Electronics For Imaging Inc. Annual Report 2013

FY2013 Annual Report · Electronics For Imaging Inc.

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ELECTRONICS FOR IMAGING, INC.
2014 PROXY STATEMENT AND
2013 ANNUAL REPORT

ELECTRONICS FOR IMAGING, INC.
6750 Dumbarton Circle
Fremont, California 94555

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held on May 14, 2014

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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 14, 2014 at
8:00 a.m., Pacific Time, at the Company’s corporate headquarters, 6750 Dumbarton Circle, Fremont, California
94555 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, 2014.

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 April 4, 2014 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

Fremont, California
April 14, 2014

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.

[THIS PAGE INTENTIONALLY LEFT BLANK]

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ELECTRONICS FOR IMAGING, INC.

PROXY STATEMENT

FOR THE ANNUAL MEETING OF STOCKHOLDERS

May 14, 2014

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 14, 2014 at 8:00 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, 6750 Dumbarton Circle, Fremont, California 94555. The Company
intends to mail this Proxy Statement and accompanying proxy card on or about April 14, 2014 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, 2014; and (4) to transact such other business as may properly come before the meeting or
any adjournment or postponement thereof. All proxies that 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 April 4, 2014 (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 46,753,728 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
23,376,865 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 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, 2014 under Proposal Three (ratification of appointment of auditors). Abstentions will 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, 2014; 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

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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.

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, 6750 Dumbarton
Circle, Fremont, California 94555, 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 2015, pursuant to Securities and
Exchange Commission (the “SEC”) Rule 14a-8, is currently expected to be December 15, 2014. 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 2015 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 14, 2015 and not later than the
close of business on February 13, 2015 (the “Discretionary Vote Deadline”). These deadlines are subject to
change if the date of the 2015 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 2015 annual meeting.

Additional Copies

The Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013 (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., 6750 Dumbarton Circle,
Fremont, California 94555.

IMPORTANT NOTICE REGARDING INTERNET AVAILABILITY OF PROXY MATERIALS

FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON May 14, 2014: The
Company’s Proxy Statement dated APRIL 14, 2014 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 2013 annual meeting. 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 April 4, 2014 are
set forth below.

Eric Brown(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

2011

Name of Nominee and Principal Occupation

Age Director Since

Self-Employed

Gill Cogan(1)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

1992

Founding Partner, Opus Capital Ventures LLC

Guy Gecht . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

2000

Chief Executive Officer and President of the Company

Thomas Georgens(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

2008

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

Richard A. Kashnow(2)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

2008

Consultant, Self-Employed

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

1996

Retired

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(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 is currently self-
employed. Previously, Mr. Brown served as Chief Operating Officer, Chief Financial Officer, and Executive
Vice President of Polycom, Inc. from February 2012 to March 2014. 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 until March 2008, Mr. Brown worked at McAfee, Inc., a
security technology company, serving as Chief Operating Officer and Chief Financial Officer from March 2006
until March 2008 and as Vice President and Chief Financial Officer from January 2005 until March 2006.
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 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 experience with the
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.

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 and was also
appointed President of the Company on May 11, 2012, a position he previously held from July 1999 to January
2000. 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 currently serves as a director of Autodesk, Inc. Mr. Georgens graduated from Rensselaer
Polytechnic Institute with 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. Until December 2012, Mr. Kashnow served on the board of directors
of Ariba, Inc., which was a public company providing on-demand spend management solutions prior to its
acquisition by SAP AG in October 2012. 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 Corporation. 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 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 seven (7) meetings in 2013. 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 2013.

Audit Committee

The Audit Committee currently consists of Directors Brown (Chairman) Georgens and Kashnow. The Audit

Committee held eight (8) meetings in 2013. The Audit Committee oversees the accounting and financial
reporting processes of the Company, the audits of the financial statements of the Company, 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 five (5) meetings in 2013. 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 and also meet the additional criteria for independence of Compensation Committee members set
forth in Rule 5605(d)(2) of the NASDAQ Rules. The Compensation Committee reviews and approves the
Company’s executive compensation policy, administers the Company’s stock plans and considers compensation
consultant, counsel and other adviser conflict of interest. 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 three (3) meetings in 2013. 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
6750 Dumbarton Circle
Fremont, CA 94555

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 2013 DIRECTOR COMPENSATION

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

2013 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 . . . . . . . . . . . .
Thomas Georgens . . . . . .
Richard Kashnow . . . . . . .
Dan Maydan . . . . . . . . . . .

$62,000
55,500
51,500
65,000
50,500

$ —
$243,880
274,165(5) —
—
243,880
—
243,880
—
243,880

$ —
—
—
—
—

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

$ —
—
—
—
—

All other
compensation
(g)

Total
(h)

$ —
—
—
—
—

$305,880
329,660
295,380
308,880
294,380

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(1) Guy Gecht, the Company’s Chief Executive Officer and President is not included in this table as he is an
employee of the Company, and thus he received no compensation for his services as director. The
compensation received by Mr. Gecht is shown in the Summary Compensation Table for 2013 on page 41 of
this Proxy Statement.

(2) The amounts reported in the Stock Awards and Option Awards column represents the aggregate grant date
fair value determined in accordance with Financial Accounting Standards Board Accounting Standard
Codification (“ASC”) 718, Stock Compensation, of equity-based awards granted to non-employee directors
during 2013. See Note 12 of the consolidated financial statements in our Annual Report on Form 10-K for
the year ended December 31, 2013 regarding assumptions underlying the valuation of equity awards.
(3) At December 31, 2013, the aggregate number of restricted stock units outstanding for each non-employee

director was as follows:

Name

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

Total
(#)

11,000
18,579
17,000
17,000
17,000

(4) At December 31, 2013, the aggregate number of option awards outstanding for each non-employee director

was as follows:

Name

Vested
(#)

Unvested
(#)

Total
(#)

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

37,125
83,975
109,375
109,375
—

27,875
30,625
30,625
30,625
30,625

65,000
114,600
140,000
140,000
30,625

(5)

Includes the annual Board of Directors Chair retainer paid in the form of an RSU grant issued to Mr. Cogan.

Director Compensation Program

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. In addition, the
chairpersons of the Board of Directors and the Board Committees receive a chairperson premium, as set forth
below:

Annual Retainer

Meeting Fees

Chairperson Member

In Person Telephone

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

*
10,000
5,000
5,000

$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. This RSU grant will vest in one installment on the first anniversary of the grant date,
subject to the director’s continued service through the vesting 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, subject to the director’s
continued service through the vesting date.

Equity Compensation.

Equity awards may be granted to the non-employee directors under the Company’s

stock incentive plans from time to time. Each non-employee director received an equity award grant of 6,500
RSUs during 2013. These RSUs vest in one installment on the first anniversary of 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 2013. 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 2013

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 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 three years of first becoming a
director, 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. As of April 4, 2014, all of our directors
have met the stock ownership requirement.

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., 6750 Dumbarton Circle, Fremont,
California 94555. 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. Three directors 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 25 of this Proxy Statement, describes the
Company’s executive compensation program and the decisions made by the Compensation Committee in 2013 in
more detail. Highlights of the program include the following:

• Our executive compensation program is designed to pay for performance. For 2013, the vast majority
of the target total direct compensation for our named executive officers was in the form of incentive
compensation with approximately 79% of the target total direct compensation for our Chief Executive
Officer and with approximately 87% of the target total direct compensation for our former Chief
Financial Officer being in the form of incentive compensation tied to the achievement of specific
financial performance goals and/or the level of our stock price. For our Chief Operating Officer, who
served as our Interim Chief Financial Officer for a portion of 2013, 70% of the target total direct
compensation was in the form of incentive compensation. 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.

• 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 executives for the Company’s overall
performance and align the executives’ interests with those of our stockholders. Management
recommended, and the Compensation Committee agreed, that the executives’ base salaries would not
be increased for 2013.

• 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, and which correlate to the 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.

Company’s stock price. The executive could also earn an additional cash bonus for exceptional
performance under the program if the Company’s performance exceeded certain targets established in
the Company’s 2013 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 in more detail below, the Compensation Committee determined that the Company’s
performance during 2013 exceeded the target levels for vesting of the restricted stock unit awards
granted under the 2013 bonus program and was less than the target levels for full payment of the cash
bonus opportunities. Consistent with our pay-for-performance philosophy, these awards vested as to
the total number of restricted stock units granted under the award, and a portion of the cash bonus
component of the program was also paid out.

• Awards to our named executive officers under our long-term equity incentive program in 2013

consisted of approximately two-thirds performance-based restricted stock units and approximately one-
third 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 combined achievement of
Company-wide revenue and non-GAAP operating income targets over a four consecutive quarter
period in addition to continued employment requirements. These awards 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.

•

In January 2014, the Company entered into a new employment agreement with Mr. Gecht to eliminate
his right under his prior employment agreement to be reimbursed by the Company for any tax liability
imposed under Section 409A of the U.S. Internal Revenue Code and to update his agreement to be on
the same form as the Company’s other agreements with its executive officers. Mr. Gecht’s new
agreement does not otherwise materially change the compensation, severance benefits or other terms of
his employment with the Company.

• As of April 4, 2014, Mr. Gecht owned approximately 0.9% of the Company’s outstanding common
stock which the Company believes 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 2013, the Company achieved record revenue, growing
to approximately $728 million, which represented an increase of approximately $76 million or 12% growth over
the prior year. This was the third consecutive year of double-digit percentage revenue growth. In addition, the
Company delivered significant returns for its stockholders in 2013 as its stock price increased from $18.99 at the
end of 2012 to $38.73 at the end of 2013.

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” approval of the executive compensation.

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PROPOSAL THREE

RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

After considering proposals from several firms including PricewaterhouseCoopers, LLP

(“PricewaterhouseCoopers”), on March 27, 2014, the Audit Committee of the Board of Directors of Electronics
for Imaging, Inc. (the “Company”) dismissed PricewaterhouseCoopers as the Company’s independent registered
public accounting firm and approved the selection of Deloitte & Touche LLP (“Deloitte”) to serve in this role for
the fiscal year ending December 31, 2014, and engaged Deloitte as of April 2, 2014.

Stockholder ratification of the appointment of Deloitte as the Company’s independent registered public
accounting firm for the fiscal year ending December 31, 2014 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
Deloitte 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.

During the Company’s fiscal years ended December 31, 2013 and 2012 and the subsequent interim period
through April 2, 2014, neither the Company, nor anyone acting on its behalf, consulted Deloitte regarding: (1) the
application of accounting principles to a specified transaction, either completed or proposed; (2) the type of audit
opinion that might be rendered on the Company’s financial statements, and Deloitte did not provide any written
report or oral advice that Deloitte concluded was an important factor considered by the Company in reaching a
decision as any such accounting, auditing, or financial reporting issue; or (3) any matter that was either the
subject of a “disagreement” as that term is defined in Item 304(a)(1)(iv) and the related instructions to Item 304
of Regulation S-K or a “reportable event” as that term is defined in Item 304(a)(1)(v) of Regulation S-K.

During the fiscal years ended December 31, 2013 and 2012, Deloitte billed the Company $1,494,372 and

$1,293,408, respectively, for professional services primarily related to tax compliance, tax advice, and tax
planning. These services include services regarding mergers and acquisitions and subsidiary management.

A representative from Deloitte will attend the 2014 Annual Meeting to respond to appropriate questions and

make a statement should they desire to do so. The agreed upon fiscal 2014 audit fees are expected to be
competitive with current market rates.

During the fiscal years ended December 31, 2013 and 2012 and the subsequent interim period through
March 27, 2014, there were: (1) no disagreements as that term is defined in Item 304(a)(1)(iv) of Regulation S-K
and the related instructions to Item 304 of Regulation S-K, between the Company and PricewaterhouseCoopers
on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or
procedures, which disagreements, if not resolved to the satisfaction of PricewaterhouseCoopers would have
caused it to make reference thereto in its reports on the Company’s financial statements for such years; and
(2) no reportable events as that term is defined in Item 304(a)(1)(v) of Regulation S-K. PricewaterhouseCoopers’
audit reports on the Company’s consolidated financial statements for the fiscal years ended December 31, 2013
and 2012 did not contain an adverse opinion or disclaimer of opinion, and were not qualified or modified as to
uncertainty, audit scope, or accounting principles. The audit reports of PricewaterhouseCoopers on the
effectiveness of internal control over financial reporting as of December 31, 2013 and 2012 did not contain any
adverse opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles,
except that the audit reports on the effectiveness of internal control over financial reporting as of December 31,
2013 and December 31, 2012 contained an explanatory paragraph due to the exclusion of certain elements of the
internal control over financial reporting of all the Company’s acquisitions which closed in 2013 and 2012,
respectively.

The Company provided PricewaterhouseCoopers with a copy of its disclosures and requested that
PricewaterhouseCoopers furnish it with a letter addressed to the Securities and Exchange Commission stating
whether or not it agrees with the Company’s statements and if not, stating the respects in which it does not agree.
A copy of the letter dated April 2, 2014 is filed as Exhibit 16.1 to the Company’s Current Report on Form 8-K
filed with the SEC on April 2, 2014. A representative of PricewaterhouseCoopers is not expected to be present at
the Annual Meeting.

During the fiscal years ended December 31, 2013 and 2012, PricewaterhouseCoopers 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(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All other fees(d)

2013

2012

$1,685
392
—

$1,575
347
4
4

Total

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

$2,081

$1,930

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(a) Audit fees consist of aggregate fees incurred for professional services rendered for the audit of the

Company’s consolidated financial statements included in annual SEC filings and reports, review of interim
consolidated financial statements, and the audit of the effectiveness of our internal controls pursuant to
Section 404 of the Sarbanes-Oxley Act.

(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 primarily include due diligence services and audit procedures related to
our acquisitions.

These services include tax assistance regarding mergers and acquisitions.

(d) All other fees consist of services provided in connection with other services consisting primarily of

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 engagement of the independent auditors, all audit engagement fees and terms and all
non-audit engagements, as may be permissible, with the independent auditors.

Vote Required

The ratification of the selection of Deloitte & Touche 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, 2014.
Proxies received by the Company will be voted “FOR” this proposal unless the stockholder specifies
otherwise in the proxy.

SECURITY OWNERSHIP

Except as otherwise indicated below, the following table sets forth certain information regarding beneficial
ownership of common stock as of April 4, 2014 by: (1) each of the Company’s current directors; (2) each of the
named executive officers listed in the Summary Compensation Table for 2013 on page 41 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 April 4, 2014, there were 46,753,728 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 April 4, 2014 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., 6750 Dumbarton Circle,
Fremont, California 94555.

Name of beneficial owner (1)

Common stock

Number of
shares

Percentage
owned

BlackRock, Inc.(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4,237,623

9.06

40 East 52nd Street
New York NY 10022

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

3,212,089

6.87

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

The Vanguard Group, Inc.(4)

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

3,480,287

7.44

100 Vanguard Blvd.
Malvern PA 19355

FMR, LLC(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4,272,296

9.14

245 Summer Street
Boston MA 02110

Guy Gecht(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gill Cogan(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dan Maydan(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thomas Georgens(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Richard Kashnow(10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Eric Brown(11)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vincent Pilette(12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marc Olin(13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
David Reeder(14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

428,677
82,929
15,685
133,750
126,250
46,750
—
46,977
—

*
*
*
*
*
*
*
*
*

All current executive officers and directors as a group (9 persons)(15) . . . . . . . . . . . . . .

881,018

1.86%

* Less than one percent.

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(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 April 4, 2014. 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 46,753,728 shares outstanding on April 4, 2014, 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 January 29, 2014, by BlackRock, Inc. BlackRock, Inc. has sole voting power as to
4,072,569 shares of common stock and sole dispositive power over 4,237,623 shares of common stock.
(3) Beneficial ownership information is based on information contained in Schedule 13G, as amended, filed

with the SEC on February 10, 2014, by Dimensional Fund Advisors LP (“DFA”). DFA has sole voting
power as to 3,130,531 shares of common stock and sole dispositive power as to 3,212,089 shares of
common stock subject to the following qualification. DFA 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 are collectively referred to as the “Funds”). In certain cases, subsidiaries of DFA may act as an
adviser or sub-adviser to certain Funds. In its role as investment advisor, sub-adviser, and/or manager, DFA
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. DFA disclaims beneficial ownership of such securities.

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

with the SEC on February 12, 2014, by The Vanguard Group, Inc. (“VGI”), Vanguard Fiduciary Trust
Company (“VFTC”), and Vanguard Investments Australia, Ltd. (“VIA”). VFTC is the beneficial owner as
to 64,413 shares of common stock as a result of serving as investment manager of collective trust accounts
and VIA is the beneficial owner as to 3,700 shares of common stock as a result of serving as investment
manager of Australian investment offerings. VGI has sole voting power over 68,113 shares of common
stock and sole dispositive power as to 3,415,874 shares of common stock. VGI and VFTC have shared
dispositive power as to 64,413 shares of common stock. VGI, as the parent company of VFTC and VIA,
may be deemed to beneficially own the shares reported by VFTC and VIA. VGI, together with VFTC and
VIA, beneficially own 3,480,287 shares of common stock.

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

with the SEC on February 14, 2014, by FMR, LLC. Fidelity Management & Research Company (“FMRC”)
is a wholly-owned subsidiary of FMR, LLC. As an investment adviser to various investment companies,
FMRC has sole voting power as to 755,610 shares of common stock and sole dispositive power over
4,272,296 shares of common stock.
Includes 162,138 shares of common stock issuable upon the exercise of options granted to Mr. Gecht under
the 2009 equity incentive plan, which are currently exercisable and/or exercisable within 60 days of April 4,
2014.
Includes 68,350 shares of common stock issuable upon the exercise of options granted to Mr. Cogan under
the 2009 equity incentive plan, which are currently exercisable and/or exercisable within 60 days of April 4,
2014.
Includes 3,125 shares of common stock issuable upon the exercise of options granted to Mr. Maydan under
the 2009 equity incentive plan, which are currently exercisable and/or exercisable within 60 days of April 4,
2014.
Includes 118,750 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 April 4, 2014.

(6)

(7)

(8)

(9)

(10) Includes 118,750 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 April 4, 2014.

(11) Includes 45,250 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 April 4,
2014.

(12) Mr. Pilette resigned as our Chief Financial Officer in August 2013 effective as of September 3, 2013.

Mr. Pilette does not hold any options, which are currently exercisable and/or exercisable within 60 days of
April 4, 2014.

(13) Mr. Olin served as our Interim Chief Financial Officer from September 3, 2013 until January 15, 2014, and
was appointed as our Chief Operating Officer effective January 16, 2014. Mr. Olin does not hold any
options, which are currently exercisable and/or exercisable within 60 days of April 4, 2014.

(14) Mr. Reeder was appointed as our Chief Financial Officer effective January 16, 2014. Mr. Reeder does not
hold any options, which are currently exercisable and/or exercisable within 60 days of April 4, 2014.
(15) Includes an aggregate of 881,018 shares of common stock issuable upon the exercise of options granted to
executive officers and directors collectively under the 2007 and 2009 equity incentive plans, which are
currently exercisable and/or exercisable within 60 days of April 4, 2014.

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 on our review of the copies of such reports furnished to us, the following officers and directors

failed to file certain reports required by Section 16(a) of the Exchange Act on a timely basis.

Mr. Olin had one late filing of a Form 4 that did not timely report the vesting of 3,214 restricted stock units,

conversion of such restricted stock units into shares of common stock, and withholding of 1,552 shares of
common stock for tax purposes upon vesting of the restricted stock units. Mr. Cogan had one late filing of a
Form 4 that did not timely report the sale of 6,096 shares of common stock. Mr. Georgens had one late filing of a
Form 4 that did not timely report the vesting of 1,500 restricted stock units and the conversion of such restricted
stock units into shares of common stock. Mr. Gecht had one late filing of a Form 4 that did not timely report the
sale of 22,768 shares of common stock.

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EXECUTIVE OFFICERS

The following table lists certain information regarding the Company’s executive officers as of April 4,

2014:

Name

Guy Gecht . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marc Olin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
David Reeder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Age

48
49
39

Position

Chief Executive Officer
Chief Operating Officer
Chief Financial Officer

Mr. Gecht was appointed Chief Executive Officer of the Company on January 1, 2000 and was also
appointed President of the Company on May 11, 2012, a position he previously held from July 1999 to January
2000. 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. Olin was appointed Chief Operating Officer of the Company effective January 16, 2014. From

September 2013 until January 15, 2014, Mr. Olin served as our Interim Chief Financial Officer. Mr. Olin joined
the Company in 2003 when the Company acquired Printcafe Software. Since 2003, Mr. Olin has served in
various roles at the Company, most recently, since 2006, as Senior Vice President and General Manager of EFI
Productivity Software. Mr. Olin holds a B.S. in Graphic Communications Management and Applied Mathematics
from Carnegie Mellon University.

Mr. Reeder was appointed Chief Financial Officer of the Company effective January 16, 2014. From July

2012 until January 2014, Mr. Reeder served as Vice President, Finance of Cisco Systems, Inc.’s Enterprise
Networking Division. Prior to that role, from October 2008 to June 2012, Mr. Reeder served as Vice President &
Managing Director, Asian Operations as well as Senior Director, Controller, for Broadcom Corporation
(“Broadcom”). Mr. Reeder holds a MBA from Southern Methodist University and a B.S. in Chemical
Engineering from the University of Arkansas.

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 2013, included Guy
Gecht, Chief Executive Officer and President; Marc Olin, Interim Chief Financial Officer, and Vincent Pilette,
former Chief Financial Officer.

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.

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

the decisions made by the Compensation Committee in 2013 in more detail. Highlights of the program include:

• Our executive compensation program is designed to pay for performance. For 2013, the vast majority
of the target total direct compensation for our named executive officers was in the form of incentive
compensation with approximately 79% of the target total direct compensation for our Chief Executive
Officer and approximately 87% of the target total direct compensation for our former Chief Financial
Officer being in the form of incentive compensation tied to the achievement of specific financial
performance goals and/or the level of our stock price. For our Chief Operating Officer, who served as
our Interim Chief Financial Officer for a portion of 2013, 70% of the target total direct compensation
was in the form of incentive compensation. 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.

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

• 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, and which correlate to the
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.

• Awards under the fiscal year 2013 bonus program consisted of restricted stock unit awards and a cash
bonus opportunity for exceptional performance. 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 for exceptional
performance under the program if the Company’s performance exceeded certain targets established in
the Company’s 2013 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.

• Awards to our named executive officers under our long-term equity incentive program in 2013

awards granted under our long-term equity program vest based on the combined achievement of
Company-wide revenue and non-GAAP operating income targets over a four consecutive quarter
period in addition to continued employment requirements. These awards 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.

• The Company has no tax gross up provisions in its agreements with its executive officers. In January
2014, the Company entered into a new employment agreement with Mr. Gecht to eliminate his right
under his prior employment agreement to be reimbursed by the Company for any tax liability imposed
under Section 409A of the U.S. Internal Revenue Code and to update his agreement to be on the same
form as the Company’s other agreements with its other executive officers. Mr. Gecht’s new agreement
does not otherwise materially change the compensation, severance benefits or other terms of his
employment with the Company.

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The Company believes the compensation program for the named executive officers is instrumental in
helping the Company achieve its financial performance. In 2013, the Company achieved record revenue, growing
to approximately $728 million, which represented an increase of approximately $76 million or 12% growth over
the prior year. This was the third consecutive year of double-digit percentage revenue growth. 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 long-term incentive awards. In addition, the Company delivered
significant returns for its stockholders in 2013 as its stock price more than doubled during the year, increasing
from $18.99 at the end of 2012 to $38.73 at the end of 2013.

Compensation Objectives and Philosophy

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

decisions made by the Compensation Committee for 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 2013, 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 2013 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, the
Vice President of Human Resources and the General Counsel (“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.

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 June 2013, approximately 96% of the votes actually cast on the say-on-pay proposal at that meeting were
voted in favor of the proposal. The Compensation Committee believes these strong results affirm stockholders’
support of the Company’s approach to its executive compensation program. In general, the Compensation
Committee did not change its approach in 2013 and believes the program in place, as in prior years, includes a
number of features that further the goals of the Company’s executive compensation program and reflect best
practices in the market. 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.

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 2013, 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.

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For 2013, 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 48 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 invoiced the
Company for approximately $136,000 in fees from the Company in connection with the Compensation
Committee’s determination of a variety of components of executive and board of director compensation during
fiscal year 2013. Mercer is a subsidiary of Marsh & McLennan Companies, Inc. (“MMC”), a diversified
conglomerate of companies that provide insurance, strategy and human resources consulting services. In 2013,
other Mercer business segments received fees from the Company of approximately $74,725, which was primarily
related to health and benefits consulting services. In addition, during 2013, MMC affiliates other than Mