leased

Inkjet

European corporate offices, sales, support

100% Leased

Fiery

69%** Leased
100% Leased
100% Leased

100% Leased
100% Leased
100% Leased

Fiery
APPS
APPS

APPS
Inkjet
APPS

services

Manufacturing, (Entrac), administrative,
design engineering, sales, customer
service

Design and engineering
Software engineering
Design engineering, software engineering,

sales, customer service

Software engineering
Sales, demonstration center
Design engineering, software engineering,

sales, customer service

100% Leased

APPS

Design engineering, software engineering,

sales, customer service

100% Leased

APPS

Design engineering, software engineering,

sales, customer service

* We have an option to purchase this facility during or at the end of the lease term for the amount expended
by the lessor to purchase the facility. Please see Note 8—Commitment and Contingencies of the Notes to
Consolidated Financial Statements.

** Non-utilized square footage has been fully reserved.

We lease 10 additional domestic and international regional operations and sales offices, excluding facilities that
have been fully reserved. We believe that our facilities, in general, are adequate for our present needs. We do not
expect that we would experience difficulties in obtaining additional space at fair market rates, if the need arose.

Item 3: Legal Proceedings

Legal Proceedings

We may be involved, from time to time, in a variety of claims, lawsuits, investigations, or proceedings relating to
contractual disputes, securities laws, intellectual property rights, employment, or other matters that may arise in
the normal course of business. We assess our potential liability in each of these matters by using the information
available to us. We develop our views on estimated losses in consultation with inside and outside counsel, which
involves a subjective analysis of potential results and various combinations of appropriate litigation and
settlement strategies. We accrue estimated losses from contingencies if a loss is deemed probable and can be
reasonably estimated.

As of December 31, 2011, we are subject to the various claims, lawsuits, investigations, or proceedings discussed
below.

Durst Fototechnik Technology GmbH (“Durst”) v. Electronics for Imaging GmbH (“EFI GmbH”) and
EFI, et al. – Mannheim Litigation

On February 23, 2007, Durst brought an action to enforce a utility model patent right against EFI GmbH in the
Mannheim District Court in Germany. On May 10, 2007, EFI GmbH filed its Statement of Defenses. These
defenses include lack of jurisdiction, non-infringement, invalidity, and unenforceability based on Durst’s
improper actions before the German patent office. EFI filed its Statement of Defense on August 29, 2007. EFI’s
defenses include those for EFI GmbH, as well as an additional defense for prior use based on EFI’s own
European patent rights. The Mannheim court conducted a trial on November 30, 2008, and following a recess to
receive additional expert testimony, finished the trial on August 28, 2009.

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In a subsequent decision, the Mannheim court invalidated Durst’s utility model registration patent and dismissed
Durst’s actions against EFI on February 26, 2010. Durst appealed the decision and the appeal hearing took place
on October 26, 2011 in Karlsruhe, Germany. The court of appeal issued their decision on December 21, 2011
upholding the February 26, 2010 decision, which invalidated Durst’s utility model registration patent. Durst has
filed a request for further appeal of this decision in the German Supreme Court.

Although we do not believe it is probable that we will incur a loss, it is reasonably possible that our financial
statements could be materially affected by the unfavorable resolution of this matter, if an appeal is granted by the
German Supreme Court. Because the action was dismissed and Durst’s patent was invalidated both in the
Mannheim court and upon appeal, among other reasons, we are unable to estimate the amount or range of loss
that may be incurred.

Durst v. EFI GmbH and EFI, et al. – Duesseldorf Litigation

On or about June 14, 2011, Durst filed an action against EFI GmbH and EFI in the Regional Court of Dusseldorf,
Germany, alleging infringement of a German patent. We have filed our response to the action, denying
infringement and arguing that the patent is not valid. Nevertheless, because this proceeding is in the preliminary
stages, we are not yet in a position to determine whether the loss is probable or reasonably possible, and if it is
probable or reasonably possible, the estimate of the amount or range of loss that may be incurred.

N.V. Perfectproof Europe v. BEST GmbH

On December 31, 2001, N.V. Perfectproof Europe (“Perfectproof”) filed a complaint against BEST GmbH,
currently Electronics For Imaging, GmbH (“BEST”) in the Tribunal de Commerce of Brussels, in Belgium (the
“Commercial Court”), alleging unlawful unilateral termination of an alleged “exclusive” distribution agreement
and claiming damages of approximately EUR 0.6 million for such termination and additional damages of EUR
0.3 million, or a total of approximately $1.1 million. In a judgment issued by the Commercial Court on June 24,
2002, the court declared that the distribution agreement was not “exclusive” and challenged its jurisdiction over
the claim. Perfectproof appealed the judgment, and by decision dated November 30, 2004, the Court d’Appel of
Brussels (the “Court of Appeal”) rejected the appeal and sent the case back to the Commercial Court.
Subsequently, by judgment dated November 17, 2009, the Commercial Court dismissed the action for lack of
jurisdiction of Belgian courts over the claim. On March 25, 2009, Perfectproof appealed to the Court of
Appeal. On November 16, 2010, the Court of Appeal declared, among other things, that the Commercial Court
was competent to hear the case and that the agreement between BEST and Perfectproof should be analyzed as an
“exclusive” distribution agreement and as such, was subject to reasonable notice prior to termination. The court
further determined that Perfectproof is entitled to damages, for lack of receiving such notice, and appointed an
expert to review accounting and other records of the parties and address certain questions relevant in assessing
the amount of total damages that Perfectproof claimed it suffered. We received the expert’s preliminary report on
July 14, 2011 and filed, on August 16, 2011, a response to the expert’s report. In October 2011, the expert issued
the final report in which the expert’s analysis of itemized damages are, in the aggregate, significantly less than
the amount of damages claimed by Perfectproof.

Although we do not believe that Perfectproof’s claims are founded and we do not believe it is probable that we
will incur a material loss in this matter, it is reasonably possible that our financial statements could be materially
affected by the court’s decision regarding the assessment of damages. Upon filing the final report with the court,
the court may approve the report and pronounce the final amount of damages to be paid by us, or require
additional analysis or consider further challenges to the final damages determination. Accordingly, it is
reasonably possible that we could incur a material loss in this matter. We estimate the range of loss to be between
one dollar and $1.1 million.

KERAjet S.A (“Kerajet”) vs. Cretaprint

In conjunction with our acquisition of Cretaprint, which closed on January 10, 2012, we assumed potential
liability in a lawsuit related to a patent infringement action brought by Kerajet against Cretaprint.

In May 2011, Kerajet filed an action against Cretaprint in the Commercial Court in Valencia, Spain, alleging,
among other things, that certain Cretaprint products infringe a patent held by Kerajet. In the Cretaprint purchase
agreement, the former owners of Cretaprint assumed an indemnification obligation to us for this potential
liability.

Although we have these rights to indemnification and we do not believe it is probable that we will incur a loss, it
is reasonably possible that our financial statements could be materially affected by the unfavorable resolution of
this matter. Accordingly, it is reasonably possible that we could incur a material loss in this matter. Because this
proceeding is in the preliminary stages and a specific amount of damages has not been claimed by Kerajet, we
are unable to estimate the amount or range of loss that may be incurred.

As of December 31, 2011, we are also subject to various other claims, lawsuits, investigations, and proceedings
in addition to those discussed above. There is at least a reasonable possibility that additional losses may be
incurred in excess of the amounts that we have accrued. However, we believe that certain of these claims are not
material with respect to our financial statements or the range of reasonably possible losses is not reasonably
estimable. Litigation is inherently unpredictable, and while we believe that we have valid defenses with respect
to legal matters pending against us, our financial statements could be materially affected in any particular period
by the unfavorable resolution of one or more of these contingencies or because of the diversion of management’s
attention and the incurrence of significant expenses.

Item 4: Mine Safety Disclosure

Not applicable.

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PART II
Item 5: Market for Registrant’s Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities

Our common stock has traded on The NASDAQ Global Select Market (formerly The NASDAQ National
Market) under the symbol EFII since October 2, 1992. The table below lists the high and low sales price during
each quarter the stock was traded in 2011 and 2010.

2011

2010

High . . . .
Low . . . .

Q1
15.95
13.52

Q2
$19.17
$14.52

Q3
$18.34
$12.73

Q4
$15.89
$12.71

Q1
$13.61
$11.25

Q2
$14.86
$ 9.22

Q3
$12.20
$ 9.18

Q4
$14.87
$11.95

As of February 1, 2012 there were 148 stockholders of record, excluding a substantially greater number of “street
name” holders or beneficial holders of our common stock, whose shares are held of record by banks, brokers, and
other financial institutions.

We did not declare or pay cash dividends on our common stock in either 2011 or 2010. We currently anticipate
that we will retain all available funds for the operation of our business and do not plan to pay any cash dividends
in the foreseeable future. We believe that the most strategic uses of our cash resources include acquisitions,
strategic investments to gain access to new technologies, repurchases of shares of our common stock, and
working capital.

Equity Compensation Plan Information

Information regarding our equity compensation plans may be found in Item 12 of this Annual Report on
Form 10-K and is incorporated herein by reference.

Repurchases of Equity Securities

Repurchases of equity securities during the twelve months ended December 31, 2011 were as follows (in
thousands except per share amounts):

Total number
of shares
purchased (2)

Average price
paid per share

Total number
of shares
purchased as
part of publicly
announced plans

Approximate
dollar value of
shares that may yet
be purchased
under the plans (1)

Fiscal month

January 2011 . . . . . . . .
February 2011 . . . . . . .
March 2011 . . . . . . . . .
April 2011 . . . . . . . . . .
May 2011 . . . . . . . . . .
June 2011 . . . . . . . . . .
July 2011 . . . . . . . . . . .
August 2011 . . . . . . . .
September 2011 . . . . . .
October 2011 . . . . . . . .
November 2011 . . . . . .
December 2011 . . . . . .

10
40
365
279
269
245
186
794
689
26
16
14

$14.49
15.42
14.37
16.51
18.03
16.59
17.52
15.85
13.97
14.47
14.08
13.91

—
—
220
275
251
245
186
655
689
26
—
—

Total

. . . . . . . . . .

2,933

2,547

$ —
30,000
26,855
22,310
17,793
13,725
10,472
30,001
20,377
20,001
20,001
20,001

$20,001

(1)

In February 2011, our Board of Directors authorized a $30 million repurchase of our outstanding common
stock. In August 2011, our Board of Directors authorized an additional $30 million repurchase of our
outstanding common stock. Under these publicly announced plans, we repurchased 2.5 million shares for an
aggregate purchase price of $40 million during the year ended December 31, 2011.

(2)

Includes 0.4 million shares purchased from employees to satisfy minimum tax withholding obligations that
arose on the vesting of restricted stock units (“RSUs”) and restricted stock awards (“RSAs”).

Comparison of Cumulative Total Return among Electronics For Imaging, Inc., NASDAQ Composite, and
NASDAQ Computer Manufacturers Index

The stock price performance graph below includes information required by the SEC and shall not be deemed
incorporated by reference by any general statement incorporating by reference in this Annual Report on Form
10-K into any filing under the Securities Act or under the Exchange Act, except to the extent the Company
specifically incorporates this information by reference, and shall not otherwise be deemed soliciting material or
filed under the Securities Act or the Exchange Act, or subject to the liabilities of Section 18 of the Exchange Act.

The following graph compares cumulative total returns based on an initial investment of $100 in the Company’s
common stock to the NASDAQ Composite and the NASDAQ Computer Manufacturers Index. The stock price
performance shown on the graph below is not indicative of future price performance and only reflects the
Company’s relative stock price for the five-year period ending on December 31, 2011. All values assume
reinvestment of dividends and are calculated at December 31 of each year.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Electronics For Imaging, Inc., The NASDAQ Composite Index,
And the NASDAQ Computer Manufacturers Index

$300

$250

$200

$150

$100

$50

12/06

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12/07

12/08

12/09

12/10

12/11

Electronics For Imaging, Inc.

NASDAQ Composite

NASDAQ Computer Manufacturers

* $100 invested on 12/31/06 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.

Item 6: Selected Financial Data

The following table summarizes selected consolidated financial data as of and for the five years ended
December 31, 2011. This information should be read in conjunction with Item 7, “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” and the audited consolidated financial statements and
related notes thereto. For a more detailed description, see Part II, Item 7, “Management’s Discussion and
Analysis of Financial Condition and Results of Operations.”

For the years ended December 31,

(in thousands, except per share amounts)

2011

2010

2009

2008

2007

Operations(1)
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$591,556

$504,007

$401,108

$ 560,380

$ 620,586

Gross profit(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

330,983

267,685

211,483

317,417

361,147

Income (loss) from operations (2)(3)

. . . . . . . . . . . . .

27,333

(276)

(67,017)

(145,015)

(2,231)

Net income (loss)(2)(3)(4)

. . . . . . . . . . . . . . . . . . . . . .

$ 27,465

7,487

$ (2,171) $(113,444) $

26,843

Earnings per share
Net income (loss) per basic common share . . . . . . .

Net income (loss) per diluted common share . . . . .

0.59

0.58

0.16

(0.04) $

(2.16) $

(0.04) $

(2.16) $

Shares used in basic per-share calculation . . . . . . . .

46,234

45,387

49,682

Shares used in diluted per-share calculation . . . . . .

47,579

47,152

49,682

52,553

0.47

0.44

56,679

68,102

(in thousands)

2011

2010

2009

2008

2007

December 31,

Financial Position
Cash, cash equivalents, and short-term

investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Convertible senior debentures . . . . . . . . . . . . . . . . .
Stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . .

$219,158
244,824
739,734
—
564,783

$229,663
265,250
706,581
—
551,749

$204,201
246,652
661,181
—
522,426

$ 189,351
293,830
751,948
—
601,218

$ 499,852
270,677
1,157,739
240,000
743,996

(1)

Includes acquired company results of operations beginning on the date of acquisition. See Note 3—
Acquisitions of the Notes to Consolidated Financial Statements for a summary of recent acquisitions during
the years ended December 31, 2011, 2010, and 2009.

(2) Gross profit includes $2.3 million provision for excess solvent inventories and related end-of-life purchases

resulting from the accelerating transition from solvent to UV technology for the year ended December 31,
2010.
Income (loss) from operations includes the following:

(3)

•

Amortization of acquisition-related intangibles of $11.2, $12.4, $18.5, $32.0, and $33.5 million for the
years ended December 31, 2011, 2010, 2009, 2008, and 2007, respectively.

Stock-based compensation expense of $23.4, $15.9, $18.6, $33.4, and $24.5 million for the years ended
December 31, 2011, 2010, 2009, 2008, and 2007, respectively.

Goodwill and long-lived asset impairment charges of $0.7, $3.2, and $111.9 million for the years ended
December 31, 2010, 2009, and 2008, respectively. Based on our assessment of goodwill impairment
during the fourth quarter of 2008, we recognized a non-cash goodwill impairment charge of $104
million.

Restructuring and other charges of $3.3, $3.6, $9.0, $11.0, and $1.5 million for the years ended
December 31, 2011, 2010, 2009, 2008, and 2007, respectively.

•

Acquisition-related costs of $2.3 and $1.2 million for the years ended December 31, 2011 and 2010
associated with businesses acquired during the years ended December 31, 2011 and 2010 and
Cretaprint, which was acquired subsequent to year end.

Change in fair value of contingent consideration of $1.5 and $0.4 million for the years ended
December 31, 2011 and 2010. ASC 805, Business Combinations, requires that we estimate the fair
value of acquisition-related contingent consideration based on the probability of realization of the
performance targets. The 2011 and 2010 Radius earnout performance targets were achieved.

Acquired in-process research & development (“IPR&D”) costs of $2.7 million for the year ended
December 31, 2008 were incurred in association with acquisitions that closed prior to the new business
combination accounting guidance becoming effective.

(4) Net income (loss) includes the following:

•

Benefit from the release of previously unrecognized tax benefits of $2.7 and $8.7 million for the years
ended December 31, 2011 and 2010, respectively, resulting from the release of previously
unrecognized tax benefits resulting from the expiration of U.S. federal and state statutes of limitations.

Gain on sale of minority investment in a privately held company. Other investments, included within
other assets, consist of equity and debt investments in privately-held companies that develop products,
markets, and services considered to be strategic to us. Each of these investments had been fully
impaired in prior years. On September 1, 2011, we sold one of these investments for $2.9 million
because it was no longer considered to be strategic.

Gain on sale of building and land of $80 million for the year ended December 31, 2009 resulting from
the sale of a portion of our Foster City, California campus in January 2009 for $137.3 million to
Gilead.

Item 7: Management’s Discussion and Analysis of Financial Condition and Results of
Operations

The following discussion and analysis should be read in conjunction with the audited consolidated financial
statements and related notes thereto included in this Annual Report on Form 10-K.

All assumptions, anticipations, expectations, and forecasts contained herein are forward-looking statements
within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act that involve risks
and uncertainties. Forward-looking statements include, among others, those statements including the words
“expects,” “anticipates,” “intends,” “believes,” and similar language. Our actual results could differ materially
from those discussed here. For a discussion of the factors that could impact our results, readers are referred to
Item 1A, “Risk Factors,” in Part I of this Annual Report on Form 10-K and to our other reports filed with the
SEC. We do not assume any obligation to update the forward-looking statements provided to reflect events that
occur or circumstances that exist after the date on which they were made.

Overview

Key financial results for 2011 were as follows:

•

Our results for the year ended December 31, 2011 reflect revenue growth, gross margin improvement,
and reduced operating expenses as a percentage of revenue. We completed our acquisition of
Alphagraph on December 6, 2011, Prism on August 2, 2011, Entrac on July 25, 2011, and Streamline
on February 16, 2011. Their results are included in our results of operations subsequent to those
respective acquisition dates.

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•

Our consolidated revenue increased by approximately 17%, or $87.6 million, from $504.0 million for
the year ended December 31, 2010 to $591.6 million for the year ended December 31, 2011 consisting
of increased Fiery, Inkjet, and APPS revenue of $31.5, $32.7, and $23.4 million, respectively.

•

Fiery revenue increased by 13% primarily due to strong demand for current products from each of
the leading printer manufacturers, increased revenue from stand-alone and embedded servers and
proofing software, and to a lesser extent, our acquisition of Entrac, which was acquired during the
third quarter of 2011. The Fiery segment continues to benefit by the transition from analog to
digital technology.

Inkjet revenue increased by 16% primarily due to increased sales of super-wide format printers
and digital UV ink. The UV printer and ink revenue increase resulted from the ongoing migration
of analog, as well as the ongoing transition from solvent-based to UV curable-based printing and
from UV curing to UV/LED curing. Digital UV ink revenue increased as a result of the high
utilization that our UV printers are experiencing in the field, partially offset by decreased solvent
printer installed base demand measured by solvent ink usage.

APPS revenue increased by 41% primarily due to our acquisition strategy in the APPS operating
segment, as well as increased Pace, Monarch, Radius, and web-to-print revenue. APPS revenue
benefited from our acquisition of Prism, which closed during the third quarter of 2011 and to a
lesser extent, our acquisition of Streamline, which closed during the first quarter of 2011, and to a
lesser extent, our acquisition of Alphagraph, which closed during the fourth quarter of 2011. The
acquisitions of Prism and Alphagraph in 2011 and Radius in 2010 have led to an increased
international presence for our APPS business.

The gross profit percentage improved by 3 percentage points from 53% in 2010 to 56% in 2011
primarily due to improved Inkjet operating segment gross profit percentages of 39% (40% during the
fourth quarter), compared to 33% in the prior year. The Inkjet gross profit percentage improved
compared with the prior year primarily due to fixed manufacturing costs being spread over higher
Inkjet revenue and reduced warranty exposure, which resulted from improved product performance,
partially offset by engineering design modifications to improve quality. The Inkjet gross profit
percentage also increased due to the $2.3 million charge for excess solvent inventories and related
end-of-life purchases in 2010, as a result of the accelerating transition from solvent to UV technology.

Operating expenses as a percent of revenue decreased from 53% in 2010 to 52% in 2011. Operating
expenses increased by $35.7 million between 2010 and 2011, but decreased as a percentage of revenue
due to the 17% increase in revenue during the corresponding periods. The increase in operating
expenses was primarily driven by head count increases related to the Alphagraph, Prism, Entrac, and
Streamline acquisitions, reinstatement of salaries and benefits reduced during the economic downturn,
variable compensation due to improved profitability, commission payments resulting from increased
revenue, non-recurring engineering expenses related to our product launches, change in fair value of
contingent consideration related to our Radius acquisition, and increased stock-based compensation
expense.

Interest and other income (expense), net, increased by $4.4 million primarily driven by the sale of a
minority investment in a privately-held company for $2.9 million because the investment was no
longer considered to be strategic and $2.2 million decrease in unfavorable realized and unrealized
foreign exchange fluctuations primarily resulting from our Euro and British pound sterling-
denominated assets and liabilities including intercompany loans, partially offset by $0.4 million of
investment gains realized in 2010.

•

• We recorded a tax provision of $3.0 million in 2011 on pre-tax income of $30.4 million compared to a
tax benefit of $9.1 million in 2010 on a pre-tax loss of $1.6 million. The change from 2010 to 2011
primarily related to the decreased benefit realized from the recognition of $2.7 million of previously
unrecognized tax benefits in 2011, compared with $8.7 million recognized in 2010 and the impact of
the increase in pre-tax operating income in the current year.

Results of Operations

The following table presents items in our consolidated statements of operations as a percentage of total revenue
for 2011, 2010, and 2009. These operating results are not necessarily indicative of results for any future period.

For the years ended December 31,

2011

2010

2009

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

100%

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses:
Research and development
. . . . . . . . . . . . . . . . . . . . . . .
Sales and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . .
Amortization of identified intangibles . . . . . . . . . . . . . .
Restructuring and other . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income (loss) from operations . . . . . . . . . . . . . . . . . . . . . . . . .
Interest and other income (expense), net . . . . . . . . . . . . . . . . .
Gain on sale of building and land . . . . . . . . . . . . . . . . . . . . . .

Income (loss) before income taxes . . . . . . . . . . . . . . . . . . . . .
Benefit from (provision for) income taxes . . . . . . . . . . . . . . .

Net income (loss)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

20
20
9
2
1

—

4
1

—

5
(1)

21
21
8
2
1

—

—
—
—

—

2 %

28
25
9
5
2
1

(17)
1
20

4
(5)

(1)%

Revenue

We classify our revenue, gross profit, assets, and liabilities in accordance with our three operating segments as
follows:

Fiery, which consists of print servers, controllers, and DFEs, which transform digital copiers and printers into
high performance networked printing devices for the office and commercial printing market. This operating
segment is comprised of (i) stand-alone print controllers and servers connected to digital copiers and other
peripheral devices, (ii) embedded and design-licensed solutions used in digital copiers and multi-functional
devices, (iii) optional software integrated into our controller solutions such as Fiery Central and MicroPress,
(iv) Entrac, our self-service and payment solution, (v) PrintMe, our mobile printing application, and (vi) stand-
alone software-based solutions such as our proofing and scanning solutions.

Inkjet, which consists of sales of our VUTEk super-wide and Rastek wide format inkjet printers, Jetrion label
and packaging digital inkjet printers, ink, parts, and service revenue.

APPS, which consists of our business process automation software, including Monarch (formerly Hagen), PSI,
Logic, PrintSmith, and PrintFlow; Pace, our business process automation software that is available in a cloud-
based environment; Digital StoreFront, our cloud-based e-commerce solution that allows print service providers
to accept, manage, and process printing orders over the internet; Radius, our business process automation
software for label and packaging printers; PrintStream, our business process automation software for mailing and
fulfillment services in the printing industry; Prism, our business process automation software for the printing and
packaging industry; and Alphagraph, which includes business process automation solutions for the graphic arts
industry.

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operations; Monarch to large commercial, publication, direct mail, and digital print shops; Radius to the label and
packaging industry; Digital StoreFront to customers desiring e-commerce and web-to-print solutions, and
PrintStream to Pace and Monarch customers that provide fulfillment services to their end customers.

Our revenue by operating segment for the years ended December 31, 2011, 2010, and 2009 was as follows (in
thousands):

For the years ended December 31,

2011

2010

2009

% change

2011
over
2010

2010
over
2009

Fiery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inkjet
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
APPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$270,073
240,318
81,165

46% $238,621
207,654
40
57,732
14

47% $193,012
159,732
41
48,364
12

48% 13% 24%
40
12

30
19

16
41

Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . .

$591,556

100% $504,007

100% $401,108

100% 17% 26%

Proofing software revenue previously reported in the APPS operating segment of $8.6 million for the year ended
December 31, 2009 has been revised to conform to the presentation for the years ended December 31, 2011 and
2010, reflecting the reclassification of proofing software from the APPS to the Fiery operating segment. Total
revenue for the year ended December 31, 2009 has not changed.

Overview

Revenue was $591.6, $504.0, and $401.1 million for the years ended December 31, 2011, 2010, and 2009,
respectively, resulting in a 17% increase in 2011 compared with 2010 and a 26% increase in 2010 compared with
2009. The $87.6 million increase in 2011 compared with 2010 consisted of increased Fiery, Inkjet, and APPS
revenue of $31.5, $32.7, and $23.4 million, respectively. The $102.9 million increase in 2010 compared with
2009 consisted of increased Fiery, Inkjet, and APPS revenue of $45.6, $47.9, and $9.4 million, respectively.

Fiery Revenue

Fiery revenue increased by $31.5 million, or 13%, in 2011 compared with 2010, as the Fiery operating segment
continues to benefit from the conversion from analog to digital technology. The Fiery operating segment has
experienced strong demand in 2011 for current products from the leading printer manufacturers and increased
revenue from stand-alone and embedded servers and proofing software. Fiery revenue benefited to a lesser extent
from the Entrac acquisition, which closed during the third quarter of 2011.

Fiery revenue increased by $45.6 million, or 24%, in 2010 compared with 2009, primarily driven by strong
demand for our digital color controllers in the high-end production market. New and refreshed printer
manufacturer engine launches contributed to the revenue increase.

Inkjet Revenue

Inkjet revenue increased by $32.7 million, or 16%, in 2011 compared with 2010, across all of our Inkjet product
lines encompassing increased printer, digital UV ink, and service part sales. Following the successful
introduction of the GS series of super-wide format printers in 2009, we continued to extend the GS product
family in 2010 and 2011 with LED technology on our hybrid GS, as well as a GS roll-to-roll version. In addition,
we introduced new printing solutions including textile and entry-level production UV hybrid printers.

Coming out of the 2009 downturn, the transition from solvent-based printing to UV curable-based printing and
the transition from UV curing to UV/LED curing has continued to accelerate. The digital UV ink and service part
sales increase reflects the high utilization that our UV printers are experiencing in the field, which is partially
offset by a decreased solvent printer installed base demand, also measured by solvent ink usage and service parts.

Inkjet revenue increased by $47.9 million, or 30%, in 2010 compared with 2009, primarily due to GS series
printer sales and significantly increased UV printer and ink sales.

APPS Revenue

APPS revenue increased by $23.4 million, or 41%, in 2011 compared with 2010, primarily due to internally
generated revenue increases with respect to the Pace, Monarch, Radius, and web-to-print products. APPS
revenue benefited from our acquisition of Prism, which closed during the third quarter of 2011 and to a lesser
extent, our acquisitions of Streamline and Alphagraph, which closed during the first and fourth quarters of 2011,
respectively. APPS recurring revenue includes subscription revenue and maintenance fees.

APPS revenue increased by $9.4 million, or 19%, in 2010 compared with 2009, due to revenue realized from our
2010 acquisition of Radius, in addition to increased Pace and web-to-print revenue.

Our revenue by geographic area for the years ended December 31, 2011, 2010, and 2009 was as follows (in
thousands):

For the years ended December 31,

2011

2010

2009

% change

2011
over
2010

2010
over
2009

Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EMEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rest of world (“ROW”) . . . . . . . . . . . . . . . . . . . . . . .

$345,303
178,471
67,782
35,655
32,127

58% $293,747
149,488
30
60,772
12
41,853
6
18,919
6

58% $229,294
122,696
30
49,118
12
35,041
8
14,077
4

57% 18% 28%
30
13
9
4

19
12
(15)
70

22
24
19
34

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Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . .

$591,556

100% $504,007

100% $401,108

100% 17% 26%

2011 Compared with 2010

Our consolidated revenue increase of $87.6 million, or 17%, in 2011 compared with 2010, resulted from double
digit percentage growth in Americas, EMEA, and ROW resulting from increased revenue in all three operating
segments, partially offset by decreased revenue in Japan. The 2011 and 2010 Fiery and Inkjet product launches
mitigated the impact of the weak economic environment in 2011. The operating segment geographic breakdown
in 2011 remained comparable to 2010 with the exception of the decrease in Japan.

Americas revenue increased by $51.6 million, or 18%, in 2011 compared with 2010. Americas revenue increased
due to double digit percentage revenue increases in all three of our operating segments.

EMEA revenue increased by $29.0 million, or 19%, in 2011 compared with 2010, due to double digit percentage
revenue growth in all three of our operating segments.

•

Fiery revenue in EMEA increased due to strong demand for current products from the leading printer
manufacturers and increased revenue from stand-alone and embedded servers and proofing software.

Inkjet revenue growth in EMEA was primarily driven by increased sales of our super-wide format
printers, digital UV ink, and parts.

Our APPS EMEA customer base has increased significantly as a result of the Alphagraph and Prism
acquisitions and benefited from an expanded international sales force acquired with the Alphagraph,
Prism, and Radius acquisitions.

Japan revenue decreased by $6.2 million, or 15%, in 2011 compared with 2010, primarily due to decreased Fiery
and Inkjet revenue resulting from the poor economy in Japan and delayed sales and supply constraints resulting
from the March 2011 earthquake and tsunami.

ROW revenue increased by $13.2 million, or 70%, in 2011 compared with 2010, primarily due to increased
demand for Fiery and Inkjet products in China and the rest of Asia. We have expanded our international sales
force as a result of the Alphagraph, Prism, and Radius acquisitions.

In the individual regions, Fiery revenue represented 40%, 46%, 93%, and 51% of 2011 revenue in the Americas,
EMEA, Japan, and ROW, respectively, compared with 41%, 49%, 90%, and 40% of 2010 revenue.

Inkjet revenue represented 40%, 49%, 7%, and 41% of 2011 revenue in the Americas, EMEA, Japan, and ROW,
respectively, compared with 41%, 48%, 9%, and 57% of 2010 revenue.

APPS revenue represented 20%, 5%, 0%, and 8% of 2011 revenue in the Americas, EMEA, Japan, and ROW,
respectively, compared with 18%, 3%, 1%, and 3% of 2010 revenue.

2010 Compared with 2009

Our consolidated revenue increase of $102.9 million, or 26%, in 2010 compared with 2009, resulted from double
digit percentage growth in all three operating segments. The operating segment geographic breakdown in 2010
remained comparable to 2009. Comparing 2010 to 2009, Americas, EMEA, Japan, and ROW revenue increased
by 28%, 22%, 19%, and 34%, respectively.

Revenue rebounded in 2010 across all regions and all operating segments within each region. New Fiery and
Inkjet product launches mitigated the impact of the weak economic environment in 2010. Revenue had
previously declined in 2009 primarily due to weakness in Fiery sales caused by reduced demand from the leading
printer manufacturers due to the slow economy, weak Inkjet sales due to the tight global credit market, and the
decline in global marketing spending.

Shipments to some of our significant printer manufacturer customers are made to centralized purchasing and
manufacturing locations, which in turn ship to other locations, making it difficult to obtain accurate geographical
shipment data. Accordingly, we believe that export sales of our products into each region may differ from what is
reported. We expect that sales outside of the U.S. will continue to represent a significant portion of our total
revenue.

The percentage of business driven by our end customers through the leading printer manufacturers as, in effect,
distributors of our products has leveled off in recent years after decreasing for several years previously. In 2011,
2010, and 2009, 57% of our revenue was from other sources. During 2011, on a quarterly basis, revenue from
these leading printer manufacturers decreased from 49% in the first quarter to 38% by the fourth quarter with
revenue from other sources increasing from 51% in the first quarter to 62% by the fourth quarter. Over time, we
expect our revenue from the leading printer manufacturers to continue to decline. Because sales of our printer
and copier-related products constitute a significant portion of our revenue and there are a limited number of
printer manufacturers producing copiers and printers in sufficient volume to be attractive customers for us, we
expect that we will continue to depend on a relatively small number of printer manufacturers for a significant
portion of our Fiery controller revenue in future periods. Accordingly, if we lose or experience reduced sales to
one of these printer manufacturer /distributors, we will have difficulty replacing that revenue with sales to new or
existing customers and our Fiery revenue will likely decline significantly.

Our reliance on revenue from the leading printer manufacturers decreased throughout the year ended
December 31, 2011 because the Inkjet and APPS revenue increases were greater than the Fiery revenue increase
in both percentage and absolute dollars. Although end customer and reseller channel preference for Fiery
products drives demand, most Fiery revenue relies on the leading printer manufacturers to design, develop, and
integrate Fiery technology into their print engine as described above. No assurance can be given that our
relationships with these and other printer manufacturers will continue or that we will be successful in increasing
the number of printer manufacturing customers or the size of our existing relationships. Several of our printer
manufacturing customers have reduced their purchases from us at various times in the past and any of these
printer manufacturers or other customers could do so in the future as there are no contractual commitments to
purchase our products in significant amounts, or at all. Such reductions have occurred in the past and could in the
future have a significant negative impact on our consolidated financial position and results of operations. We
expect that if we continue to increase our revenue in the Inkjet and APPS operating segments, the percentage of
our revenue from printer manufacturing customers will decrease.

We intend to continue to develop new products and technologies for each of our product lines including new
generations of server and controller products, super-wide and wide format printers, and other new product lines,
and to distribute those new products to or through current and new printer manufacturers, distributors, and end
users in 2012 and beyond. No assurance can be given that the introduction or market acceptance of current or
future products will be successful.

If sales of our products do not grow over time in absolute terms, or if we are not able to meet demand for higher
unit volumes, it could have a material adverse effect on our operating results. There can be no assurance that
products that we introduce in the future will successfully compete, be accepted by the market, or otherwise
effectively replace the volume of revenue and/or income from our older products. Market acceptance of our
software products, products acquired through acquisitions, and other products cannot be assured. In addition, we
may experience potential loss of sales, unexpected costs, or adverse impact on relationships with customers or
suppliers as a result of acquisitions.

We also believe that in addition to the factors described above, price reductions for our products will affect
revenue in the future. We have previously reduced, and in the future will likely change, prices for our products.
Depending on the price elasticity of demand for our products, the pricing and quality of competitive products,
and other economic and competitive conditions, price changes have had, and may in the future have, an adverse
impact on our revenue and profits.

Gross Profit

Gross profit by operating segment, excluding stock-based compensation, for the years ended December 31, 2011,
2010, and 2009 was as follows (in thousands):

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$270,073
86,989

$240,318
147,580

$81,165
24,340

$ —
1,664

For the year ended December 31, 2011

Fiery

Inkjet

APPS

Stock-based
Compensation
Expense

Total

$591,556
260,573

Gross profit

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$183,084

$ 92,738

$56,825

$(1,664)

$330,983

Gross profit percentages . . . . . . . . . . . . . . . . . . . . . .

67.8%

38.6%

70.0%

56.0%

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Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$238,621
77,402

$207,654
139,533

$57,732
18,403

$ —
984

For the year ended December 31, 2010

Fiery

Inkjet

APPS

Stock-based
Compensation
Expense

Total

$504,007
236,322

Gross profit

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$161,219

$ 68,121

$39,329

$ (984)

$267,685

Gross profit percentages . . . . . . . . . . . . . . . . . . . . . .

67.6%

32.8%

68.1%

53.1%

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$193,012
63,772

$159,732
108,984

$48,364
15,795

$ —
1,074

For the year ended December 31, 2009

Fiery

Inkjet

APPS

Stock-based
Compensation
Expense

Total

$401,108
189,625

Gross profit

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$129,240

$ 50,748

$32,569

$(1,074)

$211,483

Gross profit percentages . . . . . . . . . . . . . . . . . . . . . .

67.0%

31.8%

67.3%

52.7%

Proofing software gross profit previously reported in the APPS operating segment of $7.7 million for the year
ended December 31, 2009 has been revised to conform to the presentation for the years ended December 31,
2010, reflecting the reclassification of proofing software from the APPS to the Fiery operating segment. Total
gross profit for the year ended December 31, 2009 has not changed.

Overview

Our gross profit percentages were 56.0%, 53.1%, and 52.7% for the years ended 2011, 2010, and 2009,
respectively. Our gross profit percentage improved by 2.9 percentage points in 2011, as compared with 2010,
primarily due to a 5.8 percentage point increase in the Inkjet gross profit percentage, a 1.9 percentage point
increase in the APPS gross profit percentage, and increased Fiery revenue. All three operating segments
contributed to the small increase in the gross profit percentage in 2010, as compared with 2009.

Fiery Gross Profit

The Fiery gross profit percentage of 67.8% in 2011 was comparable to 67.6% in 2010. The increase in Fiery
revenue dollars aided the consolidated gross profit percentage due to the fixed component included within the
Fiery cost of revenue.

The Fiery gross profit percentage increased from 67.0% in 2009 to 67.6% in 2010 primarily due to a mix shift
toward stand-alone servers, which have higher margins than embedded servers, partially offset by the costs to
launch new products.

Inkjet Gross Profit

The Inkjet gross profit percentage increased from 32.8% in 2010 to 38.6% in 2011. The improvement in the
Inkjet gross profit percentage compared with the prior year is primarily due to fixed manufacturing costs being
spread over higher Inkjet revenue and reduced warranty exposure, which resulted from improved product
performance, partially offset by engineering design modifications to improve quality. The Inkjet gross profit
percentage also increased due to the $2.3 million write-off of excess solvent inventories and related end-of-life
purchases during 2010, as a result of the accelerating transition from solvent to UV technology.

The Inkjet gross profit percentage increased from 31.8% in 2009 to 32.8% in 2010. Improving Inkjet gross profit
was primarily due to fixed manufacturing costs spread over higher Inkjet revenue, higher selling prices for new
products launched in 2010, and favorable product mix shift toward higher margin printers, partially offset by
engineering design modifications to improve quality and reduce warranty exposure and the $2.3 million
provision for excess solvent inventories and related end-of-life purchases resulting from the accelerating
transition from solvent to UV technology.

APPS Gross Profit

The increase in the APPS gross profit percentage from 68.1% in 2010 to 70.0% in 2011 was primarily due to
efficiencies gained through increased revenue. APPS revenue increased from 12% of total revenue in 2010 to
14% of total revenue in 2011.

The increase in the APPS gross profit percentage from 67.3% in 2009 to 68.1% in 2010 was also primarily due to
efficiencies gained through increased revenue. APPS revenue was 12% of total revenue in 2010, which was
comparable to 2009, but the increase in revenue dollars aided the gross profit percentage due to the fixed
component included within the APPS cost of revenue.

If our product mix changes significantly, our gross profit will fluctuate. In addition, gross profit can be impacted
by a variety of other factors. These factors include market prices achieved on our current and future products,
availability and pricing of key components (including memory subsystems, processors, and print heads),
subcontractor manufacturing costs, product mix, distribution channel, geographic mix, product transition results,
new product introductions, competition, business acquisitions, and general economic conditions in the U.S. and
abroad. Consequently, gross profit may fluctuate from period to period. In addition, if we reduce prices, gross
profit could be lower.

Many of our products and sub-assemblies are manufactured by subcontract manufacturers that purchase most of
the necessary components. If our subcontract manufacturers cannot obtain necessary components at favorable
prices, we could experience increased product costs. We purchase certain components directly, including
processors, memory subsystems, certain ASICs, and software licensed from various sources, including Adobe
PostScript® software.

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Operating Expenses

Operating expenses for the years ended December 31, 2011, 2010, and 2009 were as follows (in thousands):

For the years ended December 31,

2011

2010

2009

% change

2011
over
2010

2010
over
2009

Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of identified intangibles . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring and other
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset impairment

$115,901
119,487
53,756
11,248
3,258
—

$105,769
107,322
38,185
12,385
3,615
685

$110,822
102,001
35,033
18,479
8,957
3,208

10% (5)%
11
41
(9)
(10)
(100)

5
9
(33)
(60)
(79)

Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$303,650

$267,961

$278,500

13% (4)%

Operating expenses increased by $35.7 million, or 13%, in 2011 as compared with 2010, and decreased by $10.5
million, or 4%, in 2010 as compared with 2009.

Operating expenses increased by $35.7 million between 2010 and 2011, but decreased as a percentage of revenue
from 53% in 2010 to 52% in 2011 due to the 17% increase in revenue during the corresponding periods. The
increase in operating expenses was primarily driven by head count increases related to the Alphagraph, Prism,
Entrac, and Streamline acquisitions, reinstatement of salaries and benefits reduced during the economic
downturn, variable compensation due to improved profitability, commission payments resulting from increased
revenue, non-recurring engineering expenses related to our product launches, change in fair value of contingent
consideration related to our Radius acquisition, and increased stock-based compensation expense.

Operating expenses decreased by $10.5 million between 2009 and 2010 and decreased as a percentage of revenue
from 70% in 2009 to 53% in 2010 primarily due to decreased amortization of identified intangibles, restructuring
and other, and asset impairment. Decreased intangible amortization resulted from full amortization of VUTEk
existing technology in 2009, partially offset by increased intangible amortization in 2010 due to the Radius
acquisition. Restructuring and other and asset impairment decreased in 2010 as compared with 2009 primarily
due to higher personnel-related restructuring charges in 2009 and the write-off of equipment and non-cancellable
purchase orders relating to a planned product that was cancelled in 2009.

Research and Development

Research and development expenses consist primarily of costs associated with personnel, consulting, travel,
research and development facilities, and prototype materials. Research and development expenses for the years
ended December 31, 2011, 2010, and 2009 were $115.9 million, or 20% of revenue, $105.8 million, or 21% of
revenue, and $110.8 million, or 28% of revenue, respectively.

Research and development expenses increased by $10.1 million, or 10%, in 2011 as compared with 2010.
Personnel-related expenses increased by $7.3 million primarily due to head count increases related to the
Alphagraph, Prism, Entrac, and Streamline acquisitions, reinstatement of salaries and benefits reduced during the
economic downturn, and increased variable compensation due to improved profitability. Prototypes and
non-recurring engineering, consulting, contractor, and travel expenses increased by $4.8 million related to
upcoming product launches, support of existing products, and trade show support. Stock-based compensation
expense increased by $1.6 million related to new equity awards granted and a true-up of estimated forfeitures.
Facility and information technology expenses decreased by $3.6 million primarily due to closure or downsizing
of certain research and development locations during the last twelve months.

Research and development expenses decreased by $5.0 million, or 5%, in 2010 as compared with 2009.
Personnel-related expenses decreased by $1.2 million primarily due to salary reductions in place for most of
2010, partially offset by increased Radius head count and increased variable compensation due to improved
profitability and decreased utilization of vacation balances. Prototypes and non-recurring engineering expenses
decreased by $1.0 million. Stock-based compensation expense decreased by $2.5 million due to the timing of
equity awards issued during the last twelve months amortized under the graded vesting method. The remaining
$0.4 million reduction in research and development expenses relates to facility downsizing achieved during the
last year in the APPS operating segment and in Japan.

Research and development head count was 944, 834, and 820 as of December 31, 2011, 2010, and 2009,
respectively.

We expect that if the U.S. dollar remains volatile against the Indian rupee, Euro, or British pound sterling,
research and development expenses reported in U.S. dollars could fluctuate, although we hedge our operating
expense exposure to the Indian rupee, which partially mitigates this risk.

Sales and Marketing

Sales and marketing expenses include personnel expenses, costs of trade shows, marketing programs and
promotional materials, sales commissions, travel and entertainment expenses, and costs associated with sales

offices in the United States, Europe, and ROW. Sales and marketing expenses for the years ended December 31,
2011, 2010, and 2009 were $119.5 million, or 20% of revenue, $107.3 million, or 21% of revenue, and $102.0
million, or 25% of revenue, respectively.

Sales and marketing expenses increased by $12.2 million, or 11%, in 2011 as compared with 2010. Personnel-
related expenses increased by $9.4 million primarily due to head count increases related to the Alphagraph,
Prism, and Streamline acquisitions, reinstatement of salaries and benefits reduced during the economic downturn,
increased commission payments resulting from increased revenue, and increased variable compensation due to
improved profitability. We have increased trade show and marketing program spending, and related travel and
freight, by $2.2 million. Stock-based compensation expense increased by $0.4 million due to new equity awards
granted and a true-up of estimated forfeitures.

Sales and marketing expenses increased by $5.3 million, or 5%, in 2010 as compared with 2009. Personnel-
related expenses increased by $4.9 million primarily due to increased head count resulting from the Radius
acquisition, variable compensation due to improved profitability, commission payments resulting from increased
revenue, and decreased utilization of vacation balances. We increased trade show and marketing program
spending, and related travel and freight, by $5.2 million as the printing industry began to recover. Stock-based
compensation expense decreased by $0.5 million due to the timing of equity awards issued during the last twelve
months amortized under the graded vesting method. The remaining $4.3 million reduction in sales and marketing
expenses relates to facility downsizing achieved during the last year and a focused effort on cost reduction in all
areas.

Sales and marketing head count was 583, 527, and 507 as of December 31, 2011, 2010, and 2009, respectively,
including 188, 168, and 167 in customer service for each of the years presented.

Over time, our sales and marketing expenses may increase in absolute terms if revenue increases in future
periods as we continue to actively promote our products and introduce new products and services. We expect that
if the U.S. dollar remains volatile against the Euro, British pound sterling, and other currencies, sales and
marketing expenses reported in U.S. dollars could fluctuate.

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General and Administrative

General and administrative expenses consist primarily of costs associated with human resources, legal, and
finance expenses. General and administrative expenses for the years ended December 31, 2011, 2010, and 2009
were $53.8 million, or 9% of revenue, $38.2 million, or 8% of revenue, and $35.0 million, or 9% of revenue,
respectively.

General and administrative expenses increased $15.6 million, or 41%, in 2011 as compared with 2010.
Personnel-related expenses increased by $5.0 million primarily driven by head count increases related to the
Alphagraph, Prism, Entrac, and Streamline acquisitions, reinstatement of salaries and benefits reduced during the
economic downturn, and increased variable compensation due to improved profitability. Acquisition-related
costs increased by $1.2 million as four acquisitions were closed in 2011, compared with one acquisition that
closed in 2010. Stock-based compensation expense increased by $4.7 million due to new equity awards granted
and a true-up of estimated forfeitures.

Updated probability-adjusted revenue estimates indicate that the 2011 Radius earnout performance targets were
achieved. Consequently, the fair value of the Radius earnout increased by $1.5 million as of December 31, 2011.
In accordance with ASC 805-30-35-1, changes in the fair value of contingent consideration subsequent to the
acquisition date have been recognized in general and administrative expense.

General and administrative expenses increased $3.2 million, or 9%, in 2010 as compared with 2009. Personnel-
related expenses increased by $0.7 million primarily due to variable compensation due to improved profitability,
decreased utilization of vacation balances, increased recruiting, and increased travel, partially offset by reduced

salaries and head count through most of the year. Legal expenses decreased by $1.0 million as significant cases
were settled in the prior year and more efficient spending. Stock-based compensation expense increased by $0.5
million due to the timing of equity awards issued during the last twelve months amortized under the graded
vesting method. Acquisition-related costs of $1.2 million were expensed in 2010 in connection with our
acquisition of Radius. The remaining $1.4 million reduction in general and administrative expenses is due to
focused effort on cost reduction in all areas.

Updated probability-adjusted revenue estimates indicate that the 2010 Radius earnout performance targets were
achieved. Consequently, the fair value of the Radius earnout increased by $0.4 million as of December 31, 2010.
In accordance with ASC 805-30-35-1, changes in the fair value of contingent consideration subsequent to the
acquisition date have been recognized in general and administrative expense.

We expect that if the U.S. dollar remains volatile against the Euro, British pound sterling, Indian rupee or other
currencies, general and administrative expenses reported in U.S. dollars could fluctuate.

Stock-based Compensation

We account for stock-based payment awards in accordance with ASC 718, Stock Compensation, which requires
stock-based compensation expense to be recognized based on the fair value of such awards on the date of grant.
We amortize stock-based compensation cost on a graded vesting basis over the vesting period, after assessing the
probability of achieving requisite performance criteria with respect to performance-based awards. Stock-based
compensation cost is recognized over the requisite service period for each separately vesting tranche of the award
as though the award were, in substance, multiple awards. This has the impact of greater stock-based
compensation expense during the initial years of the vesting period.

Stock-based compensation expense for the years ended December 31, 2011, 2010, and 2009 were $23.4 million,
or 4% of revenue, $15.9 million, or 3% of revenue, and $18.6 million, or 5% of revenue, respectively.

Stock-based compensation expense increased $7.5 million, or 47%, in 2011 as compared with 2010 due to new
equity awards granted with relatively higher fair value driven by the increase in the trading price of our stock and
a true-up of estimated forfeitures. Stock-based compensation expense decreased $2.7 million, or 15%, in 2010 as
compared with 2009 due to fewer equity awards granted in 2010 with a relatively lower fair value driven by the
decrease in the trading price of our stock. As explained in more detail above, amortization of stock-based
compensation expense under the graded vesting method results in more significant expense in the initial years of
vesting.

Amortization of Identified Intangibles

Amortization of identified intangibles for the years ended December 31, 2011, 2010, and 2009 was $11.2 million,
or 2% of revenue, $12.4 million, or 2% of revenue, and $18.5 million, or 5% of revenue, respectively.

The $1.2 million decrease in 2011, as compared with 2010, is due to intangible assets that became fully
amortized during 2011 consisting primarily of VUTEk customer relationships, partially offset by the
amortization of intangible assets resulting from the Alphagraph, Prism, Entrac, and Streamline acquisitions and a
full year of Radius intangible asset amortization.

The $6.1 million decrease in 2010, as compared with 2009, is primarily due to VUTEk existing technology
becoming fully amortized in 2010, partially offset by amortization of identified intangibles resulting from the
Radius acquisition, which closed during the third quarter of 2010, and a full year of shortened useful lives of
certain trademarks primarily within the Inkjet operating segment.

Restructuring and Other

During the years ended December 31, 2011, 2010, and 2009, cost reduction actions were taken to lower our
quarterly operating expense run rate as we analyzed our cost structure. We announced restructuring plans to
better align our costs with revenue levels and the current economic environment and to re-align our cost structure
following our business acquisitions in 2011 and 2010. Restructuring and other consists primarily of restructuring,
severance, facility downsizing, and acquisition integration expenses.

Restructuring and other costs for the years ended December 31, 2011, 2010, and 2009 were $3.3, $3.6, and $9.0
million, respectively. Restructuring and other charges include severance costs of $1.7, $2.4, and $8.1 million
related to head count reductions of 55, 98, and 227 for the years ended December 31, 2011, 2010, and 2009,
respectively. Severance costs include severance payments, related employee benefits, retention bonuses,
outplacement, and relocation costs.

Facilities reduction and other costs for the years ended December 31, 2011, 2010, and 2009 were $0.6, $0.9, and
$0.9 million, respectively. Facilities reduction and other costs includes charges resulting from a decrease in
estimated sublease income necessitated by continuing weakness in the commercial real estate market where these
facilities are located of $0.2 and $0.6 million for the years ended December 31, 2011 and 2010, respectively,
facilities relocations in 2011, and costs to downsize or relocate six facilities in 2010.

Integration expenses for the years ended December 31, 2011 and 2010 of $1.0 and $0.3 million, respectively,
were required to integrate the four acquisitions in 2011 and the Radius acquisition in 2010.

Other Income (Expense), Net

Interest and Other Income (Expense), Net

Interest and other income (expense), net, includes interest income, net, gains and losses from sales of our cash
and short-term investments, gains from sales of minority investments in privately-held companies, and net
foreign currency transaction gains and losses on our operating activities. Interest and other income (expense), net,
for the years ended December 31, 2011, 2010, and 2009 was $3.1, $(1.4), and $3.1 million, respectively.

Interest and other income (expense), net, increased by $4.4 million in 2011 primarily driven by the sale of a
minority investment in a privately-held company for $2.9 million because the investment was no longer
considered to be strategic and $2.2 million decrease in unfavorable realized and unrealized foreign exchange
fluctuations primarily resulting from our Euro and British pound sterling-denominated assets and liabilities
including intercompany loans, partially offset by $0.4 million of investment gains realized in 2010.

The $4.5 million decrease in 2010, as compared with 2009, is primarily due to $3.4 million of realized and
unrealized foreign exchanges losses in 2010, as compared with $0.2 million in realized and unrealized foreign
exchanges gains in 2009, and $2.1 million reduction in interest income in 2010, partially offset by $0.4 million
gain on sale of investments in 2010, as compared with $0.8 million in losses on sale of investments in 2009.

Interest income for the years ended December 31, 2011, 2010, and 2009 was $1.5, $1.7, and $3.8 million,
respectively. The decrease of $2.1 million from 2009 to 2010 was driven by lower investment balances and
interest rates as we sold a substantial portion of our investment portfolio during 2009 to generate cash for the
repurchase of our common stock under the $30 million accelerated stock repurchase (“ASR”) during the first
quarter of 2009 and the $70 million “modified Dutch auction” tender offer during the fourth quarter of 2009.

We had net realized gains (losses) on our marketable securities of $0.4 and $(0.8) million for the years ended
December 31, 2010 and 2009, respectively, consisting of gains on our investments in marketable debt securities
of $0.4 and $0.6 million for the years ended December 31, 2010 and 2009, respectively, offset by losses on our
equity method investments of $1.4 for the year ended December 31, 2009.

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Gain on Sale of Building and Land

During the first quarter of 2009, we sold a portion of the Foster City, California campus for $137.3 million.
Under the agreement, we sold the approximately 163,000 square foot building at 301 Velocity Way, as well as
approximately 30 acres of related land and certain other assets related to the property. The cost of the land,
building, improvements, and direct transaction costs were included in the determination of the $80 million gain
on sale of building and land.

Goodwill Impairment

We perform our annual goodwill impairment analysis in the fourth quarter of each year according to the
provisions of ASC 350-20-35. A two-step impairment test of goodwill is required. In the first step, the fair value
of each reporting unit is compared to its carrying value. If the fair value exceeds carrying value, goodwill is not
impaired and further testing is not required. If the carrying value exceeds fair value, then the second step of the
impairment test is required to determine the implied fair value of the reporting unit’s goodwill. The implied fair
value of goodwill is calculated by deducting the fair value of all tangible and intangible net assets of the
reporting unit, excluding goodwill, from the fair value of the reporting unit as determined in the first step. If the
carrying value of the reporting unit’s goodwill exceeds its implied fair value, then an impairment loss must be
recorded equal to the difference.

To identify suitable comparable companies under the market approach, consideration was given to the financial
condition and operating performance of the reporting unit being evaluated relative to companies operating in the
same or similar businesses, potentially subject to corresponding economic, environmental, and political factors
and considered to be reasonable investment alternatives. Consideration was given to the investment
characteristics of the subject company relative to those of similar publicly traded companies (i.e., guideline
companies), which are actively traded. In applying the Public Company Market Multiple Method (“PCMMM”),
valuation multiples were derived from historical and projected operating data of guideline companies and applied
to the appropriate operating data of our reporting units to arrive at an indication of fair value. Five, four, and
seven suitable guideline companies were identified for the Fiery, Inkjet, and APPS reporting units, respectively.

While the fair value of the Fiery, Inkjet and APPS reporting units exceeded their carrying value as of
December 31, 2011 as indicated by the market-based valuation, management determined to further examine
whether an impairment had occurred given the Inkjet impairment recognized in the fourth quarter of 2008 and
the susceptibility of the APPS reporting unit to fair value fluctuations. We reviewed the factors that could trigger
an impairment charge and completed an income-based impairment analysis for all three reporting units. As part
of this process, we engaged a third party valuation firm to assist management in its analysis. All estimates, key
assumptions, and forecasts were either provided by or reviewed by us. While we chose to utilize a third party
valuation firm, the impairment analysis and related valuations represent the conclusions of management and not
the conclusions or statements of any third party.

Solely for purposes of establishing inputs for the income approach to assess the fair value of the Fiery, Inkjet,
and APPS reporting units, we made the following assumptions:

•

Fiery and Inkjet revenue approximated historical normalized growth rates in 2011. During 2011, APPS
revenue growth of 41% exceeded historical normalized growth rates due to several acquisitions
completed in 2011 and 2010.

Despite the ongoing economic uncertainty, our reporting units’ revenue will grow at historical
normalized rates between 2012 and 2016 for the following primary reasons:

•

The ongoing transition from analog to digital technology will enable our Fiery revenue to grow at
historical normalized rates in spite of the economic climate. This transition is expected to continue
through the forecast horizon. Fiery is also well-positioned to achieve historical normalized growth
rates due to our software solutions, including our self-service and payment solution (Entrac).

As the leading world-wide manufacturer of digital UV ink, our Inkjet revenue is positioned to
outpace the slow economy and achieve historical normalized growth rates due to the ongoing
transition from solvent-based to UV curable-based printing and from UV curing to UV/LED
curing. This transition is expected to continue through the forecast horizon.

Our acquisition strategy in the APPS reporting unit will enable us to achieve historical normalized
revenue growth rates through the forecast horizon. Our intention is to continue to explore
additional acquisition opportunities in the APPS operating segment to further consolidate the
business process automation and cloud-based order entry and order management software
industries in both the Americas and world-wide.

Long-term industry growth after 2016 with the exception of Fiery, which is conservatively assumed at
long-term growth rates by 2013.

Gross profit percentages will approximate historical average levels in the Fiery and APPS reporting
units. Inkjet gross profit will remain at the 40 percent level, which is the approximate level achieved in
2011 as we have resolved significant warranty issues and exposures.

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Our discounted cash flow projections were based on five-year financial forecasts, which were based on annual
financial forecasts developed internally by management for use in managing our business and through
discussions with the valuation firm engaged by us. The significant assumptions utilized in these five-year
financial forecasts included consolidated annual revenue growth rates ranging from 8% to 10%, which equates to
a consolidated compound annual growth rate of 8%. These are our historical normalized growth rates. Future
cash flows were discounted to present value using a mid-year convention and a consolidated discount rate of
19%. Terminal values were calculated using the Gordon growth methodology with a consolidated long-term
growth rate of 3.5%. The sum of the fair values of the Fiery, Inkjet, and APPS reporting units was reconciled to
our current market capitalization (based on our stock price) plus an estimated control premium.

Significant assumptions used in determining fair values of the reporting units under the market-based and
income-based analyses include the determination of appropriate market comparables, estimated multiples of
revenue and earnings before interest expense and taxes (“EBIT”) that a willing buyer is likely to pay, estimated
control premium a willing buyer is likely to pay, gross profit, and operating expenses. Gross profit and operating
expenses as a percentage of revenue over the five-year forecast horizon were compared to approximate
percentages realized by the guideline companies. To assess the reasonableness of the estimated control premium
of 33%, we examined the most similar transactions in relevant industries and determined the average premium
indicated by the transactions deemed to be most similar to a hypothetical transaction involving our reporting
units. We examined the weighted average and median control premiums offered in relevant industries, industry
specific control premiums, and specific transaction control premiums to conclude that our estimated control
premium is reasonable.

We assess the impairment of identifiable intangibles and long-lived assets whenever events or changes in
circumstances indicate the carrying value may not be recoverable or the life of the asset may need to be revised.
Factors considered important that could trigger an impairment review include:

•

significant negative industry or economic trends,

significant decline in our stock price for a sustained period,

our market capitalization relative to net book value,

significant changes in the manner of our use of the acquired assets,

significant changes in the strategy for our overall business, and

our assessment of growth and profitability in each reporting unit over the coming years.

Given the uncertainty of the economic environment and the potential impact on our business, there can be no
assurance that our estimates and assumptions regarding the duration of the ongoing economic downturn, or the
period or strength of recovery, made for purposes of our goodwill impairment testing at December 31, 2011 will
prove to be accurate predictions of the future. If our assumptions regarding forecasted revenue or gross profit
rates are not achieved, we may be required to record additional goodwill impairment charges in future periods
relating to any of our reporting units, whether in connection with the next annual impairment testing in the fourth
quarter of 2012 or prior to that, if any such change constitutes an interim triggering event. It is not possible to
determine if any such future impairment charge would result or, if it does, whether such charge would be
material.

Since fair values were determined using a weighting of the market and income approaches, we reviewed the
sensitivity of the market multiple and discount rate to evaluate the sensitivity of the Fiery, Inkjet, and APPS
valuations. The impact of a change in the market multiple of 1% results in either an increase in Fiery, Inkjet, and
APPS fair values of 0.4%, 0.5%, or 0.4%, respectively, or a decrease of 0.5%, 0.5%, or 0.4%, respectively.
Likewise, the impact of a change in the discount rate of one percentage point results in either an increase in the
Fiery, Inkjet, and APPS fair values of 2.8%, 7.8%, or 3.6%, respectively, or a decrease of 2.4%, 6.4%, or 3.2%,
respectively. Consequently, we have concluded that no reasonably possible changes would reduce the fair value
of the reporting units to such a level that it would cause a failure in step one of the impairment analysis.

Long-Lived Asset Impairment

We evaluate potential impairment with respect to long-lived assets whenever events or changes in circumstances
indicate their carrying amount may not be recoverable. We recognized long-lived asset impairment charges of
$0.7 and $3.2 million for the years ended December 31, 2010 and 2009, respectively, consisting primarily of
project abandonment costs related to equipment charges in the Inkjet operating segment, assets impaired related
to an Inkjet facility closure, and the impairment of our remaining equity method investees. No asset impairment
charges were recognized during the year ended December 31, 2011.

Other investments, included within other assets, consist of equity and debt investments in privately-held
companies that develop products, markets, and services that are strategic to us. In-substance common stock
investments in which we exercise significant influence over operating and financial policies, but do not have a
majority voting interest, are accounted for using the equity method of accounting. Investments not meeting these
requirements are accounted for using the cost method of accounting.

We previously assessed each investment’s technology pipeline and market conditions in the industry and
determined it is no longer probable that they will generate sufficient positive future cash flows to recover the full
carrying amount of the investment. As such, we recognized an impairment charge of $6.1 million. During the
second quarter of 2010, we further assessed each remaining investment’s ability to sustain an earnings capacity
that would justify the carrying amount of the investment in accordance with ASC 323-10-35-32, Investments –
Equity Method and Joint Ventures – Subsequent Measurement. Based on this assessment, we impaired the
remaining carrying value of these investments of $0.3 million.

Income (Loss) before Income Taxes

Income (loss) before income taxes for the years ended December 31, 2011, 2010, and 2009 were as follows (in
thousands):

U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 3,143
27,277

$(18,818)
17,188

$24,470
(8,435)

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$30,420

$ (1,630)

$16,035

For the years ended December 31,
2009
2010
2011

For the year ended December 31, 2011, pre-tax income of $30.4 million consisted of U.S. and foreign pre-tax
income of $3.1 and $27.3 million, respectively. Pre-tax income attributable to U.S. operations is net of
amortization of identified intangibles of $8.8 million, stock-based compensation expense of $23.4 million,
restructuring and other costs of $2.6 million, and acquisition-related transaction costs of $1.0 million, partially
offset by $2.9 million gain on sale of minority investment in a privately held company. Pre-tax income
attributable to foreign operations is net of restructuring and other costs of $0.7 million, acquisition-related
transaction costs of $1.3 million, amortization of identified intangibles of $2.4 million, and change in fair value
of contingent consideration related to the Radius acquisition of $1.5 million.

For the year ended December 31, 2010, pre-tax loss of $1.6 million included $18.8 million of U.S. pre-tax loss
and $17.2 million of foreign pre-tax income. The pre-tax loss attributable to U.S. operations included
amortization of identified intangibles of $11.5 million, stock-based compensation expense of $15.9 million,
restructuring and other costs of $2.3 million, excess solvent inventory and related end-of-life purchases of $0.9
million, and asset impairment of $0.3 million. The pre-tax income attributable to foreign operations is net of
restructuring and other costs of $1.3 million, Radius acquisition-related transaction costs of $1.2 million,
amortization of identified intangibles of $0.9 million, excess solvent inventory and related end-of-life purchases
of $1.4 million, and asset impairment of $0.4 million.

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For the year ended December 31, 2009, pre-tax income of $16.0 million included $24.5 million of U.S. pre-tax
income and $8.5 million of foreign pre-tax loss. The pre-tax income attributable to U.S. operations included the
$80.0 million gain on sale of building and land, offset by the amortization of identified intangibles of $18.1
million, stock-based compensation expense of $18.6 million, restructuring and other costs of $8.6 million, and
asset impairment of $3.2 million. The pre-tax loss attributable to foreign operations included restructuring and
other costs of $2.2 million and amortization of identified intangibles of $0.4 million.

Provision for (Benefit from) Income Taxes

We recorded a tax provision of $3.0 million in 2011 on pre-tax income of $30.4 million, compared to a tax
benefit of $9.1 million in 2010 on a pre-tax loss of $1.6 million, and a tax provision of $18.2 million in 2009 on
pre-tax income of $16.0 million.

The following table reconciles our provision for (benefit from) income taxes before discrete items to our
provision for (benefit from) income taxes for the years ended December 31, 2011, 2010, and 2009 (in millions):

Provision for (benefit from) income taxes before discrete items . . . .
Provision related to tax shortfalls recorded pursuant to ASC

For the years ended
December 31,

2011

2010

2009

$ 6.7

$(0.2)

$(13.0)

718-740, Stock Compensation — Income Taxes . . . . . . . . . . . .

—

4.1

5.8

Provision related to gain on sale of minority investment in a

privately held company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision related to gain on sale of building and land . . . . . . . . . .
Provision related to the election of California Single Sales Factor . . .
Interest related to unrecognized tax benefits . . . . . . . . . . . . . . . . .
Benefit related to restructuring and other expense . . . . . . . . . . . . .
Benefit related to acquisition expenses . . . . . . . . . . . . . . . . . . . . .
Benefit related to asset impairment charges . . . . . . . . . . . . . . . . . .
Benefit related to excess solvent inventories and related

—
—
—
0.4
(1.1)

1.1
—
0.6
0.4
(0.6)
(0.4) —
—

(0.3)

—
32.0
—
0.7
(3.5)
—
(1.3)

end-of-life purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

(0.4)

—

Tax deductions related to Employee Stock Purchase Plan

(“ESPP”) dispositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(0.6)

(0.7)

(0.5)

Benefit related to reassessment of taxes related to filing of prior

year tax returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1.6)

(2.4)

—

Benefit related to reversals of uncertain tax positions due to

statute of limitation expirations . . . . . . . . . . . . . . . . . . . . . . . . .

(1.8)

(7.5)

(0.3)

Benefit related to reversals of accrued interest related to

uncertain tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefit related to net adjustments due to foreign audit settlements . .

(1.0)

(0.2)
(0.6) —

(0.6)
(1.1)

Provision for (benefit from) income taxes . . . . . . . . . . . . . . . . . . .

$ 3.0

$(9.1)

$ 18.2

In addition to the discrete benefits and charges listed above, we benefited from research and development credits
in each of these years. Our taxes also decreased due to lower taxes on foreign income in 2011 and 2010. Our
taxes increased due to non-deductible stock compensation charges in each of these years and decreased
profitability in low tax jurisdictions in 2009.

We earn a significant amount of our operating income outside the U.S., which is deemed to be permanently
reinvested in foreign jurisdictions. Most of this income is earned in the Netherlands and the Cayman Islands,
which are jurisdictions with tax rates materially lower than the statutory U.S. tax rate of 35%. No change in our
business operations is under consideration that would materially impact our results from operations. Our
effective tax rate could fluctuate significantly and be adversely impacted if anticipated earnings in the
Netherlands and the Cayman Islands are proportionally lower than current projections and earnings in all other
jurisdictions are proportionally higher than current projections.

While we currently do not foresee a need to repatriate the earnings of these operations, should we require more
capital in the U.S. than is generated by our U.S. operations, we may elect to repatriate funds held in our foreign
jurisdictions or raise capital in the U.S. through debt or equity issuances. These alternatives could result in higher
effective tax rates, the cash payment of taxes, and/or increased interest expense.

Significant judgment is required in determining any valuation allowance recorded against deferred tax assets. In
assessing the need for a valuation allowance, we consider all available evidence, including recent operating
results, projections of future taxable income, our ability to utilize loss and credit carryforwards, and the
feasibility of tax planning strategies. A significant piece of objective positive evidence evaluated was cumulative
pre-tax income over a three year period ended December 31, 2011. In addition, we considered that loss and credit
carryforwards have not expired unused and a majority of our loss and credit carryforwards will not expire prior to
2016. Finally, we considered that our results from operations have improved each year since 2008.

As a result of this evaluation, we have determined that it is more likely than not that we will realize the benefit
related to our deferred tax assets except for a valuation allowance on foreign tax credits resulting from the 2003
acquisition of Best GmbH, compensation deductions potentially limited by U.S. Internal Revenue Code (“IRC”)
162(m), and net operating loss carryforwards resulting from the 2010 Radius acquisition. The amount of deferred
tax assets considered realizable could be negatively impacted if sufficient taxable income in the carryforward
period is not generated.

Unaudited Non-GAAP Financial Information

Use of Non-GAAP Financial Information

To supplement our consolidated financial results prepared in accordance with generally accepted accounting
principles (“GAAP”), we use non-GAAP measures of net income (loss) and earnings per diluted share that are
GAAP net income (loss) and GAAP earnings per diluted share adjusted to exclude certain recurring and
non-recurring costs, expenses, and gains.

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We believe that the presentation of non-GAAP net income (loss) and non-GAAP earnings per diluted share
provides important supplemental information regarding non-cash expenses and significant recurring and
non-recurring items that we believe are important to understanding financial and business trends relating to our
financial condition and results of operations. Non-GAAP net income (loss) and non-GAAP earnings per diluted
share are among the primary indicators used by management as a basis for planning and forecasting future
periods and by management and our Board of Directors to determine whether our operating performance has met
specified targets and thresholds. Management uses non-GAAP net income (loss) and non-GAAP earnings per
diluted share when evaluating operating performance because it believes the exclusion of the items described
below, for which the amounts and/or timing may vary significantly depending on the Company’s activities and
other factors, facilitates comparability of the Company’s operating performance from period to period. We have
chosen to provide this information to investors so they can analyze our operating results in the same way that
management does and use this information in their assessment of our business and the valuation of our Company.

Use and Economic Substance of Non-GAAP Financial Measures

We compute non-GAAP net income (loss) and non-GAAP earnings per diluted share by adjusting GAAP net
income (loss) and GAAP earnings per diluted share to remove the impact of recurring amortization of
acquisition-related intangibles and stock-based compensation expense, as well as restructuring related and
non-recurring charges and gains and the tax effect of these adjustments. Such non-recurring charges and gains
include end-of-life solvent inventory purchases and related obsolescence, asset impairment, sale of a
non-strategic minority investment in a privately held company, acquisition-related transaction costs, and costs to
integrate such acquisitions into our business.

These excluded items are described below:

•

Recurring charges and gains, including:

•

Amortization of acquisition-related intangibles. Intangible assets acquired to date are being
amortized on a straight-line basis.

Stock-based compensation expense recognized in accordance with ASC 718.

•

Non-recurring charges and gains, including:

•

Provision for excess solvent inventories and related end-of-life purchases resulting from the
accelerating transition from solvent-based printing to UV curable-based printing.

Restructuring and other consists of:

•

Restructuring related charges. We have incurred restructuring charges as we reduced the
number and size of our facilities and the size of our workforce.

Expenses incurred to integrate businesses acquired during the periods reported.

Acquisition-related transaction costs associated with businesses acquired during the periods
reported and Cretaprint, which was acquired subsequent to year end.

Asset impairment costs consist primarily of equipment and non-cancellable purchase orders
relating to a planned Inkjet product that was cancelled, a facility closure, and the impairment of a
private minority investment.

• We have excluded approximately $1.5 million from our non-GAAP operating results related to the
change in the fair value of the Radius acquisition contingent consideration. Our management
determined that when analyzing operating results of an acquired entity, we should focus on the
total return provided by the investment (i.e., operating profit generated from the acquired entity
compared to the purchase price paid, including the final amounts paid for contingent
consideration) without considering any expenses recognized post-acquisition related to the change
in the fair value of the contingent consideration. Our management determined that because the
final purchase price paid for an acquisition necessarily reflects the accounting value assigned to
both contingent consideration and to the intangible assets, when analyzing the operating results of
an acquisition in subsequent periods, we should exclude the GAAP impact of any adjustments to
the fair value of acquisition-related contingent consideration from its financial results. We believe
this approach is useful in understanding the long-term return provided by an acquisition and that
investors benefit from a supplemental non-GAAP financial measure that excludes the impact of
this adjustment.

•

Gain on sale of minority investment in a privately held company. Other investments, included
within other assets, consist of equity and debt investments in privately-held companies that
develop products, markets, and services that are considered to be strategic to us. Each of these
investments had been fully impaired in prior years. On September 1, 2011, we sold one of these
investments for $2.9 million because it was no longer considered to be strategic.

Gain on sale of building and land. We sold a portion of the Foster City, California campus for
$137.3 million resulting in a gain on sale of $80.0 million for the year ended December 31, 2009.

•

Tax effect of non-GAAP adjustments

•

After excluding the items described above, we apply the principles of ASC 740, Income Taxes, to
estimate the non-GAAP income tax benefit (provision) in each jurisdiction in which we operate.

• We have excluded the recognition of previously unrecognized tax benefits of $2.7 and $8.7

million, and we have also excluded interest expense accrued on prior year reserves of $0.4 and
$0.6 million, from our non-GAAP net income (loss) for the years ended December 31, 2011 and

2010, respectively, to facilitate comparability of our operating performance between the years.
These tax benefits primarily arose from the release of previously unrecognized tax benefits
resulting from the expiration of U.S. federal and state statutes of limitations.

• We have excluded other tax benefits of $0.3 million from our non-GAAP net income for the year

ended December 31, 2010.

Usefulness of Non-GAAP Financial Information to Investors

These non-GAAP measures are not in accordance with or an alternative to GAAP and may be materially
different from other non-GAAP measures, including similarly titled non-GAAP measures, used by other
companies. The presentation of this additional information should not be considered in isolation from, as a
substitute for, or superior to, net income (loss) or earnings per diluted share prepared in accordance with GAAP.
Non-GAAP financial measures have limitations in that they do not reflect certain items that may have a material
impact on our reported financial results. We expect to continue to incur expenses of a nature similar to the
non-GAAP adjustments described above, and exclusion of these items from our non-GAAP net income (loss)
and non-GAAP earnings per diluted share should not be construed as an inference that these costs are unusual,
infrequent, or non-recurring.

Reconciliation of GAAP Net Income (Loss) to Non-GAAP Net Income (Loss)
(unaudited)

(millions, except per share data)

For the years ended December 31,

2011

2010

2009

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 27.5

$ 7.5

$ (2.2)

Excess solvent inventories and related end-of-life purchases . . . .
Amortization of identified intangible assets . . . . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition-related transaction costs and legal expenses . . . . . . .
Change in fair value of contingent consideration . . . . . . . . . . . . .
Asset impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of minority investment in a privately-held company . . .
Gain on sale of building and land . . . . . . . . . . . . . . . . . . . . . . . . .
Tax effect of non-GAAP net income (loss) . . . . . . . . . . . . . . . . . .

2.3
12.4
15.9
3.6
1.2
—
0.7

—
11.2
23.4
3.3
2.3
1.5
—
(2.9) —
—
—
(15.8)
(13.2)

—
18.5
18.6
9.0
(0.1)
—
3.2
—
(80.0)
22.3

Non-GAAP net income (loss)

. . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 53.1

$ 27.8

$(10.7)

Non-GAAP net income (loss) per diluted share . . . . . . . . . . . . . .

$ 1.12

$ 0.59

$(0.22)

Shares for purposes of computing diluted non-GAAP net income
(loss) per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

47.6

47.2

49.7

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Critical Accounting Policies

The preparation of the consolidated financial statements requires estimates and judgments that affect the reported
amounts of assets, liabilities, revenue, expenses, and related disclosure of contingent assets and liabilities. We
evaluate our estimates, including those related to revenue recognition, bad debts, inventories and purchase
commitments, warranty obligations, litigation, restructuring activities, self-insurance, fair value of financial
instruments, stock-based compensation, income taxes, valuation of goodwill and intangible assets, business
combinations, and contingencies on an ongoing basis. Estimates are based on historical and current experience,

the impact of the current economic environment, and various other assumptions believed to be reasonable under
the circumstances at the time of the estimate, the results of which form the basis for making judgments about the
carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ
from these estimates under different assumptions or conditions.

Our critical accounting policies and estimates are as follows:

•

revenue recognition;

estimating allowance for doubtful accounts, inventory reserves and purchase commitments, warranty
reserves, litigation accruals, restructuring reserves, and self-insurance reserves;

fair value of financial instruments;

accounting for stock-based compensation;

accounting for income taxes;

valuation analyses of goodwill and intangible assets;

business combinations; and

determination of functional currencies for consolidating international operations.

Revenue recognition. We derive our revenue primarily from product revenue, which includes hardware
(controllers, design-licensed solutions including upgrades, digital industrial inkjet printers including components
replaced under maintenance agreements, and ink), software licensing and development, and royalties. We receive
service revenue from software license maintenance agreements, printer maintenance agreements, customer
support, training, professional services, and consulting. As described below, significant management judgments
and estimates must be made and used in connection with the revenue recognized in any accounting period.
Material differences could result in the amount and timing of revenue for any period if our management made
different judgments or utilized different estimates.

We recognize revenue on the sale of controllers, printers, and ink in accordance with the provisions of SEC Staff
Accounting Bulletin 104, Revenue Recognition (“SAB 104”), and when applicable, ASC 605-25, Revenue
Recognition—Multiple-Element Arrangements. As such, revenue is generally recognized when persuasive
evidence of an arrangement exists, the product has been delivered or services have been rendered, the fee is fixed
or determinable, and collection of the resulting receivable is reasonably assured.

Products generally must be shipped against written purchase orders. We use either a binding purchase order or
signed contract as evidence of an arrangement. Sales to some of the leading printer manufacturers are evidenced
by a master agreement governing the relationship together with a binding purchase order. Sales to our resellers
are also evidenced by binding purchase orders or signed contracts and do not generally contain rights of return or
price protection. Our arrangements generally do not include product acceptance clauses. When acceptance is
required, revenue is recognized when the product is accepted by the customer.

Delivery of hardware generally is complete when title and risk of loss is transferred at point of shipment from
manufacturing facilities, or when the product is delivered to the customer’s local common carrier. We also sell
products and services using sales arrangements with terms resulting in different timing for revenue recognition as
follows:

•

if the title and/or risk of loss is transferred at a location other than our manufacturing facility, revenue
is recognized when title and/or risk of loss transfers to the customer, per the terms of the agreement;

if title is retained until payment is received, revenue is recognized when title is passed upon receipt of
payment;

if the sales arrangement is classified as an operating lease, revenue is recognized ratably over the lease
term; or

•

if the sales arrangement is a fixed price for performance extending over a long period and our right to
receive future payment depends on our future performance in accordance with these agreements,
revenue is recognized under the percentage of completion method.

We deferred an immaterial amount of revenue during the years ended December 31, 2011, 2010, and 2009
because a portion of the customer payment was contingent upon installation.

We assess whether the fee is fixed or determinable based on the terms of the contract or purchase order. We
assess collection based on a number of factors, including past transaction history with the customer, the
creditworthiness of the customer, customer concentrations, current economic trends and macroeconomic
conditions, changes in customer payment terms, the length of time receivables are past due, and significant
one-time events. We may not request collateral from our customers, although down payments are generally
required from Inkjet and APPS customers as a means to ensure payment. If we determine that collection of a fee
is not reasonably assured, we defer the fee and recognize revenue when collection becomes reasonably assured,
which is generally upon receipt of cash.

We license our software primarily under perpetual licenses. Revenue from software consists of software
licensing, post-contract customer support, and professional consulting. We apply the provisions of ASC 985-605,
Software—Revenue Recognition and, if applicable, SAB 104 and ASC 605-25, to all transactions involving the
sale of software products and hardware transactions where the software is not incidental.

We enter into contracts to sell our products and services, and, while the majority of our sales agreements contain
standard terms and conditions, there are agreements that contain multiple elements or non-standard terms and
conditions. As a result, significant contract interpretation is sometimes required to determine the appropriate
accounting, including whether the deliverables specified in a multiple element arrangement should be treated as
separate units of accounting for revenue recognition purposes, and, if so, how the price should be allocated
among the elements and when to recognize revenue for each element. We recognize revenue for delivered
elements only when the delivered elements have standalone value, uncertainties regarding customer acceptance
are resolved, and there are no customer-negotiated refund or return rights for the delivered elements. If the
arrangement includes a customer-negotiated refund or right of return relative to the delivered item and the
delivery and performance of the undelivered item is considered probable and substantially in our control, the
delivered element constitutes a separate unit of accounting. We limit revenue recognition for delivered elements
to the amount that is not contingent on the future delivery of products or services, future performance
obligations, or subject to customer-specified return or refund privileges. Changes in the allocation of the sales
price between elements may impact the timing of revenue recognition, but will not change the total revenue
recognized on the contract.

Multiple-Deliverable Arrangements

In September 2009, the Financial Accounting Standards Board (“FASB”) ratified Emerging Issues Task Force
(“EITF”) consensuses reflected in Accounting Standards Update (“ASU”) 2009-13, Multiple-Deliverable
Revenue Arrangements (ASC 605), and ASU 2009-14, Certain Revenue Arrangements That Include Software
Elements (ASC 985-605). We adopted these provisions as of the beginning of fiscal 2011 for new and materially
modified transactions originating after January 1, 2011.

ASU 2009-13 eliminated the residual method of allocating revenue in multiple deliverable arrangements. In
accordance with ASU 2009-13, we recognize revenue in multiple element arrangements involving tangible
products containing software and non-software components that function together to deliver the product’s
essential functionality by applying the relative selling price method of allocation. The selling price for each
element is determined using vendor-specific objective evidence of the fair value of the selling price (“VSOE”),
when available (including post-contract customer support, professional services, hosting, and training), or third
party evidence of the selling price (“TPE”) is used. If VSOE and TPE are not available, then the best estimate of
the selling price (“BESP”) is used when applying the relative selling price method for each unit of accounting.
When the arrangement includes software and non-software elements, revenue is first allocated to the

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non-software and software elements as a group based on their relative selling price in accordance with ASC
605-25. Thereafter, the relative selling price allocated to the software elements as a group is further allocated to
each unit of accounting in accordance with ASC 985-605. We then defer revenue with respect to the relative
selling price that was allocated to any undelivered element.

We have calculated BESP for software licenses and non-software deliverables. We considered several different
methods of establishing BESP including cost plus a reasonable margin and stand-alone selling price of the same
or similar products and, if available, targeted rate of return, list price less discount, and company published list
prices to identify the most appropriate representation of the estimated selling price of our products. Due to the
wide range of pricing offered to our customers, we determined that selling price of the same or similar products,
list price less discount, and company published list prices were not appropriate methods to determine BESP for
our products. Cost plus a reasonable margin and targeted rate of return were eliminated due to the difficulty in
determining the cost associated with the intangible elements of each product’s cost structure. As a result,
management believes that the best estimate of the selling price of an element is based on the median sales price
of deliverables sold in stand-alone transactions and/or separately priced deliverables contained in bundled
arrangements. Elements sold as stand-alone transactions and in bundled arrangements during the last three
months of 2010 and first nine months of 2011 were included in the calculation of BESP.

When historical data is unavailable to calculate and support the determination of BESP on a newly introduced or
customized product, then BESP of similar products is substituted for revenue allocation purposes. We offer
customization for some of our products. Customization does not have a significant impact on the discounting or
pricing of our products.

ASU 2009-14 determined that tangible products containing software and non-software components that function
together to deliver the product’s essential functionality are not required to follow the software revenue
recognition guidance in ASC 985-605 as long as the hardware components of the tangible product substantively
contribute to its functionality. In addition, hardware components of a tangible product containing software
components shall always be excluded from the guidance in ASC 985-605. Non-software elements are accounted
for in accordance with SAB 104.

We have not changed our accounting policy with respect to multiple element arrangements that do not include
the sale of tangible products. The residual method requires that multiple element arrangements containing only
software elements remain subject to the provisions of ASC 985-605. When several elements, including software
licenses, post-contract customer support, hosting, and professional services, are sold to a customer through a
single contract, the revenue from such multiple element arrangements are allocated to each element using the
residual method in accordance with ASC 985-605. Revenue is allocated to the support elements and professional
service elements of an agreement using VSOE and to the software license elements of the agreement using the
residual method. We have established VSOE for professional services and hosting based on the rates charged to
our customers in stand-alone orders. We have also established VSOE for post-contract customer support based
on substantive renewal rates. Accordingly, software license fees are recognized under the residual method for
arrangements in which the software was licensed with maintenance and/or professional services, and where the
maintenance and professional services were not essential to the functionality of the delivered software.

Prior to adoption of ASU 2009-13 and 2009-14, tangible products containing software and non-software
components that function together to deliver the product’s essential functionality were subject to the software
revenue recognition guidance with respect to multiple element arrangements in ASC 985-605.

We have insignificant transactions where tangible and software products are sold together in a bundled
arrangement. During the year ended December 31, 2011, we deferred $0.1 million of revenue related to certain
bundled arrangements accounted for under ASU 2009-13 and 2009-14. We are not able to reasonably estimate
the effect of adopting these standards on future periods as the impact will vary if we modify or develop new
go-to-market strategies or pricing practices, which could impact VSOE and BESP resulting in a different
allocation of revenue to the deliverables in multiple element arrangements, but will not change the total revenue
recognized for such arrangements.

Subscription Arrangements

We have subscription arrangements where the customer pays a fixed fee and receives services over a period of
time. We recognize subscription revenue ratably over the service period. Any up front setup fees associated with
our subscription arrangements are recognized ratably, generally over one year. Any up front setup fees that are
not associated with our subscription arrangements are recognized upon completion.

Long-term Contracts Involving Substantial Customization

During the quarter ended September 30, 2010, we established the ability to produce estimates sufficiently
dependable to require adoption of the percentage of completion method with respect to certain fixed price
contracts. We previously followed the completed contract method of revenue recognition on long-term contracts
involving substantial customization.

Revenue on certain fixed price contracts where we provide information technology system development and
implementation services is recognized over the contract term based on the percentage of development and
implementation services that are provided during the period compared with the total estimated development and
implementation services to be provided over the entire contract using guidance from ASC 605-35, Revenue
Recognition–Construction-Type and Production–Type Contracts. These services require that we perform
significant, extensive, and complex design, development, modification, or implementation activities of our
customers’ systems. Performance will often extend over long periods, and our right to receive future payment
depends on our future performance in accordance with these agreements.

The percentage of completion method involves recognizing probable and reasonably estimable revenue using the
percentage of services completed based on the current cumulative cost as a percentage of the estimated total cost,
using a reasonably consistent profit margin over the period. Due to the long-term nature of these projects,
developing the estimates of costs often requires significant judgment. Factors that must be considered in
estimating the progress of work completed and ultimate cost of the projects include, but are not limited to, the
availability of labor and labor productivity, the nature and complexity of the work to be performed, and the
impact of delayed performance. If changes occur in delivery, productivity, or other factors used in developing the
estimates of costs or revenue, we revise our cost and revenue estimates, which may result in increases or
decreases in revenue and costs, and such revisions are reflected in income in the period in which the facts that
give rise to that revision become known.

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We recognize losses on long-term fixed price contracts in the period that the contractual loss becomes probable
and estimable. We record amounts invoiced to customers in excess of revenue recognized as deferred revenue
until the revenue recognition criteria are met. We record revenue that is earned and recognized in excess of
amounts invoiced on fixed price contracts as trade receivables.

Deferred Revenue and Related Deferred Costs

Deferred revenue represents amounts received in advance for product support contracts, software customer
support contracts, consulting and integration projects, or product sales. Product support contracts include
standalone product support packages, routine maintenance service contracts, and upgrades or extensions to
standard product warranties. We defer these amounts when we invoice the customer and then generally recognize
revenue either ratably over the support contract life, upon performing the related services, in accordance with the
percentage of completion method, or in accordance with our revenue recognition policy. Deferred cost of revenue
related to unrecognized revenue on shipments to customers was $2.1 million at December 31, 2011 and is
included in other current assets in the Consolidated Balance Sheet. Deferred cost of revenue related to
unrecognized revenue on shipments to customers was immaterial at December 31, 2010.

Allowances for doubtful accounts. We establish an allowance for doubtful accounts to ensure that trade
receivables are not overstated due to uncollectibility. Our accounts receivable balance was $91.9 million, net of
allowance for doubtful accounts and sales returns of $12.0 million, as of December 31, 2011.

To ensure that we have established an adequate allowance for doubtful accounts, management analyzes accounts
receivable and historical bad debts, customer concentrations, customer creditworthiness, current economic trends
and macroeconomic conditions, changes in customer payment terms, the length of time receivables are past due,
and significant one-time events. We record specific reserves for individual accounts when we become aware of
specific customer circumstances, such as bankruptcy filings, deterioration in the customer’s operating results or
financial position, or potential unfavorable outcomes from disputes with customers or vendors.

Our Fiery products, which constitute approximately 46% of our revenue, are primarily sold to a limited number
of leading printer manufacturers. Although end customer and reseller channel preference for Fiery products
drives demand, most Fiery revenue relies on these significant printer manufacturer / distributors to design,
develop, and integrate Fiery technology into the their print engines. We expect that we will continue to depend
on a relatively small number of leading printer manufacturers for a significant portion of our revenue, although
the significance of that dependence is expected to decline in future periods as our revenue increases from Inkjet
and APPS products. We perform ongoing credit evaluations of the financial condition of our printer
manufacturer, third-party distributor, reseller, and other customers and require collateral, such as letters of credit
and bank guarantees, in certain circumstances. The past due or delinquency status of a receivable is based on the
contractual payment terms of the receivable. The evaluation of whether to write off a receivable balance depends
on the age, size, and a determination of collectibility of the receivable. We generally have experienced longer
accounts receivable collection cycles in our Inkjet and APPS operating segments compared to our Fiery operating
segment as, historically, the leading printer manufacturers have paid on a more timely basis. Down payments are
generally required from Inkjet and APPS customers as a means to ensure payment.

Inventory reserves. Management estimates potential future inventory obsolescence and purchase commitments
to evaluate the need for inventory reserves. Current economic trends, changes in customer demand, product
design changes, product life and demand, and the acceptance of our products are analyzed to evaluate the
adequacy of such reserves. Significant management judgment and estimates must be made in connection with
establishing inventory allowances and reserves in any accounting period. Material differences may result in
changes in the amount and timing of our net income (loss) for any period, if management made different
judgments or utilized different estimates. Our inventories were $44.8 million, net of inventory reserves of $15.5
million, as of December 31, 2011.

Warranty reserves. Our Fiery controller and Inkjet printer products are generally accompanied by a 12-month
limited warranty from date of shipment, which covers both parts and labor. In accordance with ASC 450-30,
Loss Contingencies, an accrual is required when the warranty liability is estimable and probable based upon
historical experience. A provision for estimated future warranty work is recorded in cost of revenue when
revenue is recognized.

The warranty liability is reviewed regularly and periodically adjusted to reflect changes in warranty estimates.
Significant management judgments and estimates must be made in connection with establishing and updating
warranty reserves including estimated potential inventory return rates and replacement or repair costs. Material
differences may result in changes in the amount and timing of our income for any period, if management made
different judgments or utilized different estimates. Warranty reserves were $8.9 million as of December 31,
2011.

Litigation accruals. We may be involved, from time to time, in a variety of claims, lawsuits, investigations, or
proceedings relating to contractual disputes, securities laws, intellectual property rights, employment, or other
matters that may arise in the normal course of business. We assess our potential liability in each of these matters
by using the information available to us. We develop our views on estimated losses in consultation with inside
and outside counsel, which involves a subjective analysis of potential results and various combinations of
appropriate litigation and settlement strategies. We accrue estimated losses from contingencies if a loss is
deemed probable and can be reasonably estimated.

The material assumptions used to estimate the required litigation accrual include:

•

communication with our external attorneys regarding the expected duration of the lawsuit, the potential
outcome of the lawsuit, and the likelihood of settlement;

our strategy regarding the lawsuit;

deductible amounts under our insurance policies; and

past experiences with similar lawsuits.

Litigation is inherently unpredictable, and while we believe that we have valid defenses with respect to legal
matters pending against us, our financial statements could be materially affected in any particular period by the
unfavorable resolution of one or more of these contingencies or because of the diversion of management’s
attention and the incurrence of significant expenses.

Restructuring reserves. We have engaged, and may continue to engage, in restructuring actions, which require
management to utilize significant estimates related to the timing and the expense for severance and other
employee separation costs, realizable values of assets made obsolete, lease cancellation, facility downsizing, and
other exit costs. If actual amounts differ from our estimates, the amount of the restructuring charges could be
materially impacted.

Self-insurance reserves. Beginning in 2011, we are partially self-insured for certain losses related to employee
medical and dental coverage, excluding employees covered by health maintenance organizations. We generally
have an individual stop loss deductible of $125,000 per enrollee unless specific exposures are separately insured.
We have accrued a contingent liability of $1.6 million as of December 31, 2011, which is not discounted, based
on an examination of historical trends, our claims experience, industry claims experience, actuarial analysis, and
estimates. The primary estimates used in the development of our accrual at December 31, 2011 include total
enrollment (including employee contributions), population demographics, and historical claims costs incurred.
These estimates are based on significant inputs that are not observable in the market, which ASC 820-10-35, Fair
Value Measurement - Subsequent Measurement, refers to as Level 3 inputs, reflecting our assessment of the
assumptions market participants would use to value these liabilities. Although we do not expect that we will
ultimately pay claims significantly different from our estimates, self-insurance reserves could be affected if
future claims experience differs significantly from our historical trends and assumptions.

As part of this process, we engaged a third party actuarial firm to assist management in its analysis. All estimates,
key assumptions, and forecasts were either provided by or reviewed by us. While we chose to utilize a third party
actuary, the related valuation of our self-insurance liability represents the conclusions of management and not the
conclusions or statements of any third party. While we believe these estimates are reasonable based on the
information currently available, if actual trends, including the severity of claims and medical cost inflation, differ
from our estimates, our consolidated financial position, results of operations, or cash flows could be impacted.

Fair value of financial instruments. We invest our excess cash in deposits with major banks; money market
securities; and municipal, U.S. government and sponsored entity, and corporate debt securities. By policy, we
invest primarily in high-grade marketable securities. We are exposed to credit risk in the event of default by the
financial institutions or issuers of these investments to the extent of amounts recorded on the Consolidated
Balance Sheet.

We consider all highly liquid investments with a maturity of three months or less at the time of purchase to be
cash equivalents. Typically, the cost of these investments has approximated fair value. Marketable investments
with a maturity greater than three months are classified as available-for-sale short-term investments.
Available-for-sale securities are stated at fair market value with unrealized gains and losses reported as a separate
component of accumulated other comprehensive income in stockholders’ equity (“OCI”), adjusted for deferred
income taxes. The credit portion of any other-than-temporary impairment is included in net income (loss).
Realized gains and losses on sales of financial instruments are recognized upon sale of the investments using the
specific identification method.

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ASC 820, Fair Value Measurement, identifies fair value as the exchange price, or exit price, representing the
amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants. As a basis for considering market participant assumptions in fair value measurements, ASC
820 establishes a three-tier fair value hierarchy as follows:

Level 1: Inputs that are quoted prices in active markets for identical assets or liabilities that the reporting
entity has the ability to access at the measurement date;

Level 2: Inputs that are other than quoted prices included within Level 1, that are either directly or indirectly
observable for the asset or liability through correlation with market data at the measurement date for the
duration of the instrument’s anticipated life or by comparison to similar instruments; and

Level 3: Inputs that are unobservable or inputs that reflect management’s best estimate of what market
participants would use in pricing the asset or liability at the measurement date. These include management’s
own judgments about market participant assumptions developed based on the best information available in
the circumstances.

We utilize the market approach to measure fair value of our fixed income securities. The “market approach” is a
valuation technique that uses prices and other relevant information generated by market transactions involving
identical or comparable assets or liabilities. The fair value of our fixed income securities are obtained using
readily-available market prices from a variety of industry standard data providers, large financial institutions, and
other third-party sources for the identical underlying securities.

As part of this process, we engaged pricing services to assist management in its analysis. All estimates, key
assumptions, and forecasts were either provided by or reviewed by us. While we chose to utilize third party
pricing services, the impairment analysis and related valuations represent the conclusions of management and not
the conclusions or statements of any third party.

Specifically, we obtain the fair value of our Level 2 financial instruments from third party asset managers, the
custodian bank, and the accounting service providers. Independently, these service providers use professional
pricing services to gather pricing data, which may include quoted market prices for identical or comparable
instruments or inputs other than quoted prices that are observable either directly or indirectly. The service
providers then analyze their gathered pricing inputs and apply proprietary valuation techniques, including
consensus pricing, weighted average pricing, distribution-curve-based algorithms, or pricing models such as
discounted cash flow techniques to provide a fair value for each security.

The validation procedures performed by management include the following:

•

obtaining an understanding of the pricing service’s valuation methodologies, including the timing and
frequency,

evaluating the type, nature, and complexity of our investments in financial instruments,

evaluating the activity level in the market for the type of securities in which we have invested including
the volatility of price movements requiring analysis, and

validating the quoted market prices provided by our service providers by completing a three way
reconciliation, comparing the assessment of the fair values provided by the asset manager, the custody
bank and the accounting book of record provider for each portfolio.

Obtaining an understanding of these valuation risks allows us to respond by developing internal controls that
appropriately mitigate any risks identified. If material discrepancies are noted when comparing the valuations on
a security-by-security basis, then we conduct detailed pricing analysis, search alternative pricing sources, or
require the service provider to provide an in-depth price analysis prior to recording the fair value in our financial
statements. If we determine that a price provided by the third party pricing services is not reflective of the fair
value of the security, we require the custodian bank or accounting service provider to update their price file
accordingly.

At least annually, we review the pricing practices followed by the various entities involved in determining the
fair value of our securities; including comparing their process and practices to those followed by other external
third party pricing vendors. Also, at least annually, we review the internal controls provided in place at the
custodian bank and the accounting service provider.

The fair value of our investments in certain money market funds is expected to maintain a Net Asset Value of $1
per share and, as such, is priced at the expected market price.

We review investments in fixed income debt securities for other-than-temporary impairment whenever the fair
value is less than the amortized cost and evidence indicates the investment’s carrying amount is not recoverable
within a reasonable period of time. We assess the fair value of individual securities as part of our ongoing
portfolio management. Our other-than-temporary assessment includes reviewing the length of time and extent to
which fair value has been less than amortized cost, the seniority and durations of the securities, adverse
conditions related to a security, industry, or sector, historical and projected issuer financial performance, credit
ratings, issuer specific news, and other available relevant information. To determine whether an impairment is
other-than-temporary, we consider whether we have the intent to sell the impaired security or if it will be more
likely than not that we will be required to sell the impaired security before a market price recovery and whether
evidence indicating the cost of the investment is recoverable outweighs evidence to the contrary. We have
determined that gross unrealized losses on short-term investments at December 31, 2011 are temporary in nature
because each investment meets our investment policy and credit quality requirements. We have the ability and
intent to hold these investments until they recover their unrealized losses, which may not be until maturity.
Evidence that we will recover our investments outweighs evidence to the contrary.

In determining whether a credit loss existed, we used our best estimate of the present value of cash flows
expected to be collected from each debt security. For asset-backed and mortgage-backed securities, cash flow
estimates including prepayment assumptions rely on data from widely accepted third party data sources or
internal estimates. In addition to prepayment assumptions, cash flow estimates vary based on assumptions
regarding the underlying collateral including default rates, recoveries, and changes in value. Expected cash flows
were discounted using the effective interest rate implicit in the securities.

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Accounting for stock-based compensation. We account for stock-based compensation in accordance with ASC
718, which requires stock-based compensation expense to be recognized based on the fair value of such awards
on the date of grant. We amortize stock-based compensation expense on a graded vesting basis over the vesting
period, after assessing the probability of achieving the requisite performance criteria with respect to
performance-based awards. Stock-based compensation expense is recognized over the requisite service period for
each separately vesting tranche as though the award were, in substance, multiple awards. We apply an estimated
forfeiture rate based on historical experience and management assessment to reflect what we believe will be our
final stock-based compensation expense. We must use our judgment in determining and applying the
assumptions needed for the valuation of employee stock options, RSUs, RSAs, and issuance of common stock
under our ESPP.

We use the Black-Scholes-Merton (“BSM”) option pricing model to value stock-based compensation for all
equity awards, except market -based awards. Market-based awards are valued using a Monte Carlo valuation
model. Option pricing models were developed to estimate the value of traded options that have no vesting or
hedging restrictions and are fully transferable. The BSM model determines the fair value of stock-based payment
awards based on the stock price on the date of grant and is affected by assumptions regarding a number of highly
complex and subjective variables. These variables include, but are not limited to, our expected stock price
volatility over the term of the awards, expected term, interest rates, and actual and projected employee stock
option exercise behavior. Expected volatility is based on the historical volatility of our stock over a preceding
period commensurate with the expected term of the option. The expected term is based on management’s
consideration of the historical life, vesting period, and contractual period of the options granted. The risk-free

interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of
grant. Expected dividend yield was not considered in the option pricing formula since we do not pay dividends
and have no current plans to do so in the future.

Accounting for income taxes. We are required to estimate income taxes in each of the jurisdictions in which we
operate. We estimate our actual current tax expense and temporary differences resulting from differing treatment
of items, such as deferred revenue for tax and book accounting purposes. These differences result in deferred tax
assets and liabilities, which are included within our Consolidated Balance Sheets.

Significant management judgment is required to determine our provision for income taxes, our deferred tax
assets and liabilities, and any valuation allowance recorded against our deferred tax assets. In assessing the need
for a valuation allowance, we considered all available evidence, including recent operating results, projections of
future taxable income, our ability to utilize loss and credit carryforwards, and the feasibility of tax planning
strategies. A significant piece of objective positive evidence evaluated was cumulative pre- tax income over a
three year period ended December 31, 2011. In addition, we considered that loss and credit carryforwards have
not expired unused and a majority of our loss and credit carryforwards will not expire prior to 2016. Finally, we
have considered that our results from operations have improved each year since 2008.

As a result of this evaluation, we have determined that it is more likely than not that we will realize the benefit
related to our deferred tax assets, except for a valuation allowance on foreign tax credits resulting from the 2003
acquisition of Best GmbH, compensation deductions potentially limited by IRC 162(m), and net operating loss
carryforwards resulting from the 2010 Radius acquisition. The realizability of deferred tax assets could be
negatively impacted if sufficient taxable income in the carryforward period is not generated.

Current and noncurrent deferred tax assets, net of current and noncurrent deferred tax liabilities, as of
December 31, 2011 were $57.6 million, net of valuation allowance of $2.6 million.

In accordance with ASC 740-10-25-5 through 17, Income Taxes—Basic Recognition Threshold, we account for
uncertainty in income taxes by recognizing a tax position only when it is more likely than not that the tax
position, based on its technical merits, will be sustained upon ultimate settlement with the applicable tax
authority. The tax benefit to be recognized is the largest amount of tax benefit that is greater than fifty percent
likely of being realized upon ultimate settlement with the applicable tax authority that has full knowledge of all
relevant information.

Significant management judgment is required in evaluating our uncertain tax positions. Our gross unrecognized
benefits are $35.6 million as of December 31, 2011. Our evaluation of uncertain tax positions is based on factors
including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues
under audit, and new audit activity. If actual settlements differ from these estimates, or we adjust these estimates
in future periods, we may need to recognize additional tax benefits or charges that could materially impact our
financial position and results of operations.

As of December 31, 2011, we have permanently reinvested $7.9 million of unremitted earnings. Should these
earnings be remitted to the U.S., the tax on these earnings would be $2.0 million.

Valuation analyses of goodwill and intangible assets. We perform our annual goodwill impairment analysis in
the fourth quarter of each year according to the provisions of ASC 350-20-35. A two-step impairment test of

goodwill is required. In the first step, the fair value of each reporting unit is compared to its carrying value. If the
fair value exceeds carrying value, goodwill is not impaired and further testing is not required. If the carrying
value exceeds fair value, then the second step of the impairment test is required to determine the implied fair
value of the reporting unit’s goodwill. The implied fair value of goodwill is calculated by deducting the fair value
of all tangible and intangible net assets of the reporting unit, excluding goodwill, from the fair value of the
reporting unit as determined in the first step. If the carrying value of the reporting unit’s goodwill exceeds its
implied fair value, then an impairment loss must be recorded equal to the difference.

To identify suitable comparable companies under the market approach, consideration was given to the financial
condition and operating performance of the reporting unit being evaluated relative to companies operating in the
same or similar businesses, potentially subject to corresponding economic, environmental, and political factors
and considered to be reasonable investment alternatives. Consideration was given to the investment
characteristics of the subject company relative to those of similar publicly traded companies (i.e., guideline
companies), which are actively traded. In applying the PCMMM, valuation multiples were derived from
historical and projected operating data of guideline companies and applied to the appropriate operating data of
our reporting units to arrive at an indication of fair value. Five, four, and seven suitable guideline companies
were identified for the Fiery, Inkjet, and APPS reporting units, respectively.

Solely for purposes of establishing inputs for the income approach to assess the fair value of the Fiery, Inkjet,
and APPS reporting units, we made the following assumptions:

•

Despite the ongoing economic uncertainty, our reporting units’ revenue will grow at historical
normalized rates between 2012 and 2016 for the following primary reasons:

•

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•

Long-term industry growth after 2016 with the exception of Fiery, which is conservatively assumed at
long-term growth rates by 2013.

Significant assumptions used in determining fair values of the reporting units under the market-based and
income-based analyses include the determination of appropriate market comparables, estimated multiples of
revenue and EBIT that a willing buyer is likely to pay, estimated control premium a willing buyer is likely to
pay, gross profit, and operating expenses. Gross profit and operating expenses as a percentage of revenue over
the five-year forecast horizon were compared to approximate percentages realized by the guideline companies.
To assess the reasonableness of the estimated control premium of 33%, we examined the most similar
transactions in relevant industries and determined the average premium indicated by the transactions deemed to
be most similar to a hypothetical transaction involving our reporting units. We examined the weighted average
and median control premiums offered in relevant industries, industry specific control premiums, and specific
transaction control premiums to conclude that our estimated control premium is reasonable.

•

significant negative industry or economic trends,

significant decline in our stock price for a sustained period,

our market capitalization relative to net book value,

significant changes in the manner of our use of the acquired assets,

significant changes in the strategy for our overall business, and

our assessment of growth and profitability in each reporting unit over the coming years.

period or strength of recovery, made for purposes of our goodwill impairment testing at December 31, 2011 will
prove to be accurate predictions of the future. If our assumptions regarding forecasted revenue or gross profit
rates are not achieved, we may be required to record additional goodwill impairment charges in future periods
relating to any of our reporting units, whether in connection with the next annual impairment testing in the fourth
quarter of 2012 or prior to that, if any such change constitutes an interim triggering event. It is not possible to
determine if any such future impairment charge would result or, if it does, whether such charge would be
material.

Business combinations. We allocate the purchase price of acquired companies to the tangible and intangible
assets acquired, including IPR&D, and liabilities assumed based on their estimated fair values. Such a valuation
requires management to make significant estimates and assumptions, especially with respect to intangible assets.
The results of operations for each acquisition are included in our financial statements from the date of
acquisition.

Effective in 2009, ASC 805 was amended. The fundamental requirement that the acquisition method of
accounting be used for all business combinations was retained while revising the accounting treatment for the fair
values of certain acquired assets, liabilities, and expenses. See Note 1—The Company and its Significant
Accounting Policies of our Notes to Consolidated Financial Statements for a summary of the impact of this
accounting pronouncement on our accounting for business combinations.

Management estimates fair value based on assumptions believed to be reasonable. These estimates are based on
historical experience and information obtained from the management of the acquired companies. Critical
estimates in valuing certain intangible assets include, but are not limited to: future expected cash flows; acquired
developed technologies and patents; expected costs to develop IPR&D into commercially viable products and
estimating cash flows from the projects when completed; the acquired company’s brand awareness and market
position, as well as assumptions about the period of time the acquired brand will continue to be used in the
combined company’s product portfolio; and discount rates.

We estimate the fair value of acquisition-related contingent consideration based on the probability of realization
of the performance targets. This estimate is based on significant inputs that are not observable in the market,
which ASC 820-10-35 refers to as Level 3 inputs, reflecting our assessment of the assumptions market
participants would use to value these liabilities. The fair value of contingent consideration is remeasured at each
reporting period, with any changes in the fair value recognized as a component of general and administrative
expense.

Other estimates associated with the accounting for acquisitions include severance costs and the costs to vacate or
downsize facilities, including the future costs to operate and eventually abandon or relinquish duplicate facilities.
These costs are recognized as restructuring and other expenses and are based on management estimates and are
subject to refinement. Estimated costs may change as additional information becomes available regarding assets
acquired and liabilities assumed and as management continues its assessment of the pre-merger operations.

Acquisition-related costs of $2.3 and $1.2 million were expensed during the years ended December 31, 2011 and
2010, respectively, associated with businesses acquired during the periods reported and Cretaprint, which was
acquired subsequent to year end.

Alphagraph: On December 6, 2011, we purchased privately-held Alphagraph for cash consideration of
approximately $9.5 million, net of cash acquired, plus an additional future cash earnout, which is contingent on
achieving certain performance targets. The fair value of the earnout is currently estimated to be $2.5 million as of
December 31, 2011. Headquartered in Germany, Alphagraph provides business process automation solutions for
the graphic arts industry.

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Prism: On August 2, 2011, we acquired privately held Prism for cash consideration of approximately $11.5
million, net of cash acquired. Headquartered in New Zealand, Prism is a provider of business process automation
software for the printing and packaging industry including automated shop floor management and work in
progress tracking.

Entrac: On July 25, 2011, we acquired privately-held Entrac for cash consideration of approximately $6.4
million, net of cash acquired, plus an additional future cash earnout contingent on achieving certain performance
targets. The fair value of the earnout is currently estimated to be $2.8 million as of December 31, 2011.
Headquartered in Canada, Entrac provides self-service and payment solutions for business services including
mobile printing.

Streamline: On February 16, 2011, we acquired privately-held Streamline for cash consideration of
approximately $6.8 million, including accrued working capital payments, net of cash acquired, plus an additional
future cash earnout contingent on achieving certain performance targets. The fair value of the earnout is currently
estimated to be $1.3 million as of December 31, 2011. Headquarterd in San Rafael, California, Streamline is the
provider of PrintStream business process automation software, which we acquired to establish our presence in
mailing and fulfillment services for the printing industry.

The potential undiscounted amount of future contingent consideration cash payments that we could be required to
make related to the Alphagraph, Entrac, and Streamline acquisitions, beyond amounts currently accrued, is $0.6
million as of December 31, 2011.

Radius: On July 2, 2010, we acquired privately-held Radius for cash consideration of approximately $14.1
million, net of cash acquired, plus an additional cash earnout contingent on achieving certain performance
targets. As of December 31, 2011, approximately $4.2 million had been earned against the earnout. The $1.9
million excess above the valuation at the acquisition date was expensed as a component of general and
administrative expense in accordance with ASC 805. Radius is a print management software company
headquartered in Chicago, Illinois, that provides business process automation solutions for the label and
packaging industry.

The Alphagraph, Prism, Entrac, Streamline, and Radius acquisitions are discussed more fully in Note 3—
Acquisitions of the Notes to the Consolidated Financial Statements.

Our financial projections may ultimately prove to be inaccurate and unanticipated events and circumstances may
occur. As a result, these estimates are inherently uncertain and unpredictable, assumptions may be incomplete or
inaccurate, and unanticipated events and circumstances may occur, which may affect the accuracy or validity of
such assumptions, estimates or other actual results. Therefore, no assurance can be given that the underlying
assumptions used to establish the valuation for these acquired businesses will prove to be correct. We typically
engage a third party valuation firm to assist management in its analysis. All estimates, key assumptions, and
forecasts were either provided by or reviewed by us. While we chose to utilize a third party valuation firm, the
valuations represent the conclusions of management and not the conclusions or statements of any third party.

Determining functional currencies for the purpose of consolidating our international operations. We have a
number of foreign subsidiaries, which together account for approximately 43% of our net revenue, approximately
16% of our total assets and approximately 37% of our total liabilities as of December 31, 2011. Although the
majority of our receivables are invoiced and collected in U.S. dollars, we have exposure from non-U.S. dollar-
denominated sales (consisting of the Euro, British pound sterling, Japanese yen, Australian dollar, and New
Zealand dollar) and operating expenses (primarily the Euro, British pound sterling, Japanese yen, Indian rupee,
and Australian dollar) in foreign countries.

currency into the functional currency at current exchange rates, except for non-monetary assets and capital
accounts, which are remeasured at historical exchange rates. Revenue and expenses are remeasured at monthly
exchange rates, which approximate average exchange rates in effect during each period. Gains or losses from
foreign currency remeasurement are included in other income (expense), net. Net gains or losses resulting from
foreign currency transactions, including hedging gains and losses, are reported in other income (expense), net,
and were a gain (loss) of $(1.2), $(3.4), and $0.2 million for the years ended December 31, 2011, 2010, and 2009,
respectively.

For those subsidiaries that operate in a local currency functional environment, all assets and liabilities are
translated into U.S. dollars using current exchange rates, while revenue and expenses are translated using
monthly exchange rates, which approximate the average exchange rates in effect during each period. Resulting
translation adjustments are reported as a separate component of OCI, adjusted for deferred income taxes. The
cumulative translation adjustment balance at December 31, 2011 was an unrealized gain of $1.4 million.

Based on our assessment of the salient economic indicators discussed in ASC 830-10-55-5, Foreign Currency
Matters, we consider the U.S. dollar to be the functional currency for each of our international subsidiaries except
for our German subsidiaries, EFI GmbH and Alphagraph, for which we consider the Euro to be the subsidiaries’
functional currency, our Japanese subsidiary, Electronics For Imaging Japan KK, for which we consider the
Japanese yen to be the subsidiary’s functional currency, and our U.K. subsidiaries, Electronics For Imaging
United Kingdom Limited and Prism Group Holdings Limited (U.K.), for which we consider the British pound
sterling to be the subsidiaries’ functional currency.

Recent Accounting Pronouncements

See Note 1—The Company and Its Significant Accounting Policies of the Notes to Consolidated Financial
Statements for a full description of recent accounting pronouncements including the respective expected dates of
adoption.

Liquidity and Capital Resources

Overview

Cash, cash equivalents, and short-term investments decreased by $10.5 million to $219.2 million as of
December 31, 2011 from $229.7 million as of December 31, 2010. This decrease was primarily due to $33.7
million acquisition of Alphagraph, Prism, Entrac, and Streamline, net of cash acquired and accrued payments,
Pace and Radius earnout payments of $5.1 million, treasury stock purchases of $40.0 million, net settlement of
RSUs and RSAs for employee common stock related tax liabilities of $5.8 million, and purchases of property and
equipment of $9.8 million, partially offset by cash flows provided by operating activities of $72.2 million,
proceeds from ESPP purchases of $6.1 million, proceeds from common stock exercises of $2.0 million, and $2.9
million proceeds from sale of minority investment in a privately-held company.

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Cash, cash equivalents, and short-term investments increased $25.5 million to $229.7 million as of December 31,
2010 from $204.2 million as of December 31, 2009. The increase was primarily due to cash provided by
operating activities of $43.9 million, ESPP proceeds of $5.7 million, and proceeds from the exercise of stock
options of $1.0 million, partially offset by the $14.1 million purchase of Radius, net of cash acquired, payment of
contingent consideration related to the Pace Systems Group, Inc. (“Pace”) acquisition of $2.4 million, capital
expenditures of $5.0 million, net settlement of RSUs for employee common stock-related tax liabilities of $2.9
million, and the payment of transaction costs of $0.6 million related to the tender offer concluded during the
fourth quarter of 2009.

(in thousands)

2011

2010

2009

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$120,058
99,100

$126,363
103,300

$106,067
98,134

Total cash, cash equivalents, and short-term investments . . . . . . . . . . . . .

$219,158

$229,663

$204,201

Net cash provided by (used for) operating activities . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used for) investing activities . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used for) financing activities . . . . . . . . . . . . . . . . . . . . .
Effect of foreign exchange rate changes on cash and cash equivalents . . . . . . .

$ 72,196
(42,124)
(35,890)
(487)

$ 43,923
(27,480)
3,698
155

$ (19,668)
88,581
(95,019)
21

Increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . .

$ (6,305) $ 20,296

$ (26,085)

On January 10, 2012, we acquired privately held Cretaprint for approximately $31 million in cash, plus an
additional future cash earn out of approximately $21 million contingent on achieving certain performance targets.
Cretaprint is a leading developer and supplier of inkjet printers for ceramic tiles.

As of December 31, 2011, we have approximately $7.9 million of unremitted earnings, which are not available to
meet our operating and working capital requirements as these amounts have been permanently reinvested. Cash,
cash equivalents, and short-term investments held outside of the U.S. in various foreign subsidiaries were $69.4
and $73.2 million as of December 31, 2011 and 2010, respectively. If these funds are needed for our operations
in the U.S., we would be required to accrue and pay U.S. federal and state income taxes on some or all of these
funds. However, our intent is to indefinitely reinvest these funds outside of the U.S. and our current plans do not
demonstrate a need to repatriate them to fund our U.S. operations.

Based on past performance and current expectations, we believe that our cash, cash equivalents, short-term
investments, and cash generated from operating activities will satisfy our working capital needs, capital
expenditure, investment requirements, business acquisitions, stock repurchases, commitments (see Note 8 of the
Notes to Consolidated Financial Statements), and other liquidity requirements associated with our existing
operations through at least the next twelve months. We believe that the most strategic uses of our cash resources
include business acquisitions, strategic investments to gain access to new technologies, repurchase of shares of
our common stock, and working capital. At December 31, 2011, cash and cash equivalents and short-term
investments available were $219.2 million. We believe that our liquidity position and capital resources are
sufficient to meet our operating and working capital needs.

Operating Activities

Net cash provided by operating activities in 2011 of $72.2 million compares with net cash provided by operating
activities in 2010 of $43.9 million and net cash used for operating activities in 2009 of $19.7 million. Net cash
provided by operating activities in 2011 consists primarily of net income of $27.5 million, non-cash charges and
credits of $46.4 million, less the net change in operating asset and liabilities of $1.7 million. Non-cash charges
and credits consist primarily of $18.8 million in depreciation and amortization, $23.4 million of stock-based
compensation expense, provision for inventory obsolescence of $7.0 million, and provision for allowance for bad
debts and sales-related allowances of $2.0 million, partially offset by $2.7 million deferred tax credit and $2.1

million of other non-cash credits, charges, and provisions. The net change in operating assets and liabilities of
$1.7 million consists primarily of increases in inventories, accounts receivable, and other current assets of $6.6,
$3.4, and $1.0 million, respectively, offset by increases in accounts payable and accrued liabilities of $2.5 million
and net taxes payable of $6.8 million.

Accounts Receivable

Our primary source of operating cash flow is the collection of accounts receivable from our customers. One
measure of the effectiveness of our collection efforts is average days sales outstanding for accounts receivable
(“DSO”). DSOs were 52, 54, and 65 days at December 31, 2011, 2010, and 2009, respectively. We calculate
DSO by dividing net accounts receivable at the end of the quarter by revenue recognized during the quarter,
multiplied by the total days in the quarter. DSO improved in 2011 due to strong collections. We expect DSOs to
vary from period to period because of changes in the mix of business between our direct customers and end user
demand driven through the leading printer manufacturers, the effectiveness of our collection efforts both
domestically and overseas, and variations in the linearity of our sales. As the percentage of Inkjet and APPS
related revenue increases, we expect DSOs may trend higher. Our DSOs related to the Inkjet and APPS operating
segments are traditionally higher than those related to the significant printer manufacturer customers /
distributors in our Fiery operating segment as, historically, they have paid on a more timely basis.

Inventories

Our inventories are procured primarily in support of the Inkjet and Fiery operating segments. Our inventories
decreased by $1.4 million from $46.2 million in 2010 to $44.8 million in 2011 primarily due to improved
inventory management and increased shipments during the fourth quarter. Inventory turnover improved from 5.9
turns in 2010 to 6.2 turns in 2011. We calculate inventory turnover by dividing annualized fourth quarter cost of
revenue by average inventories.

Accounts Payable, Accrued and Other Liabilities, and Net Income Taxes Payable

Our operating cash flows are impacted by the timing of payments to our vendors for accounts payable and by our
accrual of liabilities. The change in accounts payable, accrued and other liabilities, and net income taxes payable
increased our cash flows provided by operating activities by $9.3 and $7.6 million in 2011 and 2010,
respectively, and increased our cash flows used for operating activities by $16.1 million in 2009. Our working
capital, defined as current assets minus current liabilities, was $244.8 and $265.3 million at December 31, 2011
and 2010, respectively.

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Investing Activities

Cash provided by (used for) investing activities for the years ended December 31, 2011, 2010, and 2009 were as
follows (in thousands):

2011

2010

2009

Purchases of short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . $ (99,155) $(111,619) $(167,465)
127,163
Proceeds from sales and maturities of short-term investments . . . . . . . . .
105,603
(5,218)
. . . . .
Purchases, net of proceeds from sales, of property and equipment
(5,016)
—
Proceeds from sale of minority investment in a privately held company . .
—
— 135,802
Proceeds from sale of building and land, net of direct transaction costs . . .
—
Businesses purchased, net of cash acquired . . . . . . . . . . . . . . . . . . . . .
—
Proceeds from collection of notes receivable from acquired business . . .
(1,701)
Purchases of other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

101,716
(9,828)
2,866
—
(38,436)
713
—

(16,448)
—
—

Net cash provided by (used for) investing activities . . . . . . . . . . . . . . $ (42,124) $ (27,480) $ 88,581

Acquisitions

Alphagraph, Prism, Entrac, and Streamline were acquired in 2011 for approximately $33.7 million in cash, net of
cash acquired, plus additional future cash earnouts contingent on achieving certain performance targets and
accrued working capital payments. Radius was acquired in 2010 for $14.1 million, net of cash acquired, plus an
additional cash earnout, which was contingent on achieving certain performance targets.

Earnout payments were made relating to previously accrued Radius liabilities of $2.1 million during the year
ended December 31, 2011. The first earnout period ended December 31, 2010 with consideration earned of
approximately $2.1 million. The final earnout period ended December 31, 2011 with consideration earned of
approximately $2.1 million. The portion of the Radius earnout representing performance targets achieved in
excess of the fair value recognized in the opening balance sheet were $1.5 and $0.4 million for the years ended
Decmeber 31, 2011 and 2010, respectively. These adjustments to the Radius earnout were recognized as general
and administrative expenses and are reflected as cash used for operating activities in the Consolidated Statements
of Cash Flows.

Earnout payments were made relating to previously accrued Pace liabilities of $2.9 and $2.4 million during the
years ended December 31, 2011 and 2010, respectively. On July 28, 2008, we purchased Pace for approximately
$20.1 million, net of cash acquired, including direct acquisition costs, plus an additional cash earnout, which was
contingent on achieving certain performance targets. The first earnout period ended December 31, 2009 with
consideration earned of approximately $2.4 million. The second earnout period ended December 31, 2010 with
consideration earned of approximately $2.9 million. The final earnout period ended December 31, 2011 with
consideration earned of $0.6 million, resulting in cumulative additional cash earnouts of $5.9 million, which have
been accounted for as an adjustment to the purchase price in accordance with the accounting requirements for
business combinations that closed prior to 2009.

Property and Equipment

Our net property and equipment purchases totaled $9.8, $5.0, and $5.2 million in 2011, 2010, and 2009,
respectively. Our property and equipment additions have been funded by cash from operations.

We anticipate that we will continue to purchase property and equipment in the normal course of our business.
The amount and timing of these purchases and the related cash outflows in future periods are difficult to predict
and are dependent on a number of factors including our hiring of employees, the rate of change in computer
hardware and software used in our business, our business outlook, and decisions to further invest or expand
business sites.

During the first quarter of 2009, we sold a portion of the Foster City, California, campus for $137.3 million.
Under the agreement, we sold the approximately 163,000 square foot building at 301 Velocity Way, as well as
approximately 30 acres of related land and certain other assets related to the property. Net proceeds from the sale
of building and land, net of direct transaction costs paid in 2009, were $135.8 million. The cost of the land,
building, improvements, and direct transaction costs were included in the determination of the $80 million gain
on sale of building and land.

Investments

During 2011, we received net proceeds from sale and maturities of our marketable securities of $2.6 million.
During 2010 and 2009, we purchased, net of sales and maturities, marketable securities of $6.0 and
$40.3 million, respectively.

We have classified our investment portfolio as “available for sale.” Our investments are made with a policy of
capital preservation and liquidity as primary objectives. We may hold investments in corporate bonds and U.S.
government agency securities to maturity; however, we may sell an investment at any time if the quality rating of
the investment declines, the yield on the investment is no longer attractive, or we have better uses for the cash.
Since we invest primarily in investment securities that are highly liquid with a ready market, we believe the
purchase, maturity, or sale of our investments has no material impact on our overall liquidity.

Other investments, included within other assets, consist of equity and debt investments in privately-held
companies that develop products, markets, and services that are considered to be strategic to us. Each of these
investments had been fully impaired in prior years. On September 1, 2011, we received the proceeds from the
sale of one of these investments of $2.9 million.

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Restricted Cash and Investments

We have restricted investments that are required to be maintained by the synthetic lease of our Foster City office
facility. We are required to maintain cash in LIBOR-based interest-bearing accounts, which fully collateralize
our synthetic lease. We had $56.9 million of restricted investments at December 31, 2011, which was accounted
for as restricted investments within noncurrent assets.

We are also required to maintain restricted cash of $0.8 million related to a customer agreement that was
obtained through the Alphagraph acquisition. The current portion of $0.3 million represents the restriction that
will be released in 2012 and is included in other current assets. The noncurrent portion of $0.5 million is included
in other assets.

Financing Activities

Historically, our recurring cash flows provided by financing activities have been from the receipt of cash from
the issuance of common stock through the exercise of stock options and for ESPP shares. We received proceeds
from the exercise of stock options and employee purchases of ESPP shares of $8.1, $6.7, and $5.9 million
in 2011, 2010, and 2009, respectively. While we may continue to receive proceeds from these plans in future
periods, the timing and amount of such proceeds are difficult to predict and are contingent on a number of factors
including the price of our common stock, the number of employees participating in the plans, and general market
conditions. We anticipate that cash provided from the exercise of stock options may decline over time as we shift
to issuance of RSUs, rather than stock options.

The primary use of funds for financing activities in 2011, 2010, and 2009 was $45.8, $3.6, and $101.1 million,
respectively, of cash used to repurchase outstanding shares of our common stock. In February 2011, our Board of
Directors authorized a $30 million repurchase of our outstanding common stock. In August 2011, our Board of
Directors authorized an additional $30 million repurchase of our outstanding common stock, which is currently
in progress. Common stock repurchases in 2009 included the $30 million ASR, $70 million tender offer, and
repurchase of stock options from certain employees in conjunction with our fair value stock option exchange.
Common stock repurchases includes cash used for net settlement of RSUs and RSAs for employee common
stock related tax liabilities in 2011, 2010, and 2009.

On February 18, 2009, we entered into an agreement with UBS AG, London branch (“UBS”), to repurchase $30
million of our outstanding common stock under the ASR program. In March 2009, 2.8 million shares were
delivered by UBS representing the minimum number of shares to be delivered under the ASR agreement. Upon
the discretion of UBS, the ASR concluded in August 2009 with the delivery of 87 thousand shares. We are not
obligated to issue or transfer any shares to UBS or make any payment to UBS beyond the $30 million payment
made in the first quarter of 2009. Transaction costs of $0.1 million were incurred under the ASR.

In October 2009, our Board of Directors approved the repurchase of $70 million of our common stock through
the use of a “modified Dutch auction” tender offer by utilizing the balance of the previously authorized $100
million share repurchase program. The tender offer closed on December 24, 2009 resulting in the repurchase of
5.5 million shares at a cost of $70.6 million, which included $0.6 million of direct transaction costs. All shares
received from the ASR and the tender offer were recorded as additional treasury stock accounted for under the
cost method, thereby reducing shares outstanding. Our buyback program is limited by SEC regulations and by
compliance with our insider trading policy.

See Item 5—Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of
Equity Securities for further discussion of our common stock repurchase programs.

The synthetic lease agreement for our corporate headquarters provides a residual value guarantee. Under ASC
460, Guarantees, the fair value of a residual value guarantee in lease agreements must be recognized as a liability
in our Consolidated Balance Sheet. We have determined that the guarantee has no material value as of
December 31, 2011.

Other Commitments

Our Fiery inventory consists primarily of raw and finished goods, memory subsystems, processors, and ASICs,
which are sold to third party contract manufacturers responsible for manufacturing our products. Our Inkjet
inventories consist of raw and finished goods, print heads, frames, digital UV ink, and other components in
support of our internal manufacturing operations and solvent ink, which is purchased from third party contract
manufacturers responsible for manufacturing our solvent ink. Should we decide to purchase components and do
our own manufacturing of Fiery controllers, or should it become necessary for us to purchase and sell
components other than processors, ASICs, or memory subsystems to our contract manufacturers, inventory
balances and potentially property and equipment would increase significantly, thereby reducing our available
cash resources. Further, the inventories we carry could become obsolete, thereby negatively impacting our
financial condition and results of operations. We are also reliant on several sole-source suppliers for certain key
components and could experience a further significant negative impact on our financial condition and results of
operations if such supplies were reduced or not available.

We may be required to compensate our subcontract manufacturers for components purchased for orders
subsequently cancelled by us. We periodically review the potential liability and the adequacy of the related
allowance. Our financial condition and results of operations could be negatively impacted if we were required to
compensate our subcontract manufacturers in amounts in excess of the related allowance.

Legal Proceedings

Please refer to Item 3, Legal Proceedings, in this Annual Report on Form 10-K for more information regarding
our legal proceedings.

Contractual Obligations

The following table summarizes our significant contractual obligations at December 31, 2011 and the effect such
obligations are expected to have on our liquidity and cash flows in future periods. This table excludes amounts
already recorded on our balance sheet as liabilities at December 31, 2011, with the exception of acquisition-
related contingent liabilities.

(in thousands)

Operating lease obligations(1)
. . . . . . . . . . . . . . . . . . . . . . . .
Contingent liability(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase obligations(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total

$15,800
8,704
19,633

$ 5,921
5,389
19,633

$ 7,537
3,315
—

$1,796
—
—

Total(3)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$44,137

$30,943

$10,852

$1,796

$546
—
—

$546

Payments due by period

Less than
1 year

Between
1-3 years

Between
3-5 years

More than
5 years

(1)

Lease obligations related to the principal corporate facilities are estimated based on current market interest
rates (LIBOR). See Off-Balance Sheet Financing.

(2) Represents the fair value of acquisition-related contingent consideration. The current fair value is reflected
in our Consolidated Balance Sheets under the caption “accrued and other liabilities” and represents the
portion earned based on realization of 2011 performance targets. The noncurrent fair value is reflected in
our Consolidated Balance Sheets under the caption “contingent and other liabilities” and represents the
present value of the contingent liabilities expected to be earned in subsequent years based on discounted
probability-adjusted revenue.
Excludes contractual obligations recorded on the balance sheet as current liabilities and certain purchase
orders as discussed below.

(3)

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Purchase obligations in the table above include agreements to purchase goods or services that are enforceable,
non-cancellable, and legally binding and that specify all significant terms including: fixed or minimum quantities
to be purchased; fixed, minimum, or variable price provisions; and the approximate timing of the transaction.
Purchase obligations exclude purchase orders for raw materials and other goods and services that are cancelable
without penalty. Our purchase orders are based on our current manufacturing needs and are generally fulfilled by
our vendors within short time horizons. We also enter into contracts for outsourced services; however, the
obligations under these contracts were not significant and the contracts generally contain clauses allowing for
cancellation without significant penalty.

The expected timing of payment for the obligations listed above is estimated based on current information.
Timing of payments and actual amounts paid may be different depending on when the goods or services are
received or changes to agreed-upon amounts for some obligations.

The above table does not reflect unrecognized tax benefits of $35.6 million, the timing of which is uncertain. See
Note 11—Income Taxes of Notes to the Consolidated Financial Statements for additional discussion of
unrecognized tax benefits.

Off-Balance Sheet Financing

Synthetic Lease Arrangements

We guaranteed to the lessor a residual value associated with the building equal to 82% of their funding of the
Lease. Under the financial covenants, we must maintain a minimum net worth and a minimum tangible net worth
as of the end of each quarter. There is an additional covenant regarding mergers. We are liable to the lessor for
the financed amount of the building if we default on our covenants. We were in compliance with all such
financial and merger-related covenants as of December 31, 2011. We have assessed our exposure in relation to
the first loss guarantees under the Lease and have determined there is no deficiency to the guaranteed value at
December 31, 2011. If there is a decline in value, we will record a loss associated with the residual value
guarantee. The $56.9 million pledged under the Lease is in LIBOR-based interest bearing accounts as of
December 31, 2011 and is restricted as to withdrawal at all times. As of December 31, 2011, we are treated as the
owner of this building for federal income tax purposes. In conjunction with the Lease, we leased the land on
which the building is located to the lessor of the building. This separate ground lease is for approximately 30
years. The Lease is scheduled to expire in 2014.

Item 7A: Quantitative and Qualitative Disclosures about Market Risk

The following discussion of our risk management activities includes “forward-looking statements” that involve
risks and uncertainties. Actual results could differ materially from those projected in the forward-looking
statements.

Market Risk

We are exposed to various market risks. Market risk is the potential loss arising from adverse changes in market
rates and prices, general credit, foreign currency exchange rate fluctuation, liquidity, and interest rate risks,
which may be exacerbated by the tightening of the global credit market and increase in economic uncertainty that
have affected various sectors of the financial market and continue to cause credit and liquidity issues. We do not
enter into derivatives or other financial instruments for trading or speculative purposes. We may enter into
financial instrument contracts to manage and reduce the impact of changes in foreign currency exchange rates on
earnings and cash flows. The counterparties to such contracts are major financial institutions. We hedge our
operating expense exposure in Indian rupees. The notional amount of our Indian rupee cash flow hedge was $3.5
million at December 31, 2011. As of December 31, 2011, we had not entered into hedges against any other
currency exposures, but we may consider hedging against movements in other currencies as well as adjusting the
hedged portion of our Indian rupee exposure in the future. See Financial Risk Management below for a
discussion of European market risk.

Interest Rate Risk

Marketable Securities

We maintain an investment portfolio of short-term fixed income debt securities of various holdings, types, and
maturities. These short-term investments are generally classified as available–for-sale and, consequently, are
recorded on the balance sheet at fair value with unrealized gains and losses reported as a separate component of
OCI. We attempt to limit our exposure to interest rate risk by investing in securities with maturities of less than
three years; however, we may be unable to successfully limit our risk to interest rate fluctuations. At any time, a
sharp rise in interest rates could have a material adverse impact on the fair value of our investment portfolio.
Conversely, declines in interest rates could have a material impact on interest earnings for our portfolio. We do
not currently hedge these interest rate exposures.

The following table presents the hypothetical change in fair values in the financial instruments held by us at
December 31, 2011 that are sensitive to changes in interest rates. The modeling technique measures the change in
fair value arising from selected potential changes in interest rates. Market changes reflect immediate hypothetical
parallel shifts in the yield curve of plus or minus 100 basis points over a twelve month time horizon (in
thousands):

Valuation of
securities given an
interest rate
decrease of 100
basis points

$106,647

No change in
interest rates

$105,629

Valuation of
securities given an
interest rate
increase of 100
basis points

$104,611

Foreign Currency Exchange Risk

A large portion of our business is conducted in countries other than the U.S. We are primarily exposed to changes
in exchange rates for the Euro, British pound sterling, Indian rupee, Japanese yen, and Australian dollar.
Although the majority of our receivables are invoiced and collected in U.S. dollars, we have exposure from
non-U.S. dollar-denominated sales (consisting of the Euro, British pound sterling, Japanese yen, Australian
dollar, and New Zealand dollar) and operating expenses (primarily the Euro, British pound sterling, Japanese
yen, Indian rupee, and Australian dollar) in foreign countries. We can benefit from a weaker dollar and we can be
adversely affected from a stronger dollar relative to major currencies world-wide. Accordingly, changes in
exchange rates, and in particular a weakening of the U.S. dollar, may adversely affect our consolidated operating
expenses and operating income (loss) as expressed in U.S. dollars. We hedge our operating expense exposure in
Indian rupees. The notional amount of our Indian rupee cash flow hedge was $3.5 million at December 31, 2011.
As of December 31, 2011, we had not entered into hedges against any other currency exposures, but we may
consider hedging against movements in other currencies as well as adjusting the hedged portion of our Indian
rupee exposure in the future.

Financial Risk Management

As a global concern, we face exposure to adverse movements in foreign currency exchange rates. These
exposures may change over time as business practices evolve and could have a material adverse impact on our
financial results. Our exposures are related to non-U.S. dollar denominated sales in Europe, Japan, the U.K.,
Australia, and New Zealand and are primarily related to operating expenses in Europe, India, Japan, the U.K.,
and Australia. We hedge our operating expense exposure in Indian rupees. As of December 31, 2011, we had not
entered into hedges against any other currency exposures, but we may consider hedging against movements in
other currencies as well as adjusting the hedged portion of our Indian rupee exposure in the future.

We maintain investment portfolio holdings of various issuers, types, and maturities, typically U.S. Treasury and
government-sponsored entity securities, corporate debt instruments, and mortgage-backed instruments. These
short-term investments are classified as available-for-sale and consequently are recorded on the balance sheet at
fair value with unrealized gains and losses reported as a separate component of OCI. These securities are not
leveraged and are held for purposes other than trading.

SEC Division of Corporation Finance Disclosure Guidance Topic 4 (“Guidance Topic 4”), European Sovereign
Debt, encourages registrants to discuss their exposure to the recent intensification of uncertainty in the European
economy. Specifically, registrants are asked to disclose their European debt by counterparty (i.e., sovereign and
non-sovereign) and by country. We have no European sovereign debt investments. Our European debt
investments consist of non-sovereign corporate debt included within money market funds of $20.4 million, which
represents 40% of our money market funds at December 31, 2011. Our European debt investments are with
corporations domiciled in the northern or central European countries of Sweden, Germany, Netherlands,
Switzerland, Norway, France, and the U.K. We have no exposure in southern Europe where the greater risk

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resides. Accordingly, we believe that we do not have significant exposure with respect to our corporate debt
investments in Europe and such investments, which are included within money market funds, meet the definition
of cash equivalents at December 31, 2011.

Since Europe represents a significant portion of our revenue and cash flow, Guidance Topic 4 encourages
disclosure of our European concentrations of credit risk regarding gross receivables, related reserves, and aging
on a region or country basis, and the impact on liquidity with respect to estimated timing of receivable payments.
Since Europe is composed of varied countries and regional economies, our European risk profile is somewhat
more diversified due to the varying economic conditions among the countries. Approximately 29% of our
receivables are with European customers. Of this amount, 13% of our European receivables (4% of consolidated
net receivables) are in the higher risk southern European countries (mostly Italy and Spain), which are not
considered to be material to consolidated net receivables and are adequately reserved.

Item 8: Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets as of December 31, 2011 and 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations for the Years Ended December 31, 2011, 2010, and 2009 . . . . . . . .
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2011, 2010, and

2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows for the Years Ended December 31, 2011, 2010, and 2009 . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unaudited Quarterly Consolidated Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

84
85
86

87
88
89
146

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Electronics For Imaging, Inc.:

In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all
material respects, the financial position of Electronics For Imaging, Inc. and its subsidiaries at December 31, 2011 and 2010,
and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2011 in
conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the
financial statement schedule listed in the accompanying index appearing under Item 15(a)(2) presents fairly, in all material
respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also
in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2011, based on criteria established in Internal Control—Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these
financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on
Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these
financial statements, on the financial statement schedule, and on the Company’s internal control over financial reporting
based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance
about whether the financial statements are free of material misstatement and whether effective internal control over financial
reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal
control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the
risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and
procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As described in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A, management
has excluded Streamline Development, LLC (“Streamline”), Entrac Technologies, Inc. (“Entrac”), Prism Group Holdings
Limited (“Prism”), and alphagraph team GmbH (“Alphagraph”) from its assessment of internal control over financial
reporting as of December 31, 2011 because they were acquired by the Company in purchase business combinations during
2011. We have excluded Streamline, Entrac, Prism, and Alphagraph from our audit of internal control over financial
reporting. Streamline, Entrac, Prism, and Alphagraph are wholly-owned subsidiaries whose total assets and total revenue
represent 6.9% and 1.7%, respectively, of the related consolidated financial statement amounts as of and for the year ended
December 31, 2011.

/S/ PRICEWATERHOUSE COOPERS LLP
San Jose, California
February 17, 2012

Electronics For Imaging, Inc.
Consolidated Balance Sheets

December 31,

2011

2010

(in thousands)

Assets
Current assets:

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term investments, available for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, net of allowances of $12.0 and $13.2 million, respectively . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 120,058
99,100
91,923
44,788
20,792

$ 126,363
103,300
85,453
46,216
24,317

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

376,661
30,096
56,850
164,323
55,992
53,675
2,137

385,649
26,547
56,850
139,517
49,140
47,137
1,741

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 739,734

$ 706,581

Liabilities and Stockholders’ Equity
Current liabilities:

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 46,965
56,236
26,053
2,583

$ 49,189
45,730
24,298
1,182

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contingent and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-current income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

131,837
3,427
4,090
35,597

120,399
619
1,292
32,522

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

174,951

154,832

K
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Commitments and contingencies (Note 8)
Stockholders’ equity:

Preferred stock, $0.01 par value; 5,000 shares authorized; none issued and

outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

Common stock, $0.01 par value; 150,000 shares authorized; 76,565 and 74,456

shares issued and outstanding, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock, at cost, 30,964 and 28,031 shares, respectively . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

766
725,801
(534,400)
1,447
371,169

745
692,904
(488,559)
2,955
343,704

Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

564,783

551,749

Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 739,734

$ 706,581

See accompanying notes to consolidated financial statements.

Electronics For Imaging, Inc.
Consolidated Statements of Operations

(in thousands, except per share amounts)

For the years ended December 31,

2011

2010

2009

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of revenue(1)

$591,556
260,573

$504,007
236,322

$401,108
189,625

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

330,983

267,685

211,483

Operating expenses:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development(1)
Sales and marketing(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of identified intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring and other (Note 14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

115,901
119,487
53,756
11,248
3,258
—

105,769
107,322
38,185
12,385
3,615
685

110,822
102,001
35,033
18,479
8,957
3,208

Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

303,650

267,961

278,500

Income (loss) from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

27,333

(276)

(67,017)

Other income (expense), net:

. . . . . . . . . . . . . . . . . . . . . . . . .
Interest and other income (expense), net:
Gain on sale of building and land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total other income (expense), net

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3,087
—

3,087

Income (loss) before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefit from (provision for) income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

30,420
(2,955)

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 27,465

Net income (loss) per basic common share . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net income (loss) per diluted common share . . . . . . . . . . . . . . . . . . . . . . . . . . .

0.59

0.58

(1,354)
—

(1,354)

(1,630)
9,117

3,061
79,991

83,052

16,035
(18,206)

7,487

$ (2,171)

0.16

(0.04)

Shares used in basic per-share calculation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

46,234

45,387

49,682

Shares used in diluted per-share calculation . . . . . . . . . . . . . . . . . . . . . . . . . . .

47,579

47,152

49,682

(1)

Includes stock-based compensation expense as follows:

Cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,664
5,724
4,133
11,848

984
4,114
3,695
7,132

1,074
6,664
4,233
6,613

2011

2010

2009

See accompanying notes to consolidated financial statements.

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Electronics For Imaging, Inc.
Consolidated Statements of Cash Flows

(in thousands)

Cash flows from operating activities:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income (loss) to net cash provided by (used

for) operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax benefit from employee stock plans . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefit from stock-based compensation . . . . . . . . . . . . . . . . . .
Provision for allowance for bad debts and sales-related allowances . . . . .
Provision for inventory obsolescence . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash asset impairment and restructuring . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of minority investment in a privately held company . . . . . . .
Gain on sale of building and land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-cash charges and credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Changes in operating assets and liabilities, net of effect of acquired

companies:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes payable/receivable, net

Net cash provided by (used for) operating activities . . . . . . . . . . . . . . . . . . . .
Cash flows from investing activities:

Purchases of short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales and maturities of short-term investments . . . . . . . . . .
Purchases, net of proceeds from sales, of property and equipment . . . . . . .
Proceeds from sale of building and land, net of direct transaction costs . .
Businesses purchased, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of minority investment in a privately held

company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from collection of notes receivable from acquired business . . . .
Purchases of other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net cash provided by (used for) investing activities . . . . . . . . . . . . . . . . . . . .
Cash flows from financing activities:

Proceeds from issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of treasury stock and net settlement of restricted stock,

including transaction costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayment of acquired business debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefit from stock-based compensation . . . . . . . . . . . . . . . . . .

For the years ended December 31,

2011

2010

2009

$ 27,465

7,487

(2,171)

18,765
(2,691)
1,426
(2,038)
2,010
6,991
23,369
55
(2,866)
—
1,371

(3,386)
(6,550)
(1,047)
2,529
6,793

72,196

20,943
(4,190)
—
(573)
2,525
5,833
15,925
685
—
—
734

(5,718)
(5,329)
(2,083)
16,836
(9,152)

43,923

29,453
6,806
—
(180)
7,703
4,986
18,583
2,334
—
(79,991)
2,252

9,799
(6,454)
3,325
(23,383)
7,270

(19,668)

(99,155)
101,716
(9,828)
—
(38,436)

(111,619)
105,603
(5,016)
—
(16,448)

(167,465)
127,163
(5,218)
135,802

—

2,866
713
—

—
—
—

—
—
(1,701)

(42,124)

(27,480)

88,581

8,123

6,682

5,876

(45,841)
(210)
2,038

(3,557)
—
573

3,698

155

(101,075)

—
180

(95,019)

Net cash provided by (used for) financing activities . . . . . . . . . . . . . . . . . . . .

(35,890)

Effect of foreign exchange rate changes on cash and cash equivalents . . .

(487)

Increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . . . . .

(6,305)
126,363
$120,058

20,296
106,067
$ 126,363

(26,085)
132,152
$ 106,067

See accompanying notes to consolidated financial statements.

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements

Note 1: The Company and Its Significant Accounting Policies

The Company

We are a world leader in customer-focused digital printing innovation focused on the transformation from a
traditional analog based press to digital on-demand printing.

Our products include color digital print controllers, industrial super-wide, wide format, and label and packaging
digital inkjet printers that utilize our digital ink, and business process automation solutions. Our award-winning
business process automation solutions are integrated from creation to print and are vertically integrated with our
digital industrial inkjet printers and digital UV ink, of which we are the largest world-wide manufacturer. Our
product portfolio includes Fiery digital color print servers; industrial Inkjet products including VUTEk super-
wide and Rastek wide format digital industrial inkjet printers, Jetrion label and packaging digital inkjet printing
systems, and ink for each of these printers; and APPS consisting of print production workflow and business
process automation software, which provides corporate printing solutions, label and packaging solutions, and
mailing and fulfillment solutions for the printing industry. Our integrated solutions and award-winning
technologies are designed to automate print and business processes, streamline workflow, provide profitable
value-added services, and produce accurate digital output.

Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements include the accounts of EFI and our subsidiaries. All
significant intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of the consolidated financial statements requires estimates and judgments that affect the reported
amounts of assets, liabilities, revenue, and expenses, and related disclosure of contingent assets and liabilities.
We evaluate our estimates, including those related to revenue recognition, bad debts, inventories and purchase
commitments, warranty obligations, litigation, restructuring activities, self-insurance, fair value of financial
instruments, stock-based compensation, income taxes, valuation of goodwill and intangible assets, business
combinations, and contingencies on an ongoing basis. Estimates are based on historical and current experience,
the impact of the current economic environment, and various other assumptions believed to be reasonable under
the circumstances at the time of the estimate, the results of which form the basis for making judgments about the
carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ
from these estimates under different assumptions or conditions.

Cash, Cash Equivalents, and Short-term Investments

We invest our excess cash in deposits with major banks; money market securities; and municipal, U.S.
government and sponsored entity, and corporate debt securities. By policy, we invest primarily in high-grade
marketable securities. We are exposed to credit risk in the event of default by the financial institutions or issuers
of these investments to the extent of amounts recorded in the Consolidated Balance Sheet.

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Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

component of OCI, adjusted for deferred income taxes. The credit portion of any other-than-temporary
impairment is included in net income (loss). Realized gains and losses on sales of financial instruments are
recognized upon sale of the investments using the specific identification method.

Investments that we currently own could suffer declines in fair value and become other-than-temporarily
impaired. We review investments in fixed income debt securities for other-than-temporary impairment whenever
the fair value is less than the amortized cost and evidence indicates the investment’s carrying amount is not
recoverable within a reasonable period of time. We assess the fair value of individual securities as part of our
ongoing portfolio management. Our other-than-temporary assessment includes reviewing the length of time and
extent to which fair value has been less than amortized cost, the seniority and durations of the securities, adverse
conditions related to a security, industry, or sector, historical and projected issuer financial performance, credit
ratings, issuer specific news, and other available relevant information. To determine whether an impairment is
other-than-temporary, we consider whether we have the intent to sell the impaired security or if it will be more
likely than not that we will be required to sell the impaired security before a market price recovery and whether
evidence indicating the cost of the investment is recoverable outweighs evidence to the contrary.

We identified one security that was other-than-temporarily impaired at December 31, 2008. As a result of our
adoption of ASC 320-10-65-1, Transition Related to FASB Staff Position FAS 115-2 and FAS 124-2,
Recognition and Presentation of Other-Than-Temporary Impairments, effective in the second quarter of 2009, we
recorded a cumulative effect adjustment of $0.1 million, to reduce the cost of the previously identified security
and retained earnings. In the fourth quarter of 2009, we identified two additional securities that were other-than-
temporarily impaired at December 31, 2009 and recognized impairment losses of $0.2 million in other income
(expense), net. We have determined that gross unrealized losses on short-term investments at December 31, 2011
and 2010 are temporary in nature because each investment meets our investment policy and credit quality
requirements. We have the ability and intent to hold these investments until they recover their unrealized losses,
which may not be until maturity. Evidence that we will recover our investments outweighs evidence to the
contrary.

Restricted Cash

We are required to maintain restricted cash of $0.8 million related to a customer agreement that was obtained
with the Alphagraph acquisition. The current portion of $0.3 million represents the portion of the restriction that
will be released in 2012 and is included in other current assets. The noncurrent portion of $0.5 million is included
in other assets.

Allowance for Doubtful Accounts and Sales-related Allowances

We establish an allowance for doubtful accounts to ensure that trade receivables are not overstated due to
uncollectibility. To ensure that we have established an adequate allowance for doubtful accounts, management
analyzes accounts receivable and historical bad debts, customer concentrations, customer creditworthiness,
current economic trends and macroeconomic conditions, changes in customer payment terms, the length of time
receivables are past due, and significant one-time events. We record specific reserves for individual accounts

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

when we become aware of specific customer circumstances, such as bankruptcy filings, deterioration in the
customer’s operating results or financial position, or potential unfavorable outcomes from disputes with
customers or vendors.

We perform ongoing credit evaluations of the financial condition of our printer manufacturer, third-party
distributor, reseller, and other customers and require collateral, such as letters of credit and bank guarantees, in
certain circumstances. The past due or delinquency status of a receivable is based on the contractual payment
terms of the receivable. The need to write off a receivable balance depends on the age, size, and a determination
of collectibility of the receivable. Balances are written off when we deem it probable that the receivable will not
be recovered.

We make provisions for sales rebates and revenue adjustments based on analysis of current sales programs and
revenue in accordance with our revenue recognition policy.

Concentration of Risk

We are exposed to credit risk in the event of default by any of our customers to the extent of amounts recorded in
the consolidated balance sheet. We perform ongoing evaluations of the collectibility of accounts receivable
balances for our customers and maintain allowances for estimated credit losses. Actual losses have not
historically been significant, but have risen over the past several years as our customer base has grown through
acquisitions.

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Since Europe is composed of varied countries and regional economies, our European risk profile is somewhat
more diversified due to the varying economic conditions among the countries. Approximately 29% of our
receivables are with European customers. Of this amount, 13% of our European receivables (4% of consolidated
net receivables) are in the higher risk southern European countries (mostly Italy and Spain), which are not
considered to be material to consolidated net receivables and are adequately reserved.

We are reliant on certain sole-source suppliers for key components of our products. We conduct our business
with our component suppliers solely on a purchase order basis. Any disruption in the supply of key components
would result in our inability to manufacture our products.

Many of our current Fiery and APPS products include software that we license from Adobe. To obtain licenses
from Adobe, Adobe requires that we obtain quality assurance approvals from them for our products that use
Adobe software. Although to date we have successfully obtained such quality assurance approvals from Adobe,
we cannot be certain Adobe will grant us such approvals in the future. If Adobe does not grant us such licenses or
approvals, if the Adobe licenses are terminated, or if our relationship with Adobe is otherwise materially
impaired, we would likely be unable to manufacture products that incorporate Adobe PostScript® or other Adobe
software.

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

We subcontract with other companies to manufacture our Fiery controllers, certain Inkjet subassemblies, and
solvent ink. We rely on the ability of our subcontractors to manufacture the products sold to our customers. A
high concentration of our Fiery products is manufactured at one subcontractor location. If the subcontractor lost
production capabilities at this facility, we would experience delays in delivering product to our customers. We do
not maintain long-term agreements with our subcontractors, which could lead to an inability of our
subcontractors to fill our orders.

Inventories

Inventories are stated at standard cost, which approximates the lower of actual cost using a first-in, first-out
method, or market. We periodically review our inventories for potential slow-moving or obsolete items and write
down specific items to net realizable value as appropriate. Work-in-process inventories consist of our product at
various levels of assembly and include materials, labor, and manufacturing overhead. Finished goods inventory
represents completed products awaiting shipment.

We estimate potential future inventory obsolescence and purchase commitments to evaluate the need for
inventory reserves. Current economic trends, changes in customer demand, product design changes, product life
and demand, and the acceptance of our products are analyzed to evaluate the adequacy of such reserves. Material
differences may result in changes in the amount and timing of our net income (loss) for any period, if we made
different judgments or utilized different estimates.

Property and Equipment, Net

Property and equipment is recorded at cost. Depreciation is computed using the straight-line method over the
estimated useful lives of the assets. The estimated life for desktop and laptop computers is two years, furniture
has an estimated life of seven years, software is amortized over three to five years, manufacturing and other
equipment has an estimated life of three years, research and development equipment with alternative future uses
has an estimated life of two years, and buildings have an estimated life of forty years. All other assets are
typically considered to have two to ten year lives. Leasehold improvements are amortized using the straight-line
method over the estimated useful lives of the improvements or the lease term, if shorter. Land improvements,
such as parking lots and sidewalks, are amortized using the straight-line method over the estimated useful lives of
the improvements.

When assets are disposed, we remove the asset and accumulated depreciation from our records and recognize the
related gain or loss in our results of operations. The cost and related accumulated depreciation applicable to
property and equipment sold or no longer in service are eliminated from the accounts and any gain or loss is
included in other income (expense), net.

Depreciation expense was $7.4, $8.5, and $10.9 million for the years ended December 31, 2011, 2010, and 2009,
respectively.

Repairs and maintenance expenditures, which are not considered improvements and do not extend the useful life
of property and equipment, are expensed as incurred.

Internal Use Software

We follow the guidance in ASC 350-40, Intangibles—Goodwill and Other—Internal-Use Software. Software
development costs, including costs incurred to purchase third party software, are capitalized beginning when we
determine that certain factors are present, including among others, that technology exists to achieve the

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

performance requirements. The accumulation of software costs to be capitalized ceases when the software is
substantially developed and is ready for its intended use. It is amortized over an estimated useful life of three
years using the straight-line method.

Restricted Investments

Goodwill

Please see Note 5—Goodwill and Long-Lived Asset Impairment of the Notes to Consolidated Financial
Statements.

Long-lived Assets, including Intangible Assets

Intangible assets are evaluated for impairment based on their estimated future undiscounted cash flows. Based on
this analysis, no impairment of intangible assets, excluding goodwill, was recognized in 2011, 2010, or 2009.

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Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Intangible assets acquired to date are being amortized on a straight-line basis over periods ranging from 2 to 18
years. No changes have been made to the useful lives of amortizable identifiable intangible assets in 2011 or
2010. The shortening of the useful lives of certain trademarks during 2009 resulted in a $1.1, $1.1, and $0.6
million impact on amortization expense for the years ended December 31, 2011, 2010, and 2009, respectively.
Intangible amortization expense was $11.2, $12.4, and $18.5 million for the years ended December 31, 2011,
2010, and 2009, respectively.

The process of assessing whether a particular equity or debt investment’s fair value is less than its carrying cost
requires a significant amount of judgment due to the lack of a mature and stable public market for these
securities. In making this judgment, we carefully consider the investee’s most recent financial results, cash
position, recent cash flow data, projected cash flows (both short and long-term), financing needs, recent
financing rounds, most recent valuation data, the current investing environment, management or ownership
changes, and competition. This analysis is based primarily on information that we request and receive from these
privately-held companies and is performed on a quarterly basis. Although we evaluate all of our privately-held
equity and debt investments for impairment based on this criteria, each investment’s fair value is only estimated
when events or changes in circumstances have occurred that may have a significant effect on its fair value
(because the fair value of each investment is not readily determinable). Where these factors indicate that the
equity investment’s fair value is less than its carrying cost, and where we consider such diminution in value to be
other than temporary, we record an impairment charge to reduce such equity investment to its estimated fair
value.

We previously assessed each investment’s technology pipeline and market conditions in the industry and
determined it is no longer probable that they will generate sufficient positive future cash flows to recover the full
carrying amount of the investment. As such, we recognized an impairment charge of $6.1 million. During the
second quarter of 2010, we further assessed each remaining investment’s ability to sustain an earnings capacity
that would justify the carrying amount of the investment in accordance with ASC 323-10-35-32. Based on this
assessment, we impaired the remaining carrying value of these investments of $0.3 million.

Our consolidated results of operations for the year ended December 31, 2009 include, as a component of other
income (expense), net, our share of the net losses of equity method investees of $1.4 million. On September 1,
2011, we received the proceeds from the sale of one of these investments of $2.9 million.

Please see Note 5—Goodwill and Long-Lived Asset Impairment of the Notes to Consolidated Financial
Statements.

Fair Value of Financial Instruments

The carrying amounts of our financial instruments, including cash, cash equivalents, accounts receivable,
restricted investments, accounts payable, and accrued liabilities, approximate their respective fair market values
due to the short maturities of these financial instruments. The fair value of our available-for-sale securities,
contingent acquisition-related liabilities, self-insurance liability, and derivative instruments are disclosed in Note
6—Investments and Fair Value Measurements of the Notes to Consolidated Financial Statements.

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Warranty

Our Fiery controller and Inkjet printer products are generally accompanied by a 12-month limited warranty from
date of shipment, which covers both parts and labor. In accordance with ASC 450-30, Loss Contingencies, an
accrual is required when the warranty liability is estimable and probable based on historical experience. A
provision for estimated future warranty work is recorded in cost of revenue when revenue is recognized.

Research and Development

Research and development costs were $115.9, $105.8, and $110.8 million for the years ended December 31,
2011, 2010, and 2009, respectively. We expense research and development costs associated with new software
products as incurred until technological feasibility is established. Research and development costs include
salaries and benefits of researchers, supplies, and other expenses incurred from research and development efforts.
To date, we have not capitalized research and development costs associated with software development as
products and enhancements have generally reached technological feasibility and have been released for sale at
substantially the same time.

Revenue Recognition

We derive our revenue primarily from product revenue, which includes hardware (controllers, design-licensed
solutions including upgrades, digital industrial inkjet printers including components replaced under maintenance
agreements, and ink), software licensing and development, and royalties. We receive service revenue from
software license maintenance agreements, customer support, training, and consulting.

We recognize revenue on the sale of controllers, printers, and ink in accordance with the provisions of SAB 104,
and when applicable, ASC 605-25. As such, revenue is generally recognized when persuasive evidence of an
arrangement exists, the product has been delivered or services have been rendered, the fee is fixed or
determinable, and collection of the resulting receivable is reasonably assured.

•

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Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

•

if title is retained until payment is received, revenue is recognized when title is passed upon receipt of
payment;

if the sales arrangement is classified as an operating lease, revenue is recognized ratably over the lease
term; or

We deferred an immaterial amount of revenue during the years ended December 31, 2011, 2010, and 2009
because a portion of the customer payment was contingent upon installation.

We license our software primarily under perpetual licenses. Revenue from software consists of software
licensing, post-contract customer support, and professional consulting. We apply the provisions of ASC 985-605
and, if applicable, SAB 104 and ASC 605-25, to all transactions involving the sale of software products and
hardware transactions where the software is not incidental.

Multiple-Deliverable Arrangements

In September 2009, the FASB ratified EITF consensuses reflected in ASU 2009-13, Multiple-Deliverable
Revenue Arrangements (ASC 605), and ASU 2009-14, Certain Revenue Arrangements That Include Software
Elements (ASC 985-605). We adopted these provisions as of the beginning of fiscal 2011 for new and materially
modified transactions originating after January 1, 2011.

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

ASU 2009-13 eliminated the residual method of allocating revenue in multiple deliverable arrangements. In
accordance with ASU 2009-13, we recognize revenue in multiple element arrangements involving tangible
products containing software and non-software components that function together to deliver the product’s
essential functionality by applying the relative selling price method of allocation. The selling price for each
element is determined using VSOE, when available (including post-contract customer support, professional
services, hosting, and training), or TPE is used. If VSOE and TPE are not available, then the BESP is used when
applying the relative selling price method for each unit of accounting. When the arrangement includes software
and non-software elements, revenue is first allocated to the non-software and software elements as a group based
on their relative selling price in accordance with ASC 605-25. Thereafter, the relative selling price allocated to
the software elements as a group is further allocated to each unit of accounting in accordance with ASC 985-605.
We then defer revenue with respect to the relative selling price that was allocated to any undelivered element.

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Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Subscription Arrangements

Long-term Contracts Involving Substantial Customization

We previously followed the completed contract method of revenue recognition on long-term contracts involving
substantial customization. During the quarter ended September 30, 2010, we established the ability to produce
estimates sufficiently dependable to require adoption of the percentage of completion method with respect to
certain fixed price contracts.

Revenue on certain fixed price contracts where we provide information technology system development and
implementation services is recognized over the contract term based on the percentage of development and
implementation services that are provided during the period compared with the total estimated development and
implementation services to be provided over the entire contract using guidance from ASC 605-35. These services
require that we perform significant, extensive, and complex design, development, modification, or
implementation activities of our customers’ systems. Performance will often extend over long periods, and our
right to receive future payment depends on our future performance in accordance with these agreements.

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Deferred Revenue and Related Deferred Costs

Shipping and Handling Costs

Amounts billed to customers for shipping and handling costs are included in net sales. Shipping and handling
costs are charged to cost of revenue as incurred.

Advertising

Advertising costs are expensed as incurred. Total advertising and promotional expenses were $4.8, $5.2, and $3.7
million for the years ended December 31, 2011, 2010, and 2009, respectively. The decrease in advertising
expense for the year ended December 31, 2011 is offset by increased trade show spending.

Income Taxes

We account for income taxes under the provisions of ASC 740, which requires that deferred tax assets and
deferred tax liabilities be determined based on the differences between the financial statement and tax bases of
assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to
reverse. We estimate our actual current tax expense and the temporary differences resulting from differing
treatment of items, such as deferred revenue, for tax and financial accounting purposes. These differences result
in deferred tax assets and liabilities, which are included in our Consolidated Balance Sheets.

We assess the likelihood that our deferred tax assets will be recovered from future taxable income by considering
both positive and negative evidence relating to their recoverability. If we believe that recovery of these deferred
tax assets is not more likely than not, we establish a valuation allowance. Significant judgment is required in
determining any valuation allowance recorded against deferred tax assets. In assessing the need for a valuation
allowance, we considered all available evidence, including past operating results, projections of future taxable
income, our ability to utilize loss and credit carryforwards, and the feasibility of tax planning strategies. Other
than a valuation allowance on foreign tax credits resulting from the 2003 acquisition of Best GmbH,
compensation deductions potentially limited by IRC 162(m), and net operating loss carryforwards resulting from
the 2010 Radius acquisition, we have determined that it is more likely than not that we will realize the benefit
related to all other deferred tax assets. To the extent we increase a valuation allowance in a period, we include an
expense within the tax provision in the Consolidated Statement of Operations in the period in which the
determination is made.

In accordance with ASC 740-10-25-5 through 17, we account for uncertainty in income taxes by recognizing a
tax position only when it is more likely than not that the tax position, based on its technical merits, will be
sustained upon ultimate settlement with the applicable tax authority. The tax benefit to be recognized is the
largest amount of tax benefit that is greater than fifty percent likely of being realized upon ultimate settlement
with the applicable tax authority that has full knowledge of all relevant information.

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Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Business Combinations

We allocate the purchase price of acquired companies to the tangible and intangible assets acquired, including
IPR&D, and liabilities assumed based on their estimated fair values. Such a valuation requires management to
make significant estimates and assumptions, especially with respect to intangible assets. The results of operations
for each acquisition are included in our financial statements from the date of acquisition.

Effective in 2009, ASC 805 retained the fundamental requirement that the acquisition method of accounting be
used for all business combinations with the following changes: an acquirer records 100% of assets and liabilities
of the acquired business, including goodwill, at fair value, regardless of the level of interest acquired; certain
contingent assets and liabilities are recognized at fair value at the acquisition date; contingent consideration is
recognized at fair value at the acquisition date with changes in fair value recognized in earnings as assumptions
are updated or upon settlement; IPR&D is recognized at fair value at the acquisition date subject to amortization
after product launch or otherwise subject to impairment; acquisition-related transaction and restructuring costs
are expensed as incurred; reversals of valuation allowances related to acquired deferred tax assets and liabilities
and changes to acquired income tax uncertainties are recognized in earnings; and when making adjustments to
finalize preliminary accounting, acquirers revise any previously issued post-acquisition financial information in
future financial statements to reflect any adjustments as if they occurred on the acquisition date.

On December 6, 2011, we acquired Alphagraph, which provides business process automation solutions for the
graphic arts industry. On August 2, 2011, we acquired Prism, which is a provider of business process automation
software for the printing and packaging industry including automated shop floor management and work in
progress tracking. On July 25, 2011, we acquired Entrac, which provides self-service and payment solutions for
business services including mobile printing. On February 16, 2011, we acquired Streamline, the provider of
PrintStream business process automation software, which we acquired to establish our presence in mailing and
fulfillment services for the printing industry. On July 2, 2010, we acquired Radius to establish our presence in the
label and packaging industry.

Liability for Self-Insurance

Beginning in 2011, we are partially self-insured for certain losses related to employee medical and dental
coverage, excluding employees covered by health maintenance organizations. We generally have an individual
stop loss deductible of $125,000 per enrollee unless specific exposures are separately insured. We have accrued a
contingent liability of $1.6 million as of December 31, 2011, which is not discounted, based on an examination
of historical trends, our claims experience, industry claims experience, actuarial analysis, and estimates. The
primary estimates used in the development of our accrual at December 31, 2011 include total enrollment
(including employee contributions), population demographics, and historical claims costs incurred. Although we
do not expect that we will ultimately pay claims significantly different from our estimates, self-insurance
reserves could be affected if future claims experience differs significantly from our historical trends and
assumptions.

100

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Stock-Based Compensation

We adopted the fair value recognition provisions of ASC 718 using the modified prospective transition method.
Under this transition method, stock-based compensation expense in 2011, 2010, and 2009 includes compensation
expense for all stock-based payment awards granted prior to, but not yet vested, as of January 1, 2006 based on
the grant date fair value estimated in accordance with the original provisions of ASC 718 prior to amendment.
Stock-based compensation expense for all stock-based payment awards granted after January 1, 2006 is based on
the grant date fair value estimated in accordance with the provisions of ASC 718. We recognize these
compensation costs using the graded vesting method over the requisite service period, after assessing the
probability of achieving requisite performance criteria with respect to performance-based awards. Stock-based
compensation expense is recognized over the requisite service period for each separately vesting tranche as
though each award were, in substance, multiple awards.

ASC 718 requires forfeitures to be estimated at the time of grant and revised on a cumulative basis, if necessary,
in subsequent periods if actual forfeitures differ from those estimates. We use historical data and future
expectations of employee turnover to estimate forfeitures. The tax benefit resulting from tax deductions in excess
of the tax benefits related to stock-based compensation expense recognized for those awards are classified as
financing cash flows.

Our determination of the fair value of stock-based payment awards on the date of grant using an option pricing
model is affected by various assumptions including volatility, expected term, and interest rates. Expected
volatility is based on the historical volatility of our stock over a preceding period commensurate with the
expected term of the option. The expected term is based on management’s consideration of the historical life of
the options, the vesting period of the options granted, and the contractual period of the options granted. The risk-
free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time
of grant. Expected dividend yield was not considered in the option pricing formula since we do not pay dividends
and have no current plans to do so in the future.

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Foreign Currency Translation

In preparing our consolidated financial statements, we must remeasure and translate balance sheet and income
statement amounts into U.S. dollars. Foreign currency assets and liabilities are remeasured from the transaction
currency into the functional currency at current exchange rates, except for non-monetary assets and capital
accounts, which are remeasured at historical exchange rates. Revenue and expenses are remeasured at monthly
exchange rates, which approximate average exchange rates in effect during each period. Gains or losses from
foreign currency remeasurement are included in other income (expense), net. Net gains or losses resulting from
foreign currency transactions, including hedging gains and losses, are reported in other income (expense), net,
and were a gain (loss) of $(1.2), $(3.4), and $0.2 million for the years ended December 31, 2011, 2010, and 2009,
respectively.

Based on our assessment of the salient economic indicators discussed in ASC 830-10-55-5, we consider the U.S.
dollar to be the functional currency for each of our international subsidiaries except for our German subsidiaries,
EFI GmbH and Alphagraph, for which we consider the Euro to be the subsidiaries’ functional currency, our
Japanese subsidiary, Electronics For Imaging Japan KK, for which we consider the Japanese yen to be the

101

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

subsidiary’s functional currency, and our U.K. subsidiaries, Electronics For Imaging United Kingdom Limited
and Prism Group Holdings Limited (U.K.), for which we consider the British pound sterling to be the
subsidiaries’ functional currency.

Computation of Net Income (Loss) per Common Share

Net income (loss) per basic common share is computed using the weighted average number of common shares
outstanding during the period, excluding non-vested restricted stock. Net income (loss) per diluted common share
is computed using the weighted average number of common shares and dilutive potential common shares
outstanding during the period. Potential common shares result from the assumed exercise of outstanding common
stock options having a dilutive effect using the treasury stock method, from non-vested shares of restricted stock
having a dilutive effect, from shares to be purchased under the ESPP having a dilutive effect, and from
non-vested restricted stock for which the performance criteria have been met. Any potential shares that are anti-
dilutive as defined in ASC 260, Earnings Per Share, are excluded from the effect of dilutive securities.

ASC 260-10-45-48 requires that performance-based and market-based restricted stock that would be issuable if
the end of the reporting period were the end of the vesting period, if the result would be dilutive, are assumed to
be outstanding for purposes of determining net income (loss) per diluted common share as of the later of the
beginning of the period or the grant date.

Accounting for Derivative Instruments and Risk Management

We are exposed to market risk and foreign currency exchange risk from changes in foreign currency exchange
rates, which could affect operating results, financial position, and cash flows. We manage our exposure to these
risks through our regular operating and financing activities and, when appropriate, through the use of derivative
financial instruments. These derivative financial instruments are used to hedge economic exposures as well as
reduce earnings and cash flow volatility resulting from shifts in market rates. Our objective is to offset gains and
losses resulting from these exposures with losses and gains on the derivative contracts used to hedge them,
thereby reducing volatility of earnings or protecting fair values of assets and liabilities. We do not have any
leveraged derivatives, nor do we use derivative contracts for speculative purposes. ASC 815, Derivatives and
Hedging, requires the fair value of all derivative instruments, including those embedded in other contracts, to be
recorded as assets or liabilities in our consolidated balance sheet. As permitted, foreign exchange contracts with
notional amounts of $3.5 and $2.5 million and net asset/liability fair values that are immaterial have been
designated for hedge accounting treatment at December 31, 2011 and 2010, respectively. The related cash flow
impacts of our derivative contracts are reflected as cash flows from operating activities.

Our exposures are related to non-U.S. dollar-denominated sales in Europe, Japan, the U.K., Australia, and New
Zealand and are primarily related to operating expenses in Europe, India, Japan, the U.K., and Australia. We
hedge our operating expense exposure in Indian rupees. As of December 31, 2011, we had not entered into
hedges against any other currency exposures, but we may consider hedging against movements in other
currencies as well as adjusting the hedged portion of our Indian rupee exposure in the future.

By their nature, derivative instruments involve, to varying degrees, elements of market and credit risk. The
market risk associated with these instruments resulting from currency exchange movement is expected to offset
the market risk of the underlying transactions, assets, and liabilities being hedged (e.g., operating expense
exposure in Indian rupees). We do not believe there is a significant risk of loss from non-performance by the
counterparties associated with these instruments because these transactions are executed with a diversified group
of major financial institutions. Further, by policy we deal with counterparties having a minimum investment
grade or better credit rating. Credit risk is managed through the continuous monitoring of exposures to such
counterparties.

102

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Foreign currency derivative contracts with notional amounts of $3.5 and $2.5 million have been designated as
cash flow hedges of our Indian rupee operating expense exposure at December 31, 2011 and 2010, respectively.
The changes in fair value of these contracts are reported as a component of OCI and reclassified to operating
expense in the periods of payment of the hedged operating expenses. The amount of ineffectiveness that was
recorded in the consolidated statement of operations for these designated cash flow hedges was immaterial. All
components of each derivative’s gain or loss were included in the assessment of hedge effectiveness. As of
December 31, 2011, the net asset/liability fair value of these contracts was immaterial.

Variable Interest Entities

Our synthetic lease and minority investments in privately held companies could be considered to be variable
interest entities. In accordance with the Variable Interest Entities (“VIE”) sub-section of ASC 810,
Consolidation, effective January 2010, we perform a formal assessment at each reporting period regarding which
party within the VIE is considered the primary beneficiary. A qualitative approach is performed to identify the
primary beneficiary of a VIE based on the power to direct activities that most significantly impact the economic
performance of the entity and the obligation to absorb losses or right to receive benefits that could be significant
to us.

We currently do not have any arrangements that meet the definition of a VIE in accordance with the scope
exception contained within ASC 810-10-15-17d.

Recent Accounting Pronouncements

Fair Value Measurements. As a basis for considering market participant assumptions in fair value
measurements, ASC 820 establishes a three-tier fair value hierarchy as more fully defined in Note 6, Investments
and Fair Value Measurements. In January 2010, the FASB issued ASU 2010-06, Improving Disclosures about
Fair Value Measurements, which amends ASC 820 to add two new disclosures: (1) transfers in and out of Level
1 and 2 measurements and the reasons for the transfers, and (2) a gross presentation of activity within the Level 3
rollforward. The ASU also includes clarifications to existing disclosure requirements on the level of
disaggregation and disclosures regarding inputs and valuation techniques. The ASU was effective in the first
quarter of 2010, except for the gross presentation of the Level 3 rollforward, which was effective the first quarter
of 2011. Accordingly, the appropriate disclosures have been included in the accompanying condensed
consolidated financial statements.

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In May 2011, the FASB issued ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and
Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (“IFRS”). Effective in
the first quarter of 2012, the primary provisions of ASU 2011-04 impacting us are the adoption of uniform
terminology within U.S. GAAP and IFRS to reference fair value concepts, measuring the fair value of an equity
instrument used as consideration in a business combination, and the following additional disclosures concerning
fair value measurements classified as Level 3 within the fair value hierarchy:

•

quantitative information about the unobservable inputs used in the determination of Level 3 fair value
measurements,

the valuation processes used in Level 3 fair value measurements, and

the sensitivity of Level 3 fair value measurements to changes in unobservable inputs and the
interrelationships between those unobservable inputs.

We are currently evaluating the impact of ASU 2011-04 on our financial condition and results of operations.

103

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Comprehensive Income. In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income.
Effective in the first quarter of 2012, we will have the option to present total comprehensive income (loss), the
components of net income (loss), and the components of other comprehensive income (loss) either in a single
continuous statement of comprehensive income (loss) or in two separate, but consecutive, statements. We
currently present the components of other comprehensive income (loss) in the footnotes to our interim and annual
financial statements and as a component of our statement of stockholders’ equity in our annual financial
statements.

Receivables. In July 2010, the FASB issued ASU 2010-20, which amended ASC 310, Receivables, and requires
increased disclosures regarding the credit quality of our financing receivables and allowance for credit losses.
ASU 2010-20 requires disclosure of credit quality indicators, past due information, and modifications of our
financing receivables. The disclosures are effective for interim and annual reporting periods beginning after
December 15, 2010. Our financing receivables consist of $0.3 million of trade receivables having a contractual
maturity in excess of one year as of December 31, 2011. We do not expect to enter into receivables with similar
terms in the future.

Goodwill Impairment Assessment. In September 2011, the FASB issued new accounting guidance that
simplifies goodwill impairment testing. The new guidance allows a qualitative assessment to be performed to
determine whether further impairment testing is necessary. We will adopt this accounting standard on its
effective date for the year ended December 31, 2012.

Supplemental Cash Flow Information

(in thousands)

For the years ended December 31,

2011

2010

2009

Supplemental disclosure of cash flow information:
Cash paid for interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net cash paid (refunded) for income taxes . . . . . . . . . . . . . . . . . . . . .

$ (2,998)

$ 4,128

$3,171

Acquisition related activities:
Cash paid for acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash acquired in acquisitions, excluding restricted cash . . . . . . . . . . .

$39,990
(1,554)

$16,747
(299)

Net cash paid for acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$38,436

$16,448

$ —
—

$ —

Note 2: Earnings Per Share

Net income (loss) per basic common share is computed using the weighted average number of common shares
outstanding during the period, excluding non-vested restricted stock. Net income (loss) per diluted common share
is computed using the weighted average number of common shares and dilutive potential common shares
outstanding during the period. Potential common shares result from the assumed exercise of outstanding common
stock options having a dilutive effect using the treasury stock method, from non-vested shares of restricted stock
having a dilutive effect, from shares to be purchased under our ESPP having a dilutive effect, and from
non-vested restricted stock for which the performance criteria have been met. Any potential shares that are anti-
dilutive as defined in ASC 260 are excluded from the effect of dilutive securities.

104

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

beginning of the period or the grant date. Accordingly, performance-based RSUs, which vested on March 2, 2011
based on achievement of specified performance criteria related to 2010 revenue and non-GAAP operating
income targets; performance-based RSAs, which vested on March 15, 2011 based on achievement of a specified
percentage of the 2010 operating plan; market-based RSUs, which vested on various dates during the year ended
December 31, 2011 based on achievement of specified stock prices for a defined period; and performance-based
RSUs, which will vest on various dates in February 2012 based on achievement of specified performance criteria
related to 2011 revenue and non-GAAP operating income targets; are included in the determination of net
income (loss) per diluted common share as of the beginning of the period. Performance-based and market-based
targets were not met with respect to any other stock options or RSUs as of December 31, 2011.

Basic and diluted earnings per share for the years ended December 31, 2011, 2010, and 2009 are reconciled as
follows (in thousands, except for per share amounts):

For the years ended December 31,

2011

2010

2009

Basic net income (loss) per share:
Net income (loss) available to common shareholders . . . . . . . . . . . .

$27,465

$ 7,487

$ (2,171)

Weighted average common shares outstanding . . . . . . . . . . . . . . . . .
Basic net income (loss) per share . . . . . . . . . . . . . . . . . . . . . . . . . . . .

46,234
0.59

45,387
0.16

49,682
$ (0.04)

Dilutive net income (loss) per share:
Net income (loss) available to common shareholders . . . . . . . . . . . .

$27,465

$ 7,487

$ (2,171)

Weighted average common shares outstanding . . . . . . . . . . . . . . . . .
Dilutive stock options and non-vested restricted stock . . . . . . . . . . .

46,234
1,345

45,387
1,765

49,682
—

Weighted average common shares outstanding for purposes of

computing diluted net income (loss) per share . . . . . . . . . . . . . . .

47,579

47,152

49,682

Dilutive net income (loss) per share . . . . . . . . . . . . . . . . . . . . . . . . . .

0.58

0.16

$ (0.04)

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Potential shares of common stock that are not included in the determination of diluted net income (loss) per share
because they are anti-dilutive for the periods presented consist of weighted stock options, non-vested restricted
stock, and shares to be purchased under our ESPP having an anti-dilutive effect, excluding any performance-
based or market-based stock options and RSUs for which the performance criteria were not met, of 2.2, 2.3, and
5.5 million shares for the years ended December 31, 2011, 2010, and 2009, respectively.

ASC 260-10-45 to 65 requires use of the two-class method to calculate earnings per share when non-vested RSAs
are eligible to receive dividends (i.e., participating securities), even if we do not intend to declare dividends. Our
RSAs vested on March 15, 2011 based on achievement of a specified percentage of the 2010 operating plan.
Consequently, there were no RSAs outstanding at December 31, 2011. There were only 101 thousand weighted
average non-vested restricted stock awards eligible to receive dividends for the year ended December 31, 2010;
consequently, the impact on net income per diluted common share in applying the two-class method for the year
ended December 31, 2010 was not material. We incurred a net loss in 2009; consequently, the two-class method
is not applicable to 2009 since non-vested restricted stockholders do not “participate” in net losses.

Note 3: Acquisitions

We acquired Alphagraph, Prism, Entrac, and Streamline during 2011, while Radius was acquired in 2010. These
acquisitions were accounted for as purchase business combinations. In accordance with ASC 805, the purchase

105

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

price has been allocated to the tangible and identifiable intangible assets acquired and liabilities assumed on the
basis of their estimated fair values on the acquisition date based on the valuation performed by management with
the assistance of a third party. Excess purchase consideration was recorded as goodwill. Factors contributing to a
purchase price that results in goodwill include, but are not limited to, the retention of research and development
personnel with skills to develop future technology, support personnel to provide maintenance services related to
the products, a trained sales force capable of selling current and future products, the opportunity to cross-sell
Streamline and Radius products to existing customers, the opportunity to sell PrintSmith, Pace, Monarch, and
Radius products to Alphagraph and Prism customers, and the positive reputation of each of these companies in
the market.

We engaged a third party valuation firm to aid management in its analyses of the fair value of these acquired
businesses. All estimates, key assumptions, and forecasts were either provided by or reviewed by us. While we
chose to utilize a third party valuation firm, the fair value analyses and related valuations represent the
conclusions of management and not the conclusions or statements of any third party. The purchase price
allocations are subject to change within the respective measurement periods as valuations are finalized. We
expect to continue to obtain information to assist us in finalizing the fair value of the net assets acquired at the
respective acquisition dates during the respective measurement periods. Measurement period adjustments
determined to be material will be applied retrospectively to the appropriate acquisition date in our consolidated
financial statements and, depending on the nature of the adjustments, our operating results subsequent to the
acquisition period could be affected.

alphagraph team GmbH

On December 6, 2011, we purchased privately-held Alphagraph, a German company headquarterd in Essen,
Germany, for approximately $9.5 million, net of cash acquired, plus an additional future cash earnout, which is
contingent on achieving certain performance targets. Alphagraph provides business process automation solutions
for the graphic arts industry. Support and operations of Alphagraph will be integrated into the APPS operating
segment, which will provide PrintSmith, Pace, Monarch, and Radius products, while continuing to support
existing Alphagraph customers.

The fair value of the earnout is currently estimated to be $2.5 million by applying the income approach in
accordance with ASC 805-30-25-5. Key assumptions include a discount rate of 4.9% and a probability-adjusted
level of Alphagraph revenue. Probability-adjusted revenue is a significant input that is not observable in the
market, which ASC 820-10-35 refers to as a Level 3 input. This contingent liability is reflected in the
Consolidated Balance Sheet as of December 31, 2011, as a current and noncurrent liability of $1.3 and $1.2
million, respectively.

Prism Group Holdings Limited

On August 2, 2011, we purchased privately held Prism, a U.K. limited liability company, the parent holding
company of Prism Group Holdings Limited, Prism USA Holdings, Inc., and QTMS 2006 Limited (UK)
(“Prism”), for cash consideration of approximately $11.5 million, net of cash acquired. Headquartered in New
Zealand, Prism is a provider of business process automation software for the printing and packaging industry
including automated shop floor management and work in progress tracking. Support and operations of Prism will
be integrated into the APPS operating segment, which will provide PrintSmith, Pace, Monarch, and Radius
products, while continuing to support existing Prism customers.

106

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Entrac Technologies, Inc.

On July 25, 2011, we purchased privately-held Entrac, a Canadian company headquartered near Toronto,
Canada, which was a subsidiary of GLIC Corporation Limited, for cash consideration of approximately $6.4
million, net of cash acquired, plus an additional future cash earnout contingent on achieving certain performance
targets. Entrac provides self-service and payment solutions for business services including mobile printing and
has been incorporated into the Fiery operating segment.

The fair value of the earnout is currently estimated to be $2.8 million by applying the income approach in
accordance with ASC 805-30-25-5. Key assumptions include a discount rate of 5.8% and a probability-adjusted
level of Entrac revenue. Probability-adjusted revenue is a significant input that is not observable in the market,
which ASC 820-10-35 refers to as a Level 3 input. This contingent liability is reflected in the Condensed
Consolidated Balance Sheet as of December 31, 2011, as a current and noncurrent liability of $1.4 and $1.4
million, respectively.

Streamline Development, LLC

On February 16, 2011, we purchased privately-held Streamline for cash consideration of approximately $6.8
million, net of cash acquired, plus an additional future cash earnout contingent on achieving certain performance
targets. Streamline is the provider of PrintStream business process automation software, which we acquired to
establish our APPS operating segment presence in mailing and fulfillment services for the printing industry.

The fair value of the earnout is currently estimated to be $1.3 million by applying the income approach in
accordance with ASC 805-30-25-5. Key assumptions include a discount rate of 6.1% and a probability-adjusted
level of Streamline revenue. Probability-adjusted revenue is a significant input that is not observable in the
market, which ASC 820-10-35 refers to as a Level 3 input. This contingent liability has been reflected in the
Condensed Consolidated Balance Sheet as of December 31, 2011, as a current and noncurrent liability of $0.5
and $0.8 million, respectively.

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Radius Solutions Incorporated

On July 2, 2010, we purchased privately held Golflane, a U.K. private limited company, the parent holding
company of Radius, for approximately $14.1 million, net of cash acquired, plus an additional future cash earnout
contingent on achieving certain performance targets. Radius is a print management software company
headquartered in Chicago, Illinois, that provides business process automation solutions for the label and
packaging industry and has been incorporated into our APPS operating segment.

The fair value of the earnout was estimated to be $2.3 million by applying the income approach in accordance
with ASC 805-30-25-5. Key assumptions included a discount rate of 6.3% and probability-adjusted level Radius
revenues. Probability-adjusted revenue is a significant input that is not observable in the market, which ASC
820-10-35 refers to as a Level 3 input. As of December 31, 2011, approximately $4.2 million had been earned
against the earnout. The $1.9 million excess above the valuation at the acquisition date was expensed as a
component of general and administrative expense in accordance with ASC 805.

107

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Valuation Methodology

Intangible assets acquired consist of customer relationships, trade names, existing technology, and IPR&D. Each
intangible asset valuation methodology assumes a discount rate between 15% and 23%.

Alphagraph, Prism, Streamline, and Radius customer relationships were valued using the excess earnings
method, which is an income approach. The value of customer relationships lies in the generation of a consistent
and predictable revenue source and the avoidance of the costs associated with developing the relationships.
Customer relationships were valued by estimating the revenue attributable to existing customer relationships,
probability-weighted in each forecast year to reflect the uncertainty of maintaining existing relationships based
on historical attrition rates.

Entrac customer relationships were valued based on the “with and without” method, which is an income
approach. Customer relationships were valued by assessing the profitability improvement resulting from the
acquisition of Entrac’s customer relationships assuming that it would take us four years to develop these
relationships on our own, assuming reasonable customer development costs. Revenue was also probability-
weighted in each forecast year to reflect the uncertainty of maintaining these acquired relationships based on
historical attrition rates.

Alphagraph, Prism, Streamline (PrintStream), and Radius trade names were valued using the relief from royalty
method with royalty rates based on various factors including an analysis of market data, comparable trade name
agreements, and consideration of historical advertising dollars spent supporting the trade names.

Alphagraph, Prism, Streamline, and Radius existing technology and IPR&D were valued using the relief from
royalty method based on royalty rates for similar technologies. Entrac existing technology and IPR&D were
valued using the excess earnings method. The value of existing technology is derived from consistent and
predictable revenue, including the opportunity to cross-sell Prism, Entrac, and Streamline products to existing
customers, and the avoidance of the costs associated with developing the technology. Revenue related to existing
technology was adjusted in each forecast year to reflect the evolution of the technology.

Using each of these methodologies, the value of IPR&D was determined by estimating the cost to develop
purchased IPR&D into commercially viable products, estimating the net cash flows resulting from the sale of
those products, and discounting the net cash flows back to their present value. Project schedules were based on
management’s estimate of tasks completed and tasks to be completed to achieve technical and commercial
feasibility.

Discount rate for IPR&D . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IPR&D percent complete at acquisition date . . . . . . . . . . . . . .
IPR&D percent complete at December 31, 2011 . . . . . . . . . . .

23%
20%
22%
50% 48-79% 78-89%
95% 87-95% 92-98%

Prism

Entrac

Streamline

108

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

The preliminary allocation of the purchase price to the assets acquired and liabilities assumed (in thousands) with
respect to each of these acquisitions at their respective acquisition dates is summarized as follows:

Alphagraph

Prism

Entrac

Streamline

Radius

Weighted
average
useful life

Purchase
Price
Allocation

Weighted
average
useful life

Purchase
Price
Allocation

Weighted
average
useful life

Purchase
Price
Allocation

Weighted
average
useful life

Purchase
Price
Allocation

Weighted
average
useful life

Purchase
Price
Allocation

Customer

relationships . . . . . .
Existing technology . .
Trade names . . . . . . . .
IPR&D . . . . . . . . . . . .
Goodwill . . . . . . . . . . .

6 years
4 years
4 years
—
—

Net tangible assets

(liabilities) . . . . . . . .

Total purchase price . .

5 years
2 - 5 years

—
5 years
—

5 years
3 years
5 years
3 years
—

$ 4,220
1,270
360
—
8,645

14,495

(1,970)

$12,525

$ 2,870
1,120
400
186
8,011

12,587

(665)

$11,922

$2,340
1,290
—
410
4,611

8,651

579

$9,230

5 years
3 years
5 years
5 years
—

$3,060
670
340
110
3,364

7,544

1,154

$8,698

5 years
5 years
6 years
—
—

$ 3,101
2,850
1,050
—
13,774

20,775

(4,075)

$16,700

IPR&D is subject to amortization after product launch over the product life or otherwise subject to impairment in
accordance with the acquisition accounting guidance that became effective in 2009. Pro forma results of
operations for these acquisitions have not been presented because they are not material to our consolidated results
of operations. Goodwill, which represents the excess of the purchase price over the net tangible and intangible
assets acquired, is not deductible for tax purposes.

Alphagraph generates revenue and incurs operating expenses in Euros; accordingly, we have adopted the Euro as
the functional currency for Alphagraph. Prism generates revenue and incurs operating expenses in British pounds
sterling; accordingly, we have adopted British pounds sterling as the functional currency for Prism.

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The U.S. operations of Radius were integrated into our U.S. operations and its U.K. entities were integrated into
our U.K. operations. Radius U.K. generates revenue and incurs operating expenses in British pounds sterling.
This resulted in a change in the functional currency of our EFI U.K. entity to the British pound sterling.

109

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Note 4: Balance Sheet Components

Selected balance sheet components are as follows (in thousands):

Inventories, net of allowances:
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Property and equipment, net:
Land, buildings, and improvements . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment and purchased software . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture and leasehold improvements . . . . . . . . . . . . . . . . . . . . . . .

Less accumulated depreciation and amortization . . . . . . . . . . . . . . . .

Accrued and other liabilities:
Accrued compensation and benefits . . . . . . . . . . . . . . . . . . . . . . . . . .
Warranty provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued royalty payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contingent liabilities—current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

December 31,

2011

2010

$ 19,703
3,547
21,538

$ 19,178
5,826
21,212

$ 44,788

$ 46,216

$ 20,955
58,143
19,216

$ 20,955
52,398
19,409

98,314
(68,218)

92,762
(66,215)

$ 30,096

$ 26,547

$ 26,239
8,877
5,028
5,989
10,103

$ 17,632
9,232
4,423
5,070
9,373

$ 56,236

$ 45,730

Note 5: Goodwill and Long-Lived Asset Impairment

Purchased Intangible Assets

Our purchased intangible assets associated with completed acquisitions for the years ended December 31, 2011
and 2010 are as follows (in thousands, except for weighted average useful life):

December 31, 2011

December 31, 2010

Weighted
average
useful life

Gross
carrying
amount

Accumulated
amortization

Net
carrying
amount

Gross
carrying
amount

Accumulated
amortization

Net
carrying
amount

Goodwill

. . . . . . . . . . . . . . . . . . . . . — $164,323 $

— $164,323 $139,517 $

— $139,517

Existing technology . . . . . . . . . . . . .
Patents, trademarks, and trade

4.5

$117,317 $(108,235) $

9,082 $113,076 $(105,365) $

7,711

names . . . . . . . . . . . . . . . . . . . . . .
. .

Customer relationships and other
IPR&D . . . . . . . . . . . . . . . . . . . . . . . —

14.3
5.9

52,638
78,709
706

(23,334)
(61,809)
—

29,304
16,900
706

51,555
66,769
—

(20,432)
(56,463)
—

31,123
10,306
—

Amortizable intangible assets . . . . .

7.0

$249,370 $(193,378) $ 55,992 $231,400 $(182,260) $ 49,140

Acquired existing technology, patents, trademarks, trade names, and other intangible assets are amortized over
their estimated useful lives of 2 to 18 years using the straight-line method, which approximates the pattern in

110

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

which the economic benefits of the intangible assets are realized. Aggregate amortization expense was $11.2,
$12.4, and $18.5 million for the years ended December 31, 2011, 2010, and 2009, respectively. As of
December 31, 2011 future estimated amortization expense for each of the next five years and thereafter related to
amortizable intangible assets is as follows (in thousands):

For the years ended December 31,

2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Future
amortization
expense

$10,968
9,587
7,927
6,869
4,592
16,049

$55,992

Goodwill Rollforward

The goodwill rollforward for the years ended December 31, 2011 and 2010 as required by ASC 805 (in
thousands):

Fiery

Inkjet

APPS

Total

Ending Balance, December 31, 2009 . . . . . . . . . . . . . . . . . . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Radius opening balance sheet adjustment
. . . . . . . . . . . . . . . . . . . .
Reclassification of Proofing Business from APPS to Fiery . . . . . . .
Foreign currency adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$53,250
$ — $
—
6,228
528

$ 36,508

$33,082
— $16,173
—
943
(6,228)
—
(967)
—

$ 122,840
16,173
943
—
(439)

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Ending Balance, December 31, 2010 . . . . . . . . . . . . . . . . . . . . . .

$60,006

$ 36,508

$43,003

$ 139,517

Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
Prism opening balance sheet adjustment
Foreign currency adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 4,611
—
(205)

— $20,620
(254)
—
(220)
—

$ 25,231
(254)
(425)

Ending Balance, December 31, 2011 . . . . . . . . . . . . . . . . . . . . . .

$64,412

$ 36,508

$63,149

$ 164,069

Accumulated Impairment, December 31, 2011 . . . . . . . . . . . . . .

$ — $(103,991) $ — $(103,991)

Goodwill additions in 2011 result from the Alphagraph, Prism, Entrac, and Streamline acquisitions, as well as
Pace contingent consideration. Goodwill additions in 2010 result from the Radius acquisition and Pace
contingent consideration. The Pace acquisition closed prior to the effective date of ASC 805. Consequently, Pace
contingent consideration is accounted for as an adjustment to the purchase price.

Goodwill previously reported in the APPS operating segment for the year ended December 31, 2009 has been
revised to conform to the December 31, 2010 presentation, reflecting the reclassification of proofing software
from the APPS to the Fiery operating segment. Total goodwill for the years ended December 31, 2011 and 2010
has not changed.

The initial preliminary allocation of the Prism purchase price was adjusted during the fourth quarter of 2011 to
reflect a $0.3 million decrease to goodwill, offset by a corresponding decrease in deferred tax liabilities. This
adjustment was recorded as an adjustment to the opening balance sheet.

111

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

The initial preliminary allocation of the Radius purchase price was adjusted during the fourth quarter of 2010 to
reflect a $0.9 and $0.6 million increase to goodwill and deferred tax assets, respectively, offset by a
corresponding decrease in customer relationships. This adjustment was recorded as an adjustment to the opening
balance sheet resulting in a credit to intangible amortization expense of $0.2 million in 2010.

Based on the outcome of conditions existing during the fourth quarter of 2008, we determined that a triggering
event requiring an interim impairment analysis had occurred relating to the Inkjet reporting unit. The resulting
impairment analysis resulted in a non-cash goodwill impairment charge of $104 million. The goodwill valuation
analysis was performed based on our respective reporting units—Fiery, Inkjet, and APPS—which are consistent
with our operating segments identified in Note 15—Segment Information, Geographic Data, and Major
Customers of the Notes to Consolidated Financial Statements.

Goodwill Assessment

To identify suitable comparable companies under the market approach, consideration was given to the financial
condition and operating performance of the reporting unit being evaluated relative to companies operating in the
same or similar businesses, potentially subject to corresponding economic, environmental, and political factors
and considered to be reasonable investment alternatives. Consideration was given to the investment
characteristics of the subject company relative to those of similar publicly traded companies (i.e., guideline
companies), which are actively traded. In applying the PCMMM, valuation multiples were derived from
historical and projected operating data of guideline companies and applied to the appropriate operating data of
our reporting units to arrive at an indication of fair value. Five, four, and seven suitable guideline companies
were identified for the Fiery, Inkjet, and APPS reporting units, respectively.

While the fair value of the Fiery, Inkjet, and APPS reporting units exceeded their carrying value as of
December 31, 2011 as indicated by the market-based valuation, management determined to further examine
whether an impairment had occurred given the Inkjet impairment recognized in the fourth quarter of 2008 and
the susceptibility of the APPS reporting unit to fair value fluctuations. We reviewed the factors that could trigger

112

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

an impairment charge and completed an income-based impairment analysis for all three reporting units. As part
of this process, we engaged a third party valuation firm to assist management in its analysis. All estimates, key
assumptions, and forecasts were either provided by or reviewed by us. While we chose to utilize a third party
valuation firm, the impairment analysis and related valuations represent the conclusions of management and not
the conclusions or statements of any third party.

Solely for purposes of establishing inputs for the income approach to assess the fair value of the Fiery, Inkjet,
and APPS reporting units, we made the following assumptions:

•

Despite the ongoing economic uncertainty, our reporting units’ revenue will grow at historical
normalized rates between 2012 and 2016 for the following primary reasons:

•

Long-term industry growth after 2016 with the exception of Fiery, which is conservatively assumed at
long-term growth rates by 2013.

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Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

the five-year forecast horizon were compared to approximate percentages realized by the guideline companies.
To assess the reasonableness of the estimated control premium of 33%, we examined the most similar
transactions in relevant industries and determined the average premium indicated by the transactions deemed to
be most similar to a hypothetical transaction involving our reporting units. We examined the weighted average
and median control premiums offered in relevant industries, industry specific control premiums, and specific
transaction control premiums to conclude that our estimated control premium is reasonable.

•

significant negative industry or economic trends,

significant decline in our stock price for a sustained period,

our market capitalization relative to net book value,

significant changes in the manner of our use of the acquired assets,

significant changes in the strategy for our overall business, and

our assessment of growth and profitability in each reporting unit over the coming years.

Long-Lived Assets

114

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

financing rounds, most recent valuation data, the current investing environment, management or ownership
changes, and competition. This analysis is based primarily on information that we request and receive from these
privately-held companies and is performed on a quarterly basis. Although we evaluate all of our privately-held
equity and debt investments for impairment based on this criteria, each investment’s fair value is only estimated
when events or changes in circumstances have occurred that may have a significant effect on its fair value
(because the fair value of each investment is not readily determinable). Where these factors indicate that the
equity investment’s fair value is less than its carrying cost, and where we consider such diminution in value to be
other than temporary, we record an impairment charge to reduce such equity investment to its estimated fair
value.

We previously assessed each investment’s technology pipeline and market conditions in the industry and
determined it is no longer probable that they will generate sufficient positive future cash flows to recover the full
carrying amount of the investment. As such, we recognized an impairment charge of $6.1 million. During the
second quarter of 2010, we further assessed each remaining investment’s ability to sustain an earnings capacity
that would justify the carrying amount of the investment in accordance with ASC 323-10-35-32. Based on this
assessment, we impaired the remaining carrying value of these investments of $0.3 million.

Note 6: Investments and Fair Value Measurements

We invest our excess cash in deposits with major banks in money market securities and municipal, U.S.
government and sponsored entity, and corporate debt securities. By policy, we invest primarily in high-grade
marketable securities. We are exposed to credit risk in the event of default by the financial institutions or issuers
of these investments to the extent of amounts recorded on the Consolidated Balance Sheet.

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We consider all highly liquid investments with a maturity of three months or less at the time of purchase to be
cash equivalents. Typically, the cost of these investments has approximated fair value. Marketable investments
with a maturity greater than three months are classified as available-for-sale short-term investments.
Available-for-sale securities are stated at fair market value with unrealized gains and losses reported as a separate
component of OCI, adjusted for deferred income taxes. The credit portion of any other-than-temporary
impairment is included in net income (loss). Realized gains and losses on sales of financial instruments are
recognized upon sale of the investments using the specific identification method.

115

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Our available-for-sale securities as of December 31, 2011 and 2010 are as follows (in thousands):

Amortized cost

Gross unrealized
gains

Gross unrealized
losses

Fair value

December 31, 2011
U.S. Government securities and sponsored

entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign Government securities . . . . . . . . . . . . . . . . .
Corporate debt securities . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . .
Mortgage-backed securities—residential

$ 21,366
3,782
62,218
11,592

Total short-term investments . . . . . . . . . . . . . . . . . . .

$ 98,958

December 31, 2010
U.S. Government securities and sponsored

entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate debt securities . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . .
Mortgage-backed securities—residential

$ 26,635
64,825
11,451

Total short-term investments . . . . . . . . . . . . . . . . . . .

$102,911

$ 85
—
182
48

$315

$ 89
300
80

$469

$ (10)
(4)
(117)
(42)

$(173)

$ (11)
(51)
(18)

$ (80)

$ 21,441
3,778
62,283
11,598

$ 99,100

$ 26,713
65,074
11,513

$103,300

The fair value and duration that investments, including cash equivalents, have been in a gross unrealized loss
position as of December 31, 2011 and 2010 are as follows (in thousands):

Less than 12 Months More than 12 Months

Total

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

December 31, 2011
U.S. Government securities and sponsored

entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign Government securities . . . . . . . . . . . . .
Corporate debt securities . . . . . . . . . . . . . . . . . .
. . . . .
Mortgage-backed securities—residential

$ 3,510
3,778
16,708
3,508

$ (10)
(4)
(108)
(42)

$ — $ — $ 3,510
3,778
—
17,714
3,509

—
1,006
1

(9)

—

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$27,504

$(164)

$1,007

(9)

$28,511

December 31, 2010
U.S. Government securities and sponsored

entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate debt securities . . . . . . . . . . . . . . . . . .
. . . . .
Mortgage-backed securities—residential

$ 8,839
17,964
3,127

$ (11)
(51)
(16)

$ — $ — $ 8,839
17,964
—
3,199

—
72

(2)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$29,930

$ (78)

(2)

$30,002

$ (10)
(4)
(117)
(42)

$(173)

$ (11)
(51)
(18)

$ (80)

For fixed income securities that have unrealized losses as of December 31, 2011, we have determined that we do
not have the intent to sell any of these investments and it is not more likely than not that it will be required to sell
any of these investments before recovery of the entire amortized cost basis. In addition, we have evaluated these
fixed income securities and determined that no credit losses exist. Accordingly, management has determined that
the unrealized losses on our fixed income securities as of December 31, 2011 were temporary in nature.

116

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Amortized cost and estimated fair value of investments at December 31, 2011 is summarized by maturity date as
follows (in thousands):

Mature in less than one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mature in one to three years . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amortized cost

Fair value

$43,714
55,244

$98,958

$43,759
55,341

$99,100

For the year ended December 31, 2011, $0.2 million in realized gains from sale of investments were offset by
$0.2 million in realized losses. For the year ended December 31, 2010, $0.4 million was recognized in net
realized gains, which was comprised of $0.6 million in realized gains from sale of investments, partially offset by
$0.2 million in realized losses. For the year ended December 31, 2009, $0.6 million was recognized in net
realized gains, which was comprised of $0.9 million in realized gains from sale of investments, partially offset by
$0.3 million in realized losses, which included $0.2 million of credit-related impairment charges on two
corporate debt instruments. As of December 31, 2011 and 2010, net unrealized gains of $0.1 and $0.4 million,
respectively, were included in OCI in the accompanying Consolidated Balance Sheets.

Fair Value Measurements

ASC 820 identifies fair value as the exchange price, or exit price, representing the amount that would be received
to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a basis for
considering market participant assumptions in fair value measurements, ASC 820 establishes a three-tier fair
value hierarchy as follows:

Level 1: Inputs that are quoted prices in active markets for identical assets or liabilities that the reporting
entity has the ability to access at the measurement date;

We obtain the fair value of our Level 2 financial instruments from several third party asset manager, custodian
bank, and the accounting service providers. Independently, these service providers use professional pricing
services to gather pricing data, which may include quoted market prices for identical or comparable instruments
or inputs other than quoted prices that are observable either directly or indirectly. The service providers then
analyze their gathered pricing inputs and apply proprietary valuation techniques, including consensus pricing,
weighted average pricing, distribution-curve-based algorithms, or pricing models such as discounted cash flow
techniques to provide a fair value for each security.

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Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

As part of this process, we engaged an pricing service to assist management in its pricing analysis and
assessment of other-than-temporary impairment. All estimates, key assumptions, and forecasts were either
provided by or reviewed by us. While we chose to utilize a third party pricing service, the impairment analysis
and related valuations represent the conclusions of management and not the conclusions or statements of any
third party.

Our investments have been presented in accordance with the fair value hierarchy specified in ASC 820 as of
December 31, 2011 and 2010 as follows (in thousands):

December 31, 2011

Assets:

U.S. Government securities and sponsored

entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign Government securities . . . . . . . . . . . . . .
Corporate debt securities . . . . . . . . . . . . . . . . . . .
Mortgage-backed securities — residential . . . . . .
Money market funds . . . . . . . . . . . . . . . . . . . . . . .

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

Significant
other
Observable
Inputs
(Level 2)

Unobservable
Inputs
(Level 3)

$ 21,441
3,778
62,283
11,598
50,532

$149,632

$ 9,194
—
—
—
50,532

$59,726

$ 12,247
3,778
62,239
11,598
—

$ —
—
44
—
—

$ 89,862

Liabilities:

Liabilities for contingent consideration,

current and noncurrent . . . . . . . . . . . . . . . . . . .
Liability for self-insurance . . . . . . . . . . . . . . . . . .

8,704
1,640

$ 10,344

$ —
—

$ —

$ —
—

$ —

$ 8,704
1,640

$10,344

December 31, 2010

Assets:

U.S. Government securities and sponsored

Liabilities:

Liability for contingent consideration,

$ 26,713
2,500
69,272
11,513
73,864

$183,862

$ 4,778
—
—
—
73,864

$78,642

$ 21,935
2,500
69,223
11,513
—

$ —
—
49
—
—

$105,171

current and noncurrent . . . . . . . . . . . . . . . . . . .

2,744

$ —

$ 2,744

Included in money market funds is $50.5 and $73.9 million, which have been classified as cash equivalents as of
December 31, 2011 and 2010, respectively. There were no foreign government or corporate debt securities
classified as cash equivalents as of December 31, 2011. Included in foreign government and corporate debt
securities is $2.5 and $4.2 million, respectively, which have been classified as cash equivalents as of
December 31, 2010. Investments are generally classified within Level 1 or Level 2 of the fair value hierarchy
because they are valued using quoted market prices or alternative pricing sources with reasonable levels of price

118

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

transparency. Investments in overnight money market mutual funds have been classified as Level 1 because these
securities are valued based on quoted prices in active markets or they are actively traded at $1.00 Net Asset
Value. There have been no transfers between Level 1 and 2 during the years ended December 31, 2011 and 2010.

Government agency investments and corporate debt instruments, including investments in asset-backed and
mortgage-backed securities, have generally been classified as Level 2 because markets for these securities are
less active or valuations for such securities utilize significant inputs, which are directly or indirectly observable.

At December 31, 2011 and 2010, one corporate debt instrument has been classified as Level 3 due to its
significantly low level of trading activity.

Investments measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the
years ended December 31, 2011 and 2010 are reconciled as follows (in thousands):

Level 3

2011

2010

Corporate Debt
Securities

Money Market
Funds

Balance at January 1,
. . . . . . . . . . . . . . . . . . . . . . .
Included in interest and other income (expense), net
. .
Included in OCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases, sales, and maturities . . . . . . . . . . . . . . . . .

49
—
8
(13)

82
(10)
(5)
(18)

Balance at December 31, . . . . . . . . . . . . . . . . . . . . . .

$ 962
33

—
(995)

$ —

Impairment charges for the year then ended
included in other income (expense), net,
attributable to assets still held at the respective
year end . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ —

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Money market funds of $1.0 million at January 1, 2010, net of reserves, represented funds in The Reserve
Primary Fund (“Fund”) reclassified from cash and cash equivalents as the Fund had adopted a plan of liquidation.
As a result, the Fund’s shares were not tradable at January 1, 2010. Our interest in the Fund was $14.8 million
prior to their adoption of the liquidation plan. We received $14.6 million in liquidation of our interest in the
Fund, net of reserves, which was invested in alternative money market funds, all of which are highly liquid and
currently tradable at $1 per share Net Asset Value. We have no remaining exposure to the Fund.

We review investments in debt securities for other-than-temporary impairment whenever the fair value is less
than the amortized cost and evidence indicates the investment’s carrying amount is not recoverable within a
reasonable period of time. We assess the fair value of individual securities as part of our ongoing portfolio
management. Our other-than-temporary assessment includes reviewing the length of time and extent to which
fair value has been less than amortized cost, the seniority and durations of the securities, adverse conditions
related to a security, industry, or sector, historical and projected issuer financial performance, credit ratings,
issuer specific news, and other available relevant information. To determine whether an impairment is other-
than-temporary, we consider whether we have the intent to sell the impaired security or if it will be more likely
than not that we will be required to sell the impaired security before a market price recovery and whether
evidence indicating the cost of the investment is recoverable outweighs evidence to the contrary.

119

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

estimates including prepayment assumptions were based on data from widely accepted third party data sources or
internal estimates. In addition to prepayment assumptions, cash flow estimates vary based on assumptions
regarding the underlying collateral including default rates, recoveries, and changes in value. Expected cash flows
were discounted using the effective interest rate implicit in the securities.

As a result of our adoption of ASC 320-10-65-1, Transition Related to FASB Staff Position FAS 115-2 and FAS
124-2, Recognition and Presentation of Other-Than-Temporary Impairments, effective in the second quarter of
2009, we recorded a cumulative effect adjustment of $0.1 million, to reduce the cost of the identified security and
retained earnings. In the fourth quarter of 2009, we identified two additional securities that were other-than-
temporarily impaired at December 31, 2009 and recognized impairment losses of $0.2 million in other income
(expense), net. We have determined that gross unrealized losses on short-term investments at December 31, 2011
and 2010 are temporary in nature because each investment meets our investment policy and credit quality
requirements. We have the ability and intent to hold these investments until they recover their unrealized losses,
which may not be until maturity. Evidence that we will recover our investments outweighs evidence to the
contrary.

Accumulated other-than-temporary credit-related impairments charged to retained earnings and other income
(expense), net, consists of the following:

Impairments
Charged to
Retained
Earnings

Impairments
Recognized in
Other Income
(Expense), Net

Accumulated Impairments, net attributable to assets still held at

December 31, 2011, as of January 1, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairments recognized in other income (expense), net . . . . . . . . . . . . . . . . . .
Cumulative effect adjustment upon adoption of ASC 320-10-65-1 as of

April 1, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Accumulated impairments, net, attributable to assets still held at

December 31, 2011, at December 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . . .
Impairments recognized in other income (expense), net . . . . . . . . . . . . . . . . . .

Accumulated impairments, net, attributable to assets still held at

December 31, 2011, at December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . .
Impairments recognized in other income (expense), net . . . . . . . . . . . . . . . . . .

Accumulated impairments, net, attributable to assets still held at

$ —
—

58
—

$640
217

—

$824
—

Total

$640
217

$882
—

December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$824

$882

No other-than-temporary impairments have been recognized related to factors that are not credit-related.

Minority Investment in Privately-Held Company

Liabilities for Contingent Consideration

Acquisition-related current and noncurrent liabilities for contingent consideration (i.e., earnouts) related to the
acquisitions of Alphagraph, Entrac, and Streamline in 2011, and Radius in 2010. The fair value of these earnouts

120

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

is estimated to be $8.7 and $2.7 million as of December 31, 2011 and 2010, respectively, by applying the income
approach in accordance with ASC 805-30-25-5. Key assumptions include discount rates between 4.9% and 6.3%
and probability-adjusted revenue levels. Probability-adjusted revenue is a significant input that is not observable
in the market, which ASC 820-10-35 refers to as a Level 3 input. These contingent liabilities have been reflected
in the Consolidated Balance Sheet as of December 31, 2011, as a current liability of $5.4 million and a
noncurrent liability of $3.3 million.

The 2011 and 2010 Radius earnout performance targets were achieved. Consequently, the fair value of the
Radius earnout increased by $1.5 and $0.4 million as of December 31, 2011 and 2010, respectively. In
accordance with ASC 805-30-35-1, changes in the fair value of contingent consideration subsequent to the
acquisition date have been recognized in general and administrative expense.

Liabilities for Contingent Consideration (in thousands)
Fair value of Radius contingent consideration at July 2, 2010 . . . . . . . . . . . . . . . . .
Changes in valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fair value at December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of Streamline contingent consideration at February 16, 2011 . . . . . . . . .
Fair value of Entrac contingent consideration at July 25, 2011 . . . . . . . . . . . . . . . .
Fair value of Alphagraph contingent consideration at December 6, 2011 . . . . . . . .
Changes in valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Radius payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Foreign currency adjustment

$ 2,350
394

$ 2,744
1,320
2,730
2,588
1,538
(2,125)
(91)

Fair value at December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 8,704

Liability for Self-Insurance

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Liability for Self-Insurance (in thousands)
Fair value of self-insurance liability at December 31,

2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions to reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: insurance claims and administrative fees paid . . . . . . .

$ —
11,840
2,710
(12,910)

Fair value of self-insurance liability at December 31,

2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,640

121

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Fair Value of Derivative Instruments

We have adopted the provisions of ASC 820 regarding nonfinancial assets and liabilities that are recognized or
disclosed at fair value in the consolidated financial statements on a nonrecurring basis. The adoption of these
provisions did not materially impact our financial position or results of operations.

We utilize the income approach to measure the fair value of our derivative assets and liabilities. The income
approach uses pricing models that rely on market observable inputs such as yield curves, currency exchange
rates, and forward prices, and are therefore classified as Level 2 measurements. The fair value of our derivative
assets and liabilities having notional amounts of $3.5 and $2.5 million as of December 31, 2011 and 2010,
respectively, was not material.

Note 7: Accumulated Other Comprehensive Income

Other comprehensive income (loss), which includes net income (loss), market valuation adjustments on available
for sale investments, net of tax, currency translation adjustments, net of tax, and net deferral of gains (losses) on
derivative instruments, consists of the following for the years ended December 31, 2011 and 2010 (in thousands):

For the years ended December 31,

2011

2010

2009

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$27,465

$7,487

$(2,171)

Net unrealized investment gains (losses):
Unrealized holding gains, net of tax provisions of $0, $(0.2), and $(0.8) million

in 2011, 2010, and 2009, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

257

1,169

Reclassification adjustment for losses included in net income (loss), net of tax

benefits of $0.1, $0.2, and $0.3 million in 2011, 2010, and 2009,
respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net unrealized investment gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Currency translation adjustments, net of tax benefits of $0.1, $0, and $0.2 million

(187)

(148)

in 2011, 2010, and 2009, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1,292)
(68)

(357)

(100)

727
(18)

(451)

718

(59)
(47)

Other comprehensive income/(loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$25,957

$8,096

$(1,559)

The components of accumulated other comprehensive income was (in thousands):

Net unrealized investment gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Currency translation gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

86
1,436
(75)

$ 234
2,728
(7)

Accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,447

$2,955

December 31,

2011

2010

Note 8: Commitments and Contingencies

Contingent Consideration

We are liable to make payments to acquired company stockholders based on the achievement of specified
performance targets. The fair value of these earnouts is estimated to be $8.7 and $2.7 million as of December 31,
2011 and 2010, respectively, by applying the income approach in accordance with ASC 805-30-25-5. That

122

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

measure relies on significant inputs that are not observable in the market, which ASC 820-10-35 refers to as
Level 3 inputs. Key assumptions include discount rates between 4.9% and 6.3% and probability-adjusted revenue
levels. These contingent liabilities have been reflected in the Consolidated Balance Sheet as of December 31,
2011 as a current liability of $5.4 million and a noncurrent liability of $3.3 million. The potential undiscounted
amount of all future contingent consideration cash payments that we could be required to make, beyond amounts
currently accrued, is $0.6 million as of December 31, 2011.

Liability for Self-Insurance

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Off-Balance Sheet Financing—Synthetic Lease Arrangement

As of December 31, 2008, we were a party to two synthetic leases (the “301 Lease” and the “303 Lease”,
together “Leases”) covering our facilities located at 301 and 303 Velocity Way, Foster City, California. The
Leases provided a cost effective means of providing adequate office space for our corporate offices. The Leases
included an option to purchase the facilities during or at the end of each Lease term for the amount expended by
the lessor to purchase the facilities. The funds pledged under the Leases ($56.9 million for the 303 Lease and
$31.7 million for the 301 Lease at December 31, 2008) were in LIBOR-based interest bearing accounts and
restricted as to withdrawal at all times.

On January 29, 2009, we sold the 163,000 square foot 301 Velocity Way building, along with approximately
30 acres of land and certain other assets related to the property for $137.3 million. We retained ownership of the
approximately 295,000 square foot building at 303 Velocity Way that we currently occupy along with the related
land. We exercised our purchase option with respect to the 301 Lease in connection with the sale of the building
and land and terminated the corresponding synthetic lease. Accordingly, the $31.7 million of pledged funds were
recognized in the determination of the gain on sale of building and land in the Consolidated Statement of
Operations for the year ended December 31, 2009.

As of December 31, 2011, we remained liable for the 303 Lease. The Lease is scheduled to expire in July 2014.
The Lease includes an option to purchase the facility for the amount expended by the lessor to purchase the
facility.

123

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

We guaranteed to the lessor a residual value associated with the buildings equal to 82% of their funding of the
Lease. Under the financial covenants, we must maintain a minimum net worth and a minimum tangible net worth
as of the end of each quarter. There is an additional covenant regarding mergers. We are liable to the lessor for
the financed amount of the buildings if we default on our covenants. We were in compliance with all such
financial and merger-related covenants as of December 31, 2011. We have assessed our exposure in relation to
the first loss guarantees under the Lease and have determined there is no deficiency to the guaranteed value at
December 31, 2011. If there is a decline in value, we will record a loss associated with the residual value
guarantee. The $56.9 million pledged under the Lease is in LIBOR-based interest bearing accounts as of
December 31, 2011 and is restricted as to withdrawal at all times. As of December 31, 2011, we are treated as the
owner of this building for federal income tax purposes. In conjunction with the Lease, we leased the land on
which the building is located to the lessor of the building. This separate ground lease is for approximately 30
years. The Lease is scheduled to expire in 2014.

Lease Commitments

As of December 31, 2011, we have leased certain of our current facilities under non-cancellable operating lease
agreements in the U.S. and internationally. We are required to pay property taxes, insurance, and nominal
maintenance costs for certain of these facilities and any increases over the base year of these expenses on the
remainder of our facilities.

Future minimum lease payments under non-cancellable operating leases for each of the next five years and
thereafter as of December 31, 2011 are as follows (in thousands):

Fiscal Year

Future Minimum
Lease Payments

Future Minimum
Sublease Receipts

2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 5,921
4,619
2,918
1,362
434
546

$15,800

$1,513
1,637
1,686
1,736
442
—

$7,014

The lease obligation related to the principal corporate facility is estimated based on current market interest rates
(LIBOR) and collateralized assumptions. Future minimum sublease income results primarily from the sublease of
45,889 square feet in our 303 Velocity Way facility to Gilead.

Rent expense was approximately $6.6, $6.9, and $6.7 million for the years ended December 31, 2011, 2010, and
2009, respectively. Sublease rental income was approximately $0.8, $0.1, and $0.3 million for the years ended
December 31, 2011, 2010, and 2009, respectively.

Purchase Commitments

We subcontract with other companies to manufacture our products. During the normal course of business, our
subcontractors procure components based on orders placed by us. If we cancel all or part of our orders, we may
still be liable to the subcontractors for the cost of the components purchased by the subcontractors to
manufacture our products. We periodically review the potential liability compared to the adequacy of the related
allowance. Our consolidated financial position and results of operations could be negatively impacted if we were
required to compensate the subcontract manufacturers for amounts in excess of the related reserve.

124

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Guarantees and Product Warranties

Under ASC 460, we are required to disclose guarantees upon issuance and recognize a liability for the fair value
of obligations we assume under such guarantees.

Our Fiery controller and Inkjet printer products are generally accompanied by a 12-month limited warranty from
date of shipment, which covers both parts and labor. In accordance with ASC 450-30, Loss Contingencies, an
accrual is made when the warranty liability is estimable and probable based on historical experience. A provision
for estimated future warranty work is recorded in cost of revenue upon recognition of revenue and the resulting
accrual is reviewed regularly and periodically adjusted to reflect changes in warranty estimates.

Product warranty reserve activities for the years ended December 31, 2011 and 2010 were as follows (in
thousands):

Balance at January 1,
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 9,232
10,307
(10,662)

$ 6,838
14,136
(11,742)

Balance at December 31,

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 8,877

$ 9,232

For the years ended
December 31,

2011

2010

The synthetic lease agreement for our corporate headquarters provides a residual value guarantee. Under ASC
460, Guarantees, the fair value of a residual value guarantee in lease agreements must be recognized as a liability
in our consolidated balance sheet. We have determined that the guarantee has no material value as of
December 31, 2011.

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In the normal course of business and in an effort to facilitate the sales of our products, we sometimes indemnify
other parties, including customers, lessors, and parties to other transactions with us. When we indemnify other
parties, typically those provisions protect other parties against losses arising from our infringement of third party
intellectual property rights. Those provisions also often contain various limitations including limits on the
amount of protection provided. In addition, we have entered into indemnification agreements with our current
and former officers and directors. Our amended and restated bylaws also contain similar indemnification
obligations for our agents.

Legal Proceedings

125

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

As of December 31, 2011, we are subject to the various claims, lawsuits, investigations, or proceedings discussed
below.

Durst Fototechnik Technology GmbH (“Durst”) v. EFI GmbH and EFI, et al. – Mannheim Litigation

Durst v. EFI GmbH and EFI, et al. – Duesseldorf Litigation

N.V. Perfectproof Europe v. BEST GmbH

126

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

expert to review accounting and other records of the parties and address certain questions relevant in assessing
the amount of total damages that Perfectproof claimed it suffered. We received the expert’s preliminary report on
July 14, 2011 and filed, on August 16, 2011, a response to the expert’s report. On October 2011, the expert
issued the final report in which the expert’s analysis of itemized damages are, in the aggregate, significantly less
than the amount of damages claimed by Perfectproof.

Kerajet vs. Cretaprint

Although we have these rights to indemnification and we do not believe it is probable that we will incur a loss, it
is reasonably possible that our financial statements could be materially affected by the unfavorable resolution of
this matter. Accordingly, it is reasonably possible that we could incur a material loss in this matter. Because this
proceeding is in the preliminary stages and a specific amount of damages has been claimed by Kerajet, we are
unable to estimate the amount or range of loss that may be incurred.

Note 9: Common Stock Repurchase Programs

In February 2011, our Board of Directors authorized a $30 million repurchase of our outstanding common stock.
In August 2011, our Board of Directors authorized an additional $30 million repurchase of our outstanding
common stock. Under these publicly announced plans, we repurchased 2.5 million shares for an aggregate
purchase price of $40.0 million during the year ended December 31, 2011.

Our employees have the option to surrender shares of common stock to satisfy their tax withholding obligations
that arise on the vesting of RSUs and RSAs. Employees surrendered 0.4 and 0.2 million shares for an aggregate
purchase price of $5.8 and $2.9 million for the years ended December 31, 2011 and 2010, respectively.

127

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Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

These repurchased shares are recorded as treasury stock and are accounted for under the cost method thereby
reducing shares outstanding. None of these repurchased shares of common stock have been cancelled. Our
buyback program is limited by SEC regulations and is subject to compliance with our insider trading policy.

Note 10: Derivatives and Hedging

We are exposed to market risk and foreign currency exchange risk from changes in foreign currency exchange
rates, which could affect operating results, financial position, and cash flows. We manage our exposure to these
risks through our regular operating and financing activities and, when appropriate, through the use of derivative
financial instruments. These derivative financial instruments are used to hedge economic exposures as well as
reduce earnings and cash flow volatility resulting from shifts in market rates. Our objective is to offset gains and
losses resulting from these exposures with losses and gains on the derivative contracts used to hedge them,
thereby reducing volatility of earnings or protecting fair values of assets and liabilities. We do not have any
leveraged derivatives, nor do we use derivative contracts for speculative purposes. ASC 815, requires the fair
value of all derivative instruments, including those embedded in other contracts, to be recorded as assets or
liabilities in our consolidated balance sheet. As permitted, foreign exchange contracts with notional amounts of
$3.5 and $2.5 million and net asset/liability fair values that are immaterial have been designated for hedge
accounting treatment at December 31, 2011 and 2010, respectively. The related cash flow impacts of our
derivative contracts are reflected as cash flows from operating activities.

Foreign currency derivative contracts with notional amounts of $3.5 and $2.5 million have been designated as
cash flow hedges of our Indian rupee operating expense exposure. The changes in fair value of these contracts are
reported as a component of OCI and reclassified to operating expense in the periods of payment of the hedged
operating expenses. The amount of ineffectiveness that was recorded in the consolidated statement of operations
for these designated cash flow hedges was immaterial. All components of each derivative’s gain or loss were
included in the assessment of hedge effectiveness. As of December 31, 2011, the net asset/liability fair value of
these contracts was immaterial.

128

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Note 11: Income Taxes

The components of income (loss) before income taxes are as follows (in thousands):

U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 3,143
27,277

$(18,818)
17,188

$24,470
(8,435)

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$30,420

$ (1,630)

$16,035

For the years ended December 31,

2011

2010

2009

The provision (benefit) for income taxes is summarized as follows (in thousands):

For the years ended December 31,

2011

2010

2009

Current:

U.S. Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,685
1,202
2,759

$(6,819)
136
1,756

$ 7,049
2,395
1,956

Total current

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5,646

(4,927)

11,400

Deferred:

(688)
(1,114)
(889)

(2,384)
(1,407)
(399)

Total deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2,691)

(4,190)

6,430
456
(80)

6,806

Provision for (benefit from) income taxes . . . . . . . . . . . . . . . . . . . .

$ 2,955

$(9,117)

$18,206

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Reconciliation between the income tax provision (benefit) computed at the federal statutory rate and the actual
tax provision (benefit) is as follows (in thousands):

Tax expense (benefit) at federal statutory rate . . . . . . . . .
State income taxes, net of federal benefit . . . . . . . . . . . . .
Research and development credits . . . . . . . . . . . . . . . . . .
Foreign tax rate differential . . . . . . . . . . . . . . . . . . . . . . . .
Reduction in accrual for estimated potential tax

assessments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-deductible travel & entertainment . . . . . . . . . . . . . . .
Non-deductible stock-based compensation charge . . . . . .
Valuation allowance changes affecting provision for

income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

For the years ended December 31,

2011

2010

2009

$10,647
57
(2,274)
(4,626)

35.0% $ (571)
(826)
0.2
(2,572)
(7.5)
(894)
(15.2)

35.0% $ 5,613
1,853
50.6
(1,219)
157.7
6,529
54.8

35.0%
11.6
(7.6)
40.7

(2,295)
368
2,179

(7.6)
1.2
7.2

(8,163)
332
4,002

500.5
(20.4)
(245.4)

(397)
274
6,512

(2.5)
1.7
40.6

(706)
(395)

(2.3)
(1.3)

123
(548)

(7.5)
33.7

(763)
(196)

(4.8)
(1.2)

$ 2,955

9.7% $(9,117)

559.0% $18,206

113.5%

129

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

The tax effects of temporary differences that give rise to deferred tax assets (liabilities) are as follows (in
thousands):

December 31,

2011

2010

Reserves and accruals not currently deductible for tax purposes . . . . . . . . . . . . . . . . . . . . . .
Net operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax credit carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 8,986
14,172
46,707
8,884
5,586

$ 8,371
20,644
38,681
7,853
6,361

Gross deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

84,335

81,910

Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of identified intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9,508)
(9,835)
(4,858)

(8,829)
(5,599)
(5,122)

Gross deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(24,201)

(19,550)

Deferred tax valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2,566)

(3,551)

Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 57,568

$ 58,809

We have $31.2 million ($60.4 million for state tax purposes) and $23.6 million ($23.1 million for state tax
purposes) of loss and credit carryforwards at December 31, 2011 for U.S. federal and state tax purposes. These
losses and credits will expire between 2015 and 2031. A significant portion of these net operating loss and credit
carryforwards relate to recent acquisitions and utilization of these loss and credit carryforwards will be subject to
an annual limitation under the IRC. We also have a valuation allowance related to foreign tax credits resulting
from the 2003 acquisition of Best GmbH, compensation limitations potentially limited by IRC 162(m), and net
operating loss carryforwards resulting from the 2010 Radius acquisition. If these foreign tax credits,
compensation deductions, and net operating loss carryforwards are ultimately utilized, the resulting benefit
would reduce income tax expense.

130

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

As of December 31 2011, 2010, and 2009, the total amount of gross unrecognized benefits that would affect the
effective tax rate if recognized was $35.6, $32.5, and $37.0 million, respectively, offset by deferred tax benefits
of $2.5, $2.9, and $2.6 million related to the federal tax effect of state taxes for the same periods. Over the next
twelve months, our existing tax positions will continue to generate an increase in liabilities for unrecognized tax
benefits. A reconciliation of the change in the gross unrecognized tax benefits from January 1, 2009 to
December 31, 2011 is as follows (in millions):

Federal, State,
and Foreign
Tax

Accrued
Interest and
Penalties

Gross
Unrecognized
Income Tax
Benefits

Balance at January 1, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . .
Additions for tax positions related to 2009 . . . . . . . . . . . . . . . . . . . . . . .
Reductions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions due to lapse of applicable statute of limitations . . . . . . . . . .

Balance at December 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . .
Additions for tax positions related to 2010 . . . . . . . . . . . . . . . . . . . . . . .
Reductions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions due to lapse of applicable statute of limitations . . . . . . . . . .

Balance at December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . .
Additions for tax positions related to 2011 . . . . . . . . . . . . . . . . . . . . . . .
Reductions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions due to lapse of applicable statute of limitations . . . . . . . . . .

Balance at December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$32.2
0.8
4.3
(0.3)
(1.1)
(0.5)

$35.4
0.4
4.2
(0.2)
—
(8.1)

$31.7
—
5.6
(0.1)
(0.6)
(2.0)

$34.6

$ 1.6
0.7
—
(0.1)
(0.5)
(0.1)

$ 1.6
0.4
—
—
—
(1.2)

$ 0.8
0.4
—
—
(0.1)
(0.1)

$ 1.0

$33.8
1.5
4.3
(0.4)
(1.6)
(0.6)

$37.0
0.8
4.2
(0.2)
—
(9.3)

$32.5
0.4
5.6
(0.1)
(0.7)
(2.1)

$35.6

We recognize potential accrued interest and penalties related to unrecognized tax benefits in income tax expense.
At December 31, 2011, 2010, and 2009, we have accrued $1.7, $1.3 and $2.7 million, respectively, for potential
payments of interest and penalties.

We were subject to examination by the Internal Revenue Service for the 2007-2010 tax years, state tax
jurisdictions for the 2007-2010 tax years, and the Netherlands tax authority for the 2009-2010 tax years. It is
reasonably possible that our unrecognized tax benefits will decrease up to $8.8 million in the next 12 months.
These adjustments, if recognized, would positively impact our effective tax rate, and would be recognized as
additional tax benefits in our income statement. The reduction in unrecognized tax benefits relates primarily to
the lapse of the statutes of limitations for federal and state tax purposes.

Note 12: Employee Benefit Plans

Equity Incentive Plans

Our stockholders approved our 2009 Equity Incentive Award Plan on June 21, 2009. As a result, no awards may
be granted under any of our prior plans. As of December 31, 2011, we had outstanding equity awards under
seven equity incentive plans, including the 2009 Plan (defined below) and six prior equity incentive plans.

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Notes to Consolidated Financial Statements—(Continued)

Our primary equity incentive plans are summarized as follows:

2009 Stock Plan

In June 2009, our stockholders approved the 2009 Equity Incentive Award Plan (“2009 Plan”) and the
reservation of an aggregate of 5 million shares of our common stock for issuance pursuant to such plan. On
May 18, 2011, our stockholders approved amendments to the 2009 Equity Incentive Award Plan to increase the
number of shares of common stock reserved under the plan for future issuance from 5 to 7 million shares,
provide flexibility with respect to the granting of performance-based awards, and authorize the granting of
performance-based awards under the plan through the 2016 annual meeting of stockholders.

The 2009 Plan provides for grants of stock options (both incentive stock options and nonqualified stock options),
RSAs, stock appreciation rights, performance shares, performance stock units, dividend equivalents, stock
payments, deferred stock, RSUs, and performance-based awards. Options and awards generally vest over a
period of three to four years from the date of grant and generally expire seven to ten years from the date of the
grant. The terms of the 2009 Plan provide that an option price shall not be less than 100% of fair market value on
the date of the grant. Our Board of Directors may grant a stock bonus or stock unit award under the 2009 Plan in
lieu of all or a portion of any cash bonus that a participant would have otherwise received for the related
performance period.

The shares of common stock covered by the 2009 Plan may be treasury shares, authorized but unissued shares, or
shares purchased in the open market. If an award under the 2009 Plan is forfeited (including a reimbursement of
a non-vested award upon a participant’s termination of employment at a price equal to the par value of the
common stock subject to the award) or expired, any shares of common stock subject to the award may be used
again for new grants under the 2009 Plan.

The 2009 Plan is administered by the Compensation Committee of the Board of Directors (“Committee”). The
Committee has the exclusive authority to administer the 2009 Plan, including the power to (i) designate
participants under the 2009 Plan, (ii) determine the types of awards granted to participants under the 2009 Plan,
the number of such awards, and the number of shares of our common stock that is subject to such awards,
(iii) determine and interpret the terms and conditions of any awards under the 2009 Plan, including the vesting
schedule, exercise price, whether to settle or accept the payment of any exercise price, in cash, common stock,
other awards, or other property, and whether an award may be cancelled, forfeited, or surrendered, (iv) prescribe
the form of each award agreement, and (v) adopt rules for the administration, interpretation, and application of
the 2009 Plan.

Persons eligible to participate in the 2009 Plan include all of our employees, directors, and consultants, as
determined by the Committee. As of December 31, 2011, approximately 2,400 employees and consultants and 5
non-employee directors were eligible to participate in the 2009 Plan.

There were 3.4 and 2.9 million shares outstanding and 2.0 and 1.5 million shares available for grant under the
2009 Plan as of December 31, 2011 and 2010, respectively.

2007 Stock Plan

With the adoption of the 2009 Plan, no additional awards may be granted under the 2007 Equity Incentive Award
Plan (“2007 Plan”). Under the 2007 Plan, 3.3 million shares of common stock were reserved and authorized for
issuance. The 2007 Plan provides for grants of stock options (both incentive stock options and nonqualified stock
options), restricted stock, stock appreciation rights, performance shares, performance stock units, dividend
equivalents, stock payments, deferred stock, RSUs, and performance-based awards. Options and awards

132

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Notes to Consolidated Financial Statements—(Continued)

generally vest over a period of three to four years from date of grant and generally expire seven to ten years from
date of the grant. The terms of the 2007 Plan provide that an option price shall not be less than 100% of fair
market value on the date of the grant. Our Board of Directors may grant a stock bonus or stock unit award under
the 2007 Plan in lieu of all or a portion of any cash bonus that a participant would have otherwise received for the
related performance period.

The shares of common stock covered by the 2007 Plan may be treasury shares, authorized but unissued shares, or
shares purchased in the open market. If an award under the 2007 Plan is forfeited (including reimbursement of a
non-vested award upon a participant’s termination of employment at a price equal to the par value of the
common stock subject to the award) or expired, any shares of common stock subject to the award may be used
again for new grants under the 2007 Plan.

The 2007 Plan is administered by a committee, which may be the Board of Directors or the Committee. The
Committee has the exclusive authority to administer the 2007 Plan, including the power to (i) designate
participants under the 2007 Plan, (ii) determine the types of awards granted to participants under the 2007 Plan,
the number of such awards, and the number of shares of our common stock subject to such awards,
(iii) determine and interpret the terms and conditions of any awards under the 2007 Plan, including the vesting
schedule, exercise price, whether to settle or accept the payment of any exercise price in cash, common stock,
other awards, or other property, and whether an award may be cancelled, forfeited, or surrendered, (iv) prescribe
the form of each award agreement, and (v) adopt rules for the administration, interpretation, and application of
the 2007 Plan.

As of December 31, 2011, 2010, and 2009, there were 0.9, 1.3, and 2.3 million shares outstanding, respectively,
under the 2007 Plan.

2004 Stock Plan

With the adoption of the 2007 Plan, no additional awards may be granted under the 2004 Stock Plan (the “2004
Plan”). Under the 2004 Plan, 8.4 million shares of common stock were authorized for issuance. This amount
includes 0.1 million shares that were consolidated from the acquired Splash Plan, T/R Plan, and Printcafe Plans
on June 7, 2006. The terms of the 2004 Plan provide that an option price shall not be less than 100% of fair
market value on the date of the grant. The vesting period for restricted stock must be at least (a) one (1) year in
the case of an RSA subject to a vesting schedule based on the achievement of specified performance goals by the
participant or (b) three (3) years in the case of an RSA absent such performance-based vesting. Under this plan,
restricted stock awards and RSUs could be granted that did not comply with the preceding minimum vesting
requirement as long as the aggregate number of shares of common stock issued with respect to such
non-conforming awards granted under the 2004 Plan did not exceed 10% of the shares reserved for issuance. The
2004 Plan provides for accelerated vesting if there is a change in control (as defined in the 2004 Plan). Options,
RSUs, and restricted stock awards generally vest over a 42 to 48 month period and expire from seven to ten years
from the date of the grant. As of December 31, 2011, 2010, and 2009, there were 0.6, 0.6, and 0.9 million shares,
respectively, outstanding under the 2004 Plan.

1999 Stock Plan

With the adoption of the 2007 Plan, no additional awards may be granted under the 1999 Stock Plan (the “1999
Plan”). The 1999 Plan authorized 10.6 million shares of common stock for issuance. The terms of the 1999 Plan
provide that an option price may not be less than 100% of fair market value and the purchase price under
restricted stock purchase agreement may not be less than 50% of fair market value on the date of the grant. The
Board of Directors or Committee had the authority to determine to whom options would be granted, the number

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Notes to Consolidated Financial Statements—(Continued)

of shares, the vesting period, the expiration date, and the exercise price. The 1999 Plan provides for accelerated
vesting if there is a change in control (as defined in the 1999 Plan). Options, RSUs, and RSAs generally vest
from two to four years and expire from seven to ten years from the date of the grant. As of December 31, 2011,
2010, and 2009, there were 0.2, 0.2, and 0.5 million shares, respectively, outstanding under the 1999 Plan.

1990 Stock Plan

The 1990 Stock Option Plan (the “1990 Plan”) by its terms expired in June 2000 and no additional awards may
be granted under this plan. In June 1990, we adopted the 1990 Plan, which, as amended, provided for the
issuance of incentive and nonqualified stock options to our employees, directors, and non-employees. We
reserved 13.2 million shares of common stock for issuance under the 1990 Plan. The original terms of the 1990
Plan provided that the exercise price of nonqualified stock options could not be less than 85% of the fair market
value on the date of the grant. In May 1995, the 1990 Plan was amended to provide that options could not be
granted at less than 100% of the fair market value of our common stock on the date of the grant. Generally, the
options vested over a four year period. The 1990 Plan allows us to buy out an option grant for cash or shares,
which was an option previously granted based on terms and conditions as established at the time such offer is
made. The 1990 Plan provides for accelerated vesting if there is a change in control (as defined in the 1990 Plan).
The options are exercisable at times and increments as specified by the Board of Directors and expire not more
than 10 years from date of grant. All options available under the 1990 Plan have been issued. Any shares (plus
any shares that might in the future be returned to the 1990 Plan as a result of cancellations) that remained
available for future grants under the 1990 Plan have been cancelled. As of December 31, 2011 and 2010, no
shares remained outstanding under the 1990 Plan. As of December 31, 2009, there were less than 0.1 million
shares, outstanding under the 1990 Plan.

Acquired Stock Plans

In connection with our acquisition of Splash Technology Holdings, Inc., T/R Systems, Inc., and Print Café,, we
assumed their stock incentive plans. As of December 31, 2011, 2010, and 2009, there were less than 0.1 million
options outstanding under these acquired stock plans.

Amended and Restated 2000 Employee Stock Purchase Plan

On June 2009, our stockholders approved the Amended and Restated 2000 Employee Stock Purchase Plan that
increased the number of shares authorized for issuance pursuant to such plan by 3.0 million shares. The share
increase was intended to ensure that we continue to have a sufficient reserve of common stock available under
the ESPP to provide our eligible employees with the opportunity to acquire our common stock through
participation in a payroll deduction-based ESPP designed to operate in compliance with Section 423 of the IRC.
The amendment and restatement of the ESPP does not provide for an automatic increase in the number of shares
reserved for issuance under the ESPP. As of December 31, 2011, 2010, and 2009, there were 1.5, 2.2, and
6.2 million shares of our common stock were reserved for issuance that remained outstanding under the ESPP.

In May 2000, our Board of Directors initially adopted the 2000 Employee Stock Purchase Plan, which became
effective on August 1, 2000 and reserved 0.4 million shares of common stock for issuance under the ESPP. The
ESPP, subsequently amended prior to 2009, had an automatic share increase feature pursuant to which the shares
reserved under the ESPP automatically increased on the first trading day in January of each year, beginning with
calendar year 2006. The increase was equal to three quarters of one percent (0.75%) of the total number of shares
of common stock outstanding on the last trading day of December in the immediately preceding calendar year,
but in no event could any such increase exceed 2.5 million shares annually.

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Notes to Consolidated Financial Statements—(Continued)

The ESPP is qualified under Section 423 of the IRC. Eligible employees may contribute from one to ten percent
of their base compensation not to exceed ten percent of the employee’s earnings. Employees are not able to
purchase more than the number of shares having a value greater than $25,000 in any calendar year, as measured
at the beginning of the offering period under the ESPP. The purchase price shall be the lesser of 85% of the fair
market value of the stock, either on the offering date or on the purchase date. The offering period shall not
exceed 27 months beginning with the offering date. The ESPP provided for offerings of four consecutive,
overlapping six-month offering periods, with a new offering period commencing on the first trading day on or
after February 1 and August 1 of each year.

During the years ended December 31, 2011, 2010, and 2009, 0.6, 0.7, and 0.8 million shares were issued under
the ESPP at an average purchase price of $9.49, $7.55, and $7.51, respectively. As of December 31, 2011, there
was $1.4 million of total unrecognized compensation cost related to stock-based compensation arrangements
granted under the ESPP. That cost is expected to be recognized over a period of 1.8 years. At December 31,
2011, 2010, and 2009, there were 1.5, 2.2, and 2.9 million shares, respectively, available for issuance under the
ESPP.

Valuation and Expense Information under ASC 718

We account for stock-based payment awards in accordance with ASC 718, which requires the measurement and
recognition of compensation expense for all equity awards granted to our employees and directors, including
employee stock options, RSAs, RSUs, and ESPP purchases related to all stock-based compensation plans based
on the fair value of such awards on the date of grant. We amortize stock-based compensation cost on a graded
vesting basis over the vesting period, after assessing the probability of achieving the requisite performance
criteria with respect to performance-based awards. Stock-based compensation cost is recognized over the
requisite service period for each separately vesting tranche of the award as though the award were, in substance,
multiple awards.

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We use the BSM option pricing model to value stock-based compensation for all equity awards, except market-
based awards. Market-based awards are valued using a Monte Carlo valuation model.

The BSM model determines the fair value of stock-based payment awards based on the stock price on the date of
grant and is affected by assumptions regarding a number of highly complex and subjective variables. These
variables include, but are not limited to, our expected stock price volatility over the term of the awards and actual
and projected employee stock option exercise behaviors. Option pricing models were developed to estimate the
value of traded options that have no vesting or hedging restrictions and are fully transferable. Because our
employee stock options and awards have certain characteristics that are significantly different from traded
options, and because changes in the subjective assumptions can materially affect the estimated value, in
management’s opinion, the existing valuation models may not provide an accurate measure of the fair value of
our employee stock options. Although the fair value of employee stock options is determined in accordance with
ASC 718 and SAB No. 107 using an appropriate option pricing model, the value may not be indicative of the fair
value observed in a willing buyer/willing seller market transaction.

135

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Notes to Consolidated Financial Statements—(Continued)

Stock-based compensation expense related to stock options, employee stock purchases under the ESPP, RSUs,
and RSAs under ASC 718 for the years ended December 31, 2011, 2010, and 2009 is summarized as follows (in
thousands):

2011

2010

2009

Stock -based compensation expense by type of award:

Employee stock options . . . . . . . . . . . . . . . . . . . . . . .
Non-vested RSUs and RSAs . . . . . . . . . . . . . . . . . . .
ESPP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 2,096
17,926
3,347

$ 1,545
12,860
1,520

Total stock-based compensation . . . . . . . . . . . . . . . . . . . .
Tax effect on stock-based compensation . . . . . . . . . . . . . .

23,369
(7,598)

15,925
(1,696)

$ 2,269
11,965
4,349

18,583
94

Net effect on net income (loss)

. . . . . . . . . . . . . . . . . . . . .

$15,771

$14,229

$18,677

Valuation Assumptions for Stock Options and ESPP Shares

Our determination of the fair value of stock-based payment awards on the date of grant using BSM is affected by
various assumptions including volatility, expected term, and interest rates. Expected volatility is based on the
historical volatility of our stock over a preceding period commensurate with the expected term of the stock
option. The expected term is based on management’s consideration of the historical life of the stock options, the
vesting period of the stock options granted, and the contractual period of the stock options granted. The risk-free
interest rate for the expected term of the stock options is based on the U.S. Treasury yield curve in effect at the
time of grant. Expected dividend yield was not considered in the option pricing formula since we do not pay
dividends and have no current plans to do so in the future.

The estimated per share weighted average fair value of stock options granted and ESPP shares issued and the
assumptions used to estimate fair value for the years ended December 31, 2011, 2010, and 2009 are as follows:

Stock Options
Years ended December 31,

Employee Stock Purchase Plan
Years ended December 31,

2011

2010

2009

2011

2010

2009

Weighted average fair value per share . . . . . . $5.77
Expected volatility . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . .
Expected term (in years) . . . . . . . . . . . . . . . . .

4.79
48% 47% 44% 28% - 42% 32% - 53% 51% - 66%
0.8% 1.2% 1.8% 0.2% - 0.6% 0.2% - 0.9% 0.3% - 1.2%
4.0

0.5 - 2.0

$3.84

$4.48

3.93

3.94

4.1

4.0

Non-vested RSUs and RSAs

Non-vested RSUs and RSAs generally vest over a service period of two to four years. The compensation expense
incurred for these service-based awards is based on the closing market price of our stock on the date of grant and
is amortized on a graded vesting basis over the requisite service period. The weighted average fair value of RSUs
granted during the years ended December 31, 2011, 2010, and 2009 were $15.09, $11.36, and $10.84,
respectively. No RSAs were granted during 2011, 2010, and 2009.

Performance-based and Market-based Stock Options and RSUs

RSUs granted during the year ended December 31, 2011 included 90,000 market-based RSUs, which vest when
our average closing stock price exceeds defined multiples of the average closing stock price for 20 consecutive
trading days preceding January 5, 2011. If these multiples are not achieved by January 5, 2018, the awards are

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Notes to Consolidated Financial Statements—(Continued)

forfeited. The grant date fair value is estimated to be $1.1 million and is being amortized over the average
derived service period of 3.93 years. The average derived service period and total fair value were determined
using the Monte Carlo valuation model based on our assumptions, which included a risk-free interest rate of
2.9% and an implied volatility of 40%. On May 10, 2011, 28,000 market-based RSUs vested due to achievement
of the threshold multiple of the average closing stock price for 20 consecutive trading days preceding January 5,
2011. As of December 31, 2011, 62,000 market-based RSUs remain outstanding.

RSUs granted during the year ended December 31, 2011 included 323,600 performance-based RSUs, which vest
when specified performance criteria are met based on 2011 revenue and non-GAAP operating income targets;
otherwise, they are forfeited. Non-GAAP operating income is defined as operating income determined in
accordance with GAAP, adjusted to remove the impact of certain expenses, and the tax effects of these
adjustments. The grant date fair value was estimated to be $5.0 million, which is being amortized over their
service periods of 1.0 year. The performance criteria was achieved with respect to approximately 92% of these
RSUs as of December 31, 2011. Accordingly, these RSUs will vest during the first quarter of 2012 when the
associated service requirements are met. As of December 31, 2011, 313,151 performance-based RSUs remain
outstanding.

RSUs granted during the year ended December 31, 2011 included 195,156 performance-based RSUs, which vest
when specified performance criteria are met based on revenue and non-GAAP operating income targets during
any four consecutive quarters between the first quarter of 2011 and the second quarter of 2014; otherwise, they
are forfeited. Non-GAAP operating income is defined as operating income determined in accordance with
GAAP, adjusted to remove the impact of certain expenses, and the tax effects of these adjustments. The grant
date fair value was estimated to be $3.0 million, which is being amortized over their average derived service
periods of 3.0 years. The probability of achieving these awards was determined based on a review of the actual
results achieved by each business unit during the year ended December 31, 2011 compared with the 2011
operating plan as well as the overall strength of the business unit within the EFI organization. Stock-based
compensation expense was adjusted based on this probability assessment. As actual results are achieved during
the year, the probability assessment will be updated and stock-based compensation expense adjusted accordingly.
As of December 31, 2011, 195,156 performance-based RSUs remain outstanding.

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RSUs granted during the year ended December 31, 2010 included 384,875 performance-based RSUs, which
vested when specified performance criteria were met based on 2010 revenue targets and non-GAAP operating
income targets; otherwise, they were forfeited. Non-GAAP operating income was defined as operating income
determined in accordance with GAAP, adjusted to remove the impact of certain expenses, and the tax effects of
these adjustments. The grant date fair value was estimated to be $4.7 million, which was amortized over their
service periods of 1.0 year. The performance criteria was achieved with respect to approximately 88% of these
RSUs as of December 31, 2010. Accordingly, these RSUs vested on March 2, 2011 when the associated service
requirement was met.

RSUs and stock options granted during the year ended December 31, 2009 included 98,000 market-based RSUs
and 294,076 market-based stock options. These awards vest when our average closing stock price exceeds
defined multiples of the June 18, 2009 or August 28, 2009 closing stock prices for 20 consecutive trading days. If
these multiples are not achieved by June 18, 2016 or August 28, 2016, the awards are forfeited. The grant date
fair value is estimated to be $0.9 million for the RSUs and $1.7 million for the stock options, which are being
amortized over their average derived service periods of 4.35 and 4.88 years, respectively. The average derived
service period and total fair value were determined using the Monte Carlo valuation model based on our
assumptions, which included a risk-free interest rate of 3.5% and 3.1%, respectively, and an implied volatility of
50%. On January 3 and 10, 2011, an aggregate of 29,335 market-based RSUs vested due to achievement of the
threshold multiple of the June 18, 2009 and August 28, 2009 closing stock prices for 20 consecutive trading days.

137

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

On April 27, 2011, 59,598 of these market-based stock options were vested due to achievement of the threshold
multiple. As of December 31, 2011, 48,665 market-based RSUs and 178,790 market-based stock options remain
outstanding.

Stock options granted during the year ended December 31, 2009 included 32,674 performance-based stock
options. These performance-based stock options vest when our annual non-GAAP return on equity exceeds
defined thresholds of the 2008 non-GAAP return on equity. Non-GAAP return on equity is defined as
non-GAAP net income divided by stockholders’ equity. Non-GAAP net income is defined as net income
determined in accordance with GAAP adjusted to remove the impact of certain recurring and non-recurring
expenses, and the tax effects of these adjustments. If these defined thresholds are not achieved by August 28,
2016, the stock options are forfeited. The grant date fair value is estimated to be $0.1 million, which is being
amortized over the average derived service period of 3.71 years. The performance-based stock options were
valued using the BSM valuation model. As of December 31, 2011, 26,487 performance-based stock options
remain outstanding.

2009 Fair Value Stock Option Exchange

We commenced a fair value stock option exchange on August 31, 2009 to allow employees, other than our
named executive officers and members of our Board of Directors, the opportunity to exchange all or a portion of
their eligible outstanding stock options for a smaller number of RSUs based on exchange ratios intended to result
in the fair value of the newly issued RSUs being equal to the fair value of the stock options that were surrendered
or for cash, in certain circumstances. Stock options that were “underwater” (i.e., those stock options with a per
share exercise price that was greater than the per share closing price of our common stock as quoted on the
NASDAQ Global Select Market as of the trading day immediately preceding August 31, 2009, the date the stock
option exchange commenced, or $10.77 per share), excluding stock options granted six months prior to the
commencement of the exchange or stock options expiring within six months after the completion of the
exchange, were eligible for exchange.

The offering period closed on September 28, 2009. A total of 1,000 eligible employees participated in the stock
option exchange. We accepted for exchange stock options to purchase an aggregate of 2.8 million shares of our
common stock, representing 82% of the total stock options eligible at the commencement of the exchange. All
surrendered stock options were cancelled and (i) we granted a total of 0.3 million new RSUs under the 2009 Plan,
and (ii) we made cash payments in the aggregate amount of $0.2 million (less applicable withholdings and
without interest). The resulting incremental compensation expense was not material to our consolidated financial
statements.

138

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Stock Option Activity

Stock options outstanding and exercisable as of December 31, 2011, 2010, and 2009 and activity for each of the
years then ended is as follows (in thousands, except weighted average exercise price and remaining contractual
term):

Options outstanding at January 1, 2009 . . . . . . . . . . . . . . . . . . . . . .
Options granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options forfeited, expired, and exchanged . . . . . . . . . . . . . . . . . . . . . .

Options granted, net of forfeited, expired, and exchanged . . . . . . . . . .
Options exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Weighted
average
remaining
contractual
term
(years)

Aggregate
intrinsic
value

Weighted
average
exercise
price

$22.73
10.50
24.93

—

6,061
844
(4,081)

(3,237)
—

Options outstanding at December 31, 2009 . . . . . . . . . . . . . . . . . . . .

2,824

$15.90

Options granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options forfeited and expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Options granted, net of forfeited and expired . . . . . . . . . . . . . . . . . . . .
Options exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

487
(696)

(209)
(86)

12.04
18.29

11.85

Options outstanding at December 31, 2010 . . . . . . . . . . . . . . . . . . . .

2,529

$14.64

Options granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options forfeited and expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Options granted, net of forfeited and expired . . . . . . . . . . . . . . . . . . . .
Options exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

140
(70)

70
(146)

15.33
18.24

13.10

Options outstanding at December 31, 2011 . . . . . . . . . . . . . . . . . . . .

2,453

$14.67

Options vested and expected to vest at December 31, 2011 . . . . . . .

2,352

$14.78

Options exercisable at December 31, 2011 . . . . . . . . . . . . . . . . . . . . .

1,718

$15.74

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$3.33

$3.24

$2.46

$2,897

$2,655

$1,196

Aggregate stock option intrinsic value represents the difference between the closing price per share of our
common stock on the last trading day of the fiscal period and the exercise price of the underlying awards for the
options that were in the money at December 31, 2011 and 2010. No options were exercised during the year ended
December 31, 2009. The total intrinsic value of options exercised, determined as of the date of option exercise,
was $0.6 and $0.2 million for the years ended December 31, 2011 and 2010, respectively. There was $1.5 million
of total unrecognized compensation cost related to stock options expected to vest as of December 31, 2011. That
cost is expected to be recognized over a weighted average period of 1.5 years.

139

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Stock options outstanding and exercisable as of December 31, 2011 are summarized as follows (shares in
thousands):

Range of exercise prices

$9.12 to $9.98 . . . . . . . . . . . . . . . . . . . . . . . . . .
$10.77 to $10.77 . . . . . . . . . . . . . . . . . . . . . . . .
$10.80 to $11.92 . . . . . . . . . . . . . . . . . . . . . . . .
$12.00 to $15.77 . . . . . . . . . . . . . . . . . . . . . . . .
$15.88 to $15.88 . . . . . . . . . . . . . . . . . . . . . . . .
$16.08 and over . . . . . . . . . . . . . . . . . . . . . . . . .

Options outstanding

Options exercisable

Weighted
average
remaining
contractual
term
(years)

4.32
4.66
5.42
6.08
3.16
1.15

3.33

75
445
318
238
505
872

2,453

Weighted
average
exercise
price

$ 9.79
10.77
11.46
13.75
15.88
17.80

$14.67

51
163
128
46
505
825

1,718

Weighted
average
exercise
price

$ 9.77
10.77
11.47
13.42
15.88
17.80

$15.74

Non-vested RSUs and RSAs

Non-vested RSUs and RSAs were awarded to employees under our equity incentive plans. Non-vested RSAs
have the same voting rights as other common stock and are considered to be currently issued and outstanding.
Non-vested RSAs are eligible to receive dividends (i.e., participating securities), even if we do not intend to
declare dividends. RSUs do not have the voting rights of common stock and the shares underlying the RSUs are
not considered issued and outstanding.

Non-vested RSUs and RSAs as of December 31, 2011, 2010, and 2009, and activity for each of the years then
ended is as follows (shares in thousands):

RSUs

RSAs

Non-vested at January 1, 2009 . . . . . . . . . . . . . . . . . . . . . . .
Restricted stock granted . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted stock issued in exchange for stock options . . . . .
Restricted stock vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted stock forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,866
1,383
348
(727)
(163)

Non-vested at December 31, 2009 . . . . . . . . . . . . . . . . . . . .

2,707

Restricted stock granted . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted stock vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted stock forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,469
(1,355)
(283)

Weighted
average
grant
date fair
value

$18.22
10.84
12.15
$19.09
19.46

$13.36

11.36
14.80
12.62

Non-vested at December 31, 2010 . . . . . . . . . . . . . . . . . . . .

2,538

$11.67

Weighted
average
grant
date fair
value

$ 27.21
—
—

$ 27.89

—

$ 27.18

—
—
26.90

$ 27.21

118
—
—

(6)

—

112

—
—
(11)

101

1,505
(1,317)
(224)

15.09
11.87
11.89

—
(101)
—

—
(27.21)
—

Non-vested at December 31, 2011 . . . . . . . . . . . . . . . . . . . .

2,502

$13.60

$ —

140

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

RSUs

The fair value of RSUs that vested during the years ended December 31, 2011, 2010, and 2009, determined as of
the vesting date, were $20.2, $16.6, and $8.2 million, respectively. The aggregate intrinsic value of RSUs vested
and expected to vest at December 31, 2011 was $31.7 million, calculated as the closing price per share of our
common stock on the last trading day of the fiscal period multiplied by 2.2 million of RSUs vested and expected
to vest at December 31, 2011. There was approximately $14.4 million of unrecognized compensation costs
related to RSUs expected to vest as of December 31, 2011. That cost is expected to be recognized over a
weighted average period of 1.2 years.

RSAs

The performance-based RSAs vested on March 15, 2011 based on achievement of a specified percentage of the
2010 operating plan. The unrecognized compensation expense of $0.1 million related to non-vested RSAs was
recognized during the quarter ended March 31, 2011.

Employee 401(k) Plan

We sponsor a 401(k) Savings Plan (“401(k) Plan”) to provide retirement and incidental benefits for our
employees. Employees may contribute from 1% to 40% of their annual compensation to the 401(k) Plan, limited
to a maximum annual amount as set periodically by the IRS. We matched 50% of U.S. employee contributions,
up to a maximum of the first 4% of the employee’s compensation contributed to the plan, subject to IRS
limitations, except for a 17 month period during 2010 and 2009 when employer matching contributions were
suspended. All matching contributions vest over four years starting with the hire date of the individual employee.
Our matching contributions to the 401(k) Plan totaled $1.7, $0.1, and $0.6 million during the years ended
December 31, 2011, 2010, and 2009, respectively. The employees’ and our contributions are cash contributions
invested in mutual funds managed by a fund manager, or in self-directed retirement plans.

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Note 13: Sale of Building and Land

On January 29, 2009, we sold a portion of the Foster City, California campus for $137.3 million. The property
sold included an approximately 163,000 square foot building at 301 Velocity Way as well as approximately 30
acres of land. Direct transaction costs consist primarily of broker commissions, documentary transfer and title
costs, legal fees, and other expenses. The cost of the land, building, and improvements were included in the
determination of the gain on sale of building and land for the year ended December 31, 2009 as follows (in
millions):

Sales proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assets held for sale at December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . .
Direct transaction costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$137.3
55.4
1.9

Gain on sale of building and land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 80.0

Note 14: Restructuring and Other

141

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

We recognized restructuring and other charges of $3.3, $3.6, and $9.0 million for the years ended
December 31, 2011, 2010, and 2009, respectively, primarily consisting of restructuring, severance, facilities
downsizing, and acquisition integration expenses. Restructuring and severance charges of $1.7, $2.4, and
$8.1 million related to head count reductions of 55, 98, and 227 for the years ended December 31, 2011, 2010,
and 2009, respectively. Severance costs include severance payments, related employee benefits, retention
bonuses, outplacement, and relocation costs.

Restructuring and other reserve activities for the years ended December 31, 2011 and 2010 are summarized as
follows (in thousands):

Reserve balance at January 1 . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2011

2010

$ 1,795
1,456
1,802
(3,183)

$ 2,796
1,902
1,713
(4,616)

Reserve balance at December 31 . . . . . . . . . . . . . . . . . . . . . .

$ 1,870

$ 1,795

Note 15: Segment Information, Geographic Data, and Major Customers

Operating Segments

ASC 280, Segment Reporting, requires operating segment information to be presented based on internal
reporting used by the chief operating decision maker to allocate resources and evaluate operating segment
performance. Our enterprise management processes became further refined in 2009 to use financial information
that is closely aligned with our three product categories at the gross profit level. Relevant discrete financial
information is prepared at the gross profit level for each of our three operating segments, which is used by the
chief operating decision making group to allocate resources and assess the performance of each operating
segment.

We classify our revenue, gross profit, assets, and liabilities in accordance with our operating segments as
follows:

142

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Inkjet, which consists of sales of VUTEk super-wide and Rastek wide format inkjet printers, Jetrion label and
packaging digital inkjet printers, ink, parts, and service revenue.

Our chief operating decision making group evaluates the performance of its operating segments based on net
sales and gross profit. Gross profit for each operating segment includes revenue from sales to third parties and
related cost of revenue attributable to the operating segment. Cost of revenue for each operating segment
excludes certain expenses managed outside the operating segments consisting primarily of stock-based
compensation expense. Operating income is not reported by operating segment because operating expenses
include significant shared expenses and other costs that are managed outside of the operating segments. Such
operating expenses include various corporate expenses such as stock-based compensation expense, corporate
sales and marketing, research and development, income taxes, various non-recurring charges, and other
separately managed general and administrative expenses.

Summary gross profit information, excluding stock-based compensation expense, for the years ended
December 31, 2011, 2010, and 2009 is as follows (in thousands):

For the years ended December 31,

2011

2010

2009

Fiery

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit percentages . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$270,073
183,084

$238,621
161,219

$193,012
129,240

67.8%

67.6%

67.0%

Inkjet

$240,318
92,738

$207,654
68,121

$159,732
50,748

38.6%

32.8%

31.8%

APPS

$ 81,165
56,825

$ 57,732
39,329

$ 48,364
32,569

70.0%

68.1%

67.3%

A reconciliation of operating segment gross profit to the consolidated statements of operations for the years
ended December 31, 2011, 2010, and 2009 is as follows (in thousands):

Segment gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . .

$332,647
(1,664)

$268,669
(984)

$212,557
(1,074)

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$330,983

$267,685

$211,483

For the years ended December 31,

2011

2010

2009

143

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Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Proofing software revenue and gross profit previously reported in the APPS operating segment of $8.6 and $7.7
million, respectively, for the year ended December 31, 2009 has been revised to conform to the presentation for
the years ended December 31, 2011 and 2010, reflecting the reclassification of proofing software from the APPS
to the Fiery operating segment. Total revenue and gross profit for the year ended December 31, 2009 has not
changed.

Tangible and intangible assets, net of liabilities, are summarized by operating segment as follows (in thousands):

Fiery

Inkjet

APPS

December 31, 2011
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Identified intangible assets, net
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Tangible assets, net of liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 64,412
3,989
40,896

$ 36,508
28,483
66,841

$63,403
23,520
(2,740)

Net tangible and intangible assets . . . . . . . . . . . . . . . . . . . . . . . . .

$109,297

$131,832

$84,183

December 31, 2010
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Identified intangible assets, net
Tangible assets, net of liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 60,005
682
40,046

$ 36,508
34,198
72,766

$43,005
14,259
(3,861)

Net tangible and intangible assets . . . . . . . . . . . . . . . . . . . . . . . . .

$100,733

$143,472

$53,403

Operating segment assets exclude corporate assets, such as cash, short-term and long-term investments, and taxes
payable. Proofing software goodwill of $6.3 million previously reported in the APPS operating segment for the
year ended December 31, 2009 has been revised to conform to the December 31, 2010 presentation, reflecting
the reclassification of proofing software from the APPS to the Fiery operating segment. Total goodwill for the
years ended December 31, 2011 and 2010 has not changed.

Information about Geographic Areas

Our revenue originates in the U.S., The Netherlands, Germany, Japan, the U.K., Australia, and New Zealand. We
report revenue by geographic area based on ship-to destinations. Shipments to some of our significant printer
manufacturer/distributor customers are made to centralized purchasing and manufacturing locations, which in
turn sell through to other locations. As a result of these factors, we believe that sales to certain geographic
locations might be higher or lower, as the ultimate destinations are difficult to ascertain.

Our revenue by sales origin for the years ended December 31, 2011, 2010, and 2009 was as follows
(in thousands):

For the years ended December 31,

2011

2010

2009

Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EMEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ROW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$345,303
178,471
67,782
35,655
32,127

$293,747
149,488
60,772
41,853
18,919

$229,294
122,696
49,118
35,041
14,077

Total Revenue

$591,556

$504,007

$401,108

144

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Our long-lived assets consist primarily of property and equipment, net, of $30.1 million. Of this amount, $27.2
million resides in the Americas, $2.1 million is in India, and the remainder is primarily in EMEA.

Major Customers

Xerox and Ricoh each provided more than 10% of our revenue individually and together accounted for 26% of
our revenue for the year ended December 31, 2011. Xerox and Canon each contributed over 10% of our revenue
and together accounted for approximately 27% and 26% of our revenue for the years ended December 31, 2010
and 2009, respectively.

One customer, Xerox, had an accounts receivable balance greater than 10% of our net consolidated accounts
receivable balance at December 31, 2011 and 2010, accounting for 21% and 15%, respectively.

Note 16: Subsequent Event

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145

SUPPLEMENTARY DATA

Unaudited Quarterly Consolidated Financial Information

The following table presents our operating results for each of the quarters in the years ended December 31, 2011
and 2010. The information for each of these quarters is unaudited, but has been prepared on the same basis as our
audited consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K. In the
opinion of management, all necessary adjustments (consisting only of normal recurring adjustments) have been
included that are required to state fairly our unaudited quarterly results when read in conjunction with our audited
consolidated financial statements and the notes thereto appearing in this Annual Report on Form 10-K. These
operating results are not necessarily indicative of the results for any future period.

(in thousands except per share data)

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income per basic common share . . . . . . . . . . . . . . . . . . . . . . .
Net income per diluted common share . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of minority investment in a privately held

2011(1)

$140,053
78,711
5,068
6,249
0.13
0.13

$
$

$141,162
78,577
3,368
3,615
0.08
0.07

$
$

$147,284
82,778
6,158
6,124
0.13
0.13

$
$

$163,057
90,917
12,739
11,477
0.25
0.25

$
$

company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ — $ — $

2,866

$ —

(in thousands except per share data)

2010(2)

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) per basic common share . . . . . . . . . . . . . . . . . . .
Net income (loss) per diluted common share . . . . . . . . . . . . . . . . .

$110,830
58,771
(7,377)
(11,378)

$
$

(0.25) $
(0.25) $

$119,117
60,963
(2,827)
(2,542)
(0.06) $
(0.06) $

$129,049
69,993
1,835
13,357
0.29
0.29

$145,011
77,958
8,093
8,050
0.17
0.17

$
$

(1)

Effective in the first quarter of 2011, we changed our accounting for certain employee benefit costs by expensing
them ratably over the year to which they relate in accordance with ASC 270, Interim Reporting. Previously,
certain employee benefit costs were expensed in the quarter in which they became payable. We believe this is a
preferable change in accounting principle because it treats these costs similarly to other employment related costs
such as stock-based compensation and annual discretionary bonuses and results in the ratable allocation of certain
employee benefit costs to each interim period that is expected to benefit from employees’ service. The effect of
this change on our interim operating results was to reduce expenses for certain deferred employee benefit costs by
$1.4 million for the three months ended March 31, 2011, immaterial for the three months ended June 30, 2011,
and to increase expenses for certain deferred employee benefit costs by $0.7 million for the three months ended
September 30 and December 31, 2011. The impact on quarterly results for the year ended December 31, 2010 was
not material.

(2) During the fourth quarter of 2010, we determined that we had not reversed stock-based compensation expense
related to certain employees terminated earlier in the year. When the recipient of an equity award leaves the
Company, stock-based compensation expense should be reversed in the period of termination. The net effect of
this fourth quarter adjustment was immaterial for the three months ended March 31, 2010, over-statement of
pre-tax loss of $0.3 million for the three months ended June 30, 2010, under-statement of pre-tax income of $0.1
million for the three months ended September 30, 2010, and over-statement of pre-tax income of $0.4 million for
the three months ended December 31, 2010. Pre-tax income was not impacted for the year ended December 31,
2010. This adjustment is not considered material to the financial information taken as a whole for any of the
periods presented.

146

Item 9: Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure

None.

Item 9A: Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Exchange
Act, that are designed to provide reasonable assurance that information required to be disclosed by us in reports
that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time
periods specified in SEC rules and forms, and that such information is accumulated and communicated to our
management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure. Our management, including the Chief Executive Officer and Chief
Financial Officer, is engaged in a comprehensive effort to review, evaluate, and improve our controls; however,
management does not expect that our disclosure controls will prevent all errors and all fraud. A control system,
no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control
system’s objectives are met. Additionally, in designing disclosure controls and procedures, our management
necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure
controls and procedures. The design of any disclosure controls and procedures is also based in part on certain
assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions.

Based on their evaluation as of the end of the period covered by this Annual Report on Form 10-K, our
Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures
were effective to provide reasonable assurance as of December 31, 2011.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial
reporting as defined in Rule 13a-15(f) of the Exchange Act. Because of its inherent limitations, internal control
over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, assessed the
effectiveness of the Company’s internal control over financial reporting as of December 31, 2011. In making this
assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”) in Internal Control—Integrated Framework.

Based on our assessment using those criteria, we concluded that our internal control over financial reporting was
effective as of December 31, 2011.

We have excluded Streamline, Entrac, Prism, and Alphagraph from our assessment of internal control over
financial reporting as of December 31, 2011 because they were acquired by us during fiscal year 2011.
Streamline, Entrac, Prism, and Alphagraph are wholly owned subsidiaries whose total assets and total revenue
represent 6.9% and 1.7%, respectively, of the related consolidated financial statement amounts as of and for the
year ended December 31, 2011.

PricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited the effectiveness of
our internal control over financial reporting as of December 31, 2011, as stated in their report included in this
Annual Report on Form 10-K.

147

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Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended
December 31, 2011 that have materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.

Item 9B: Other Information

None.

148

PART III

Item 10: Directors, Executive Officers and Corporate Governance

Information regarding our directors is incorporated by reference from the information contained under the
caption “Election of Directors” in our Proxy Statement for our 2012 Annual Meeting of Stockholders (the
“2012 Proxy Statement”). Information regarding our current executive officers is incorporated by reference from
information contained under the caption “Executive Officers” in our 2012 Proxy Statement. Information
regarding Section 16 reporting compliance is incorporated by reference from information contained under the
caption “Section 16(a) Beneficial Ownership Reporting Compliance” in our 2012 Proxy Statement. Information
regarding the Audit Committee of our Board of Directors and information regarding an Audit Committee
financial expert is incorporated by reference from information contained under the caption “Meetings and
Committees of the Board of Directors” in our 2012 Proxy Statement. Information regarding our code of ethics is
incorporated by reference from information contained under the caption “Meetings and Committees of the Board
of Directors” in our 2012 Proxy Statement. Information regarding our implementation of procedures for
stockholder nominations to our Board of Directors is incorporated by reference from information contained under
the caption “Meetings and Committees of the Board of Directors” in our 2012 Proxy Statement.

Item 11: Executive Compensation

The information required by this item is incorporated by reference from the information contained under the
captions “Compensation Discussion and Analysis” and “Executive Compensation” in our 2012 Proxy Statement.

Item 12: Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters

Other than information regarding securities authorized for issuance under equity compensation plans, which is
set forth below, the information required by this item is incorporated by reference from the information contained
under the caption “Security Ownership” in our 2012 Proxy Statement.

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Securities Authorized for Issuance Under Equity Compensation Plans

The following table sets forth information as of December 31, 2011 concerning securities that are authorized
under equity compensation plans.

Plan category

Equity compensation plans approved by

Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights

Weighted-average
exercise price of
outstanding options,
warrants and rights

Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column 1)

Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . .

4,956,171(1)

$14.67(2)

3,561,762(3)

Equity compensation plans not approved by

Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . .

—

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4,956,171

—

$14.67

—

3,561,762

(1)

Includes options outstanding as of December 31, 2011, representing 3,222 shares with an average exercise
price of $27.39 per share, that were assumed in connection with business combinations.

(2) Calculated without taking into account 2,502,936 shares of RSUs that will become issuable as those units

vest, without any cash consideration or other payment required for such shares.
Includes 2,012,534 shares available under the 2009 Plan and 1,549,228 shares available under the ESPP.

(3)

149

Item 13: Certain Relationships and Related Transactions, and Director Independence

The information required by this item is incorporated by reference from the information contained under the
caption “Certain Relationships and Related Transactions, and Director Independence” in our 2012 Proxy
Statement.

Item 14: Principal Accountant Fees and Services

The information required by this item is incorporated by reference from the information contained under the
caption “Principal Accountant Fees and Services” in our 2012 Proxy Statement.

150

PART IV

Item 15: Exhibits and Financial Statement Schedules

(a) Documents Filed as Part of this Report

(1)

Index to Financial Statements

The Financial Statements required by this item are submitted in Item 8 of this Annual Report on Form 10-K as
follows:

Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets as of December 31, 2011 and 2010 . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations for the Years Ended December 31, 2011, 2010, and

2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2011,

2010, and 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Cash Flows for the Years Ended December 31, 2011, 2010, and

2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

84
85

88
89

(2) Financial Statement Schedule

Schedule II—Valuation and Qualifying Accounts

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

156

(All other schedules are omitted because of the absence of conditions under which they are required or because
the necessary information is provided in the consolidated financial statements or notes thereto in Item 8 of this
Annual Report on Form 10-K.)

(3) Exhibits

Exhibit
No.

Description

2.1

2.2

2.3

2.4

2.5

2.6+

3.1

3.2

Agreement and Plan of Merger, dated as of August 30, 2000, by and among the Company, Vancouver
Acquisition Corp. and Splash Technology Holdings, Inc. (1)

Amendment No. 1, dated as of October 19, 2000, to the Agreement and Plan of Merger, dated as of
August 30, 2000, by and among the Company, Vancouver Acquisition Corp. and Splash Technology
Holdings, Inc. (2)

Agreement and Plan of Merger and Reorganization, dated as of July 14, 1999, among the Company,
Redwood Acquisition Corp. and Management Graphics, Inc. (3)

Agreement and Plan of Merger, dated as of February 26, 2003 by and among the Company, Strategic
Value Engineering, Inc. and Printcafe Software, Inc. (4)

Merger Agreement, dated as of April 14, 2005 by and among the Company, VUTEk, Inc. and EFI
Merger Sub, Inc. (5)

Amended and Restated Equity Purchase Agreement dated October 31, 2006 among the Company,
Electronics for Imaging, International, Jetrion, LLC and Flint Group North America Corporation (6)

Amended and Restated Certificate of Incorporation (7)

Amended and Restated By-Laws of Electronics For Imaging, Inc., (as amended August 12, 2009) (8)

151

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Exhibit
No.

4.2

10.1+

10.2

10.3

10.4

10.5

10.6

10.7

10.8

10.9

10.10

10.11

10.12

10.13

10.14

10.15

10.16

10.17

10.18

10.19

10.20+

10.21+

10.22

10.23

Description

Specimen Common Stock Certificate of the Company (9)

Agreement dated December 6, 2000, by and between Adobe Systems Incorporated and the
Company (10)

Electronics For Imaging, Inc. 1999 Equity Incentive Plan as amended (11)

Amended and Restated 2000 Employee Stock Purchase Plan (12)

Splash Technology Holdings, Inc. 1996 Stock Option Plan as amended to date (13)

Printcafe Software, Inc. 2000 Stock Incentive Plan (14)

Printcafe Software, Inc. 2002 Key Executive Stock Incentive Plan (14)

Printcafe Software, Inc. 2002 Employee Stock Incentive Plan (14)

T/R Systems, Inc. 1999 Stock Option Plan (15)

Electronics For Imaging, Inc. 2004 Equity Incentive Plan (16)

Electronics For Imaging, Inc. 2007 Equity Incentive Award Plan (17)

Electronics For Imaging, Inc. 2007 Equity Incentive Award Plan Stock Option Grant Notice and
Stock Option Agreement (18)

Electronics For Imaging, Inc. 2007 Equity Incentive Award Plan Restricted Stock Award Grant
Notice and Restricted Stock Award Agreement (18)

Electronics For Imaging, Inc. 2007 Equity Incentive Award Plan Restricted Stock Unit Award Grant
Notice and Restricted Stock Unit Award Agreement (18)

Electronics For Imaging, Inc. 2009 Equity Incentive Award Plan Stock Option Grant Notice and
Stock Option Agreement (19)

Electronics For Imaging, Inc. 2009 Equity Incentive Award Plan Restricted Stock Unit Award Grant
Notice and Restricted Stock Unit Award Grant Agreement (19)

Electronics For Imaging, Inc. 2009 Equity Incentive Award Plan Restricted Stock Award Grant
Notice and Restricted Stock Award Grant Agreement (19)

Form of Indemnification Agreement (9)

Form of Indemnity Agreement (20)

Lease Financing of Properties Located in Foster City, California, dated as of July 16, 2004, among
the Company, Société Générale Financial Corporation and Société Générale (21)

OEM Distribution and License Agreement dated September 19, 2005 by and among Adobe Systems
Incorporated, Adobe Systems Software Ireland Limited and the Company, as amended by
Amendment No. 1 dated as of October 1, 2005 (22)

Amendment No. 2 to OEM Distribution and License Agreement by and among Adobe Systems
Incorporated, Adobe Systems Software Ireland Limited and the Company, effective as of
October 1, 2005 (23)

Employment Agreement effective August 1, 2006, by and between Guy Gecht and the Company (24)

Employment Agreement effective August 1, 2006, by and between Fred Rosenzweig and the
Company (24)

152

Exhibit
No.

10.24+

10.25

10.26

10.27

10.28

10.29

10.30

10.31

12.1

23.1

24.1

31.1

31.2

32.1

Description

Amendment No. 4 to OEM Distribution and License Agreement by and among Adobe Systems
Incorporated, Adobe Systems Software Ireland Limited and the Company, effective as of
January 1, 2006 (25)

Purchase and Sale Agreement and Joint Escrow Instructions dated as of October 23, 2008 by and
between the Company and Gilead Sciences, Inc., as amended (26)

Offer Letter to Vincent Pilette, dated December 29, 2010 (27)

Executive Employment Agreement to Vincent Pilette, dated December 29, 2010 (27)

EFI 2012 Section 16 Officer -- Executive Performance Bonus Program (28)

Electronics For Imaging, Inc. 2009 Equity Incentive Award Plan (29)

Retirement and Transition Agreement dated July 20, 2011, by and between Electronics For
Imaging, Inc. and Fred Rosenzweig (30)

First Amendment to Retirement and Transition Agreement dated January 11, 2012, by and between
Electronics For Imaging, Inc. and Fred Rosenzweig

Computation of Ratios of Earnings to Fixed Charges

List of Subsidiaries

Consent of Independent Registered Public Accounting Firm

Power of Attorney (see signature page of this Annual Report on Form 10-K)

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Chief Executive Officer Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 and Chief Financial Officer Certification pursuant
to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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101.INS*

XBRL Instance Document

101.SCH*

XBRL Taxonomy Extension Schema Document

101.CAL*

XBRL Taxonomy Calculation Linkbase Document

101.DEF*

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*

XBRL Taxonomy Label Linkbase Document

101.PRE*

XBRL Taxonomy Extension Presentation Linkbase Document

+
*

(1)

(2)

(3)

(4)

The Company has received confidential treatment with respect to portions of these documents
Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a
registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or
Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability under those
sections.
Filed as exhibit (d) (1) to the Company’s Schedule TO-T on September 14, 2000 and incorporated herein
by reference.
Filed as exhibit (d) (5) to the Company’s Schedule TO/A No. 3 on October 20, 2000 and incorporated
herein by reference.
Filed as an exhibit to the Company’s Report of Unscheduled Events on Form 8-K on September 8, 1999
(File No. 000-18805) and incorporated herein by reference.
Filed as exhibit 10 to Amendment No. 2 to the Schedule 13D filed on February 26, 2003 and incorporated
herein by reference.

153

(5)

(6)

(7)

(8)

(9)

Filed as an exhibit to the Company’s Current Report on Form 8-K filed on April 18, 2005 (File No. 000-
18805) and incorporated herein by reference.
Filed as an exhibit to the Company’s Current Report on Form 8-K filed on November 3, 2006 (File
No. 000-18805) and incorporated herein by reference.
Filed as an exhibit to the Company’s Registration Statement on Form S-1 (File No. 33-57382) and
incorporated herein by reference.
Filed as an exhibit to the Company’s Current Report on Form 8-K filed on August 17, 2009 and
incorporated herein by reference.
Filed as an exhibit to the Company’s Registration Statement on Form S-1 (No. 33-50966) and incorporated
herein by reference.

(10) Filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000

(File No. 000-18805) and incorporated herein by reference.

(11) Filed as an exhibit to the Company’s Registration Statement on Form S-8 on June 24, 2003 and

incorporated herein by reference.

(12) Filed as Appendix A to the Company’s Proxy Statement filed on May 21, 2009 (File No. 000-18805) and

incorporated herein by reference.

(13) Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004

(File No. 000-18805) and incorporated herein by reference.

(14) Filed as an exhibit to Printcafe Software, Inc.’s Registration Statement on Form S-1 (File No. 333-82646)

and incorporated herein by reference.

(15) Filed as an exhibit to T/R Systems, Inc.’s Registration Statement on Form S-1 (File No. 333-82646) and

incorporated herein by reference.

(16) Filed as an exhibit to the Company’s Registration Statement on Form S-8 on June 16, 2004 and

incorporated herein by reference.

(17) Filed as Appendix B to the Company’s Proxy Statement filed on November 14, 2007 (File No. 000-18805)

and incorporated herein by reference.

(18) Filed as an exhibit to the Company’s Registration Statement on Form S-8 on December 20, 2007 and

incorporated herein by reference.

(19) Filed as an exhibit to the Company’s Current Report on Form 8-K filed on August 17, 2009 (File No. 000-

18805) and incorporated herein by reference.

(20) Filed as an exhibit to the Company’s Current Report on Form 8-K filed on February 15, 2008 (File

No. 000-18805) and incorporated herein by reference.

(21) Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004

(File No. 000-18805) and incorporated herein by reference.

(22) Filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005

(File No. 000-18805) and incorporated herein by reference.

(23) Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006

(File No. 18805) and incorporated herein by reference.

(24) Filed as an exhibit to the Company’s Current Report on Form 8-K filed on August 7, 2006 (File No. 000-

18805) and incorporated herein by reference.

(25) Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006

(File No. 18805) and incorporated herein by reference.

(26) Filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008

(File No. 000-18805) and incorporated herein by reference.

(27) Filed as an exhibit to the Company’s Current Report on Form 8-K filed on January 4, 2011 (File No. 000-

18805) and incorporated herein by reference.

(28) Filed as an exhibit to the Company’s Current Report on Form 8-K filed on February 10, 2012 (File

No. 000-18805) and incorporated herein by reference.

(29) Filed as an exhibit to the Company’s Current Report on Form 8-K filed on May 20, 2011 (File No. 000-

18805) and incorporated herein by reference.

(30) Filed as an exhibit to the Company’s Current Report on Form 8-K filed on July 21, 2011 (File No. 000-

18805) and incorporated herein by reference.

154

(b) List of Exhibits

See Item 15 (a).

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155

ELECTRONICS FOR IMAGING, INC.
Schedule II
Valuation and Qualifying Accounts

(in thousands)

Year Ended December 31, 2011
Allowance for bad debts and sales-related

Balance at
beginning
of period

Charged to
revenue
and
expenses

Charged to
(from) other
accounts

Deductions

Balance at
end of
period

allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$13,167

$2,010

$ 346(1)

$(3,492)

$12,031

Year Ended December 31, 2010
Allowance for bad debts and sales-related

allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13,050

2,525

163(2)

(2,571)

13,167

Year Ended December 31, 2009
Allowance for bad debts and sales-related

allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8,452

7,703

—

(3,105)

13,050

(1) Adjustment due to acquired bad debt allowance: Streamline
(2) Adjustment due to acquired bad debt allowance: Radius

156

SIGNATURES

Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

ELECTRONICS FOR IMAGING, INC.

February 17, 2012

By:

/S/ GUY GECHT

Guy Gecht,

Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENT, that each person whose signature appears below constitutes and
appoints Guy Gecht and Vincent Pilette jointly and severally, his attorneys-in-fact, each with the power of
substitution, for him in any and all capacities, to sign any amendments to the Form 10-K Annual Report and to
file the same, with exhibits thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or
substitutes, may do or cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature

Title

Date

/S/ GUY GECHT
Guy Gecht

Chief Executive Officer, Director
(Principal Executive Officer)

February 17, 2012

/S/ VINCENT PILETTE
Vincent Pilette

Chief Financial Officer (Principal
Financial and Accounting Officer)

February 17, 2012

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February 17, 2012

/S/ ERIC BROWN
Eric Brown

/S/ GILL COGAN
Gill Cogan

/S/ THOMAS GEORGENS
Thomas Georgens

/S/ RICHARD A. KASHNOW
Richard A. Kashnow

/S/ DAN MAYDAN
Dan Maydan

Director

157

[THIS PAGE INTENTIONALLY LEFT BLANK]

CORPORATE DIRECTORY

Stockholder Information
Independent Accounting Firm
PricewaterhouseCoopers LLP
San Jose, California

Listing
Electronics For Imaging, Inc. is listed
on the NASDAQ Stock Market LLC
The trading symbol is EFII

Transfer Agent & Registrar
American Stock Transfer & Trust Company, LLC
6201 15th Avenue
Brooklyn, New York 11219
Telephone: (800) 937-5449

Annual Meeting
The annual meeting of Stockholders will
be held on May 11, 2012

Corporate & Investor Information
Please direct inquiries to:
Investor Relations
EFI
303 Velocity Way
Foster City, California 94404
Telephone: (650) 357-3828
Facsimile: (650) 357-3907
Web site: www.efi.com

Corporate Officers

Guy Gecht
Chief Executive Officer

Vincent Pilette
Chief Financial Officer

Board of Directors

Gill Cogan (1)(2)
Chairman of the Board of the Company
Founding Partner,
Opus Capital Ventures LLC

Guy Gecht
Chief Executive Officer of the Company

Eric Brown (3)
Executive Vice President
Chief Operating Officer
Chief Financial Officer, Polycom, Inc.

Thomas Georgens (3)
President and Chief Executive Officer,
NetApp, Inc.

Richard A. Kashnow (2)(3)
Consultant, Self-Employed

Dan Maydan (1)(2)
Member, Board of Trustees,
Palo Alto Medical Foundation

(1) Member of the Compensation Committee
(2) Member of the Nominating and Governance Committee
(3) Member of the Audit Committee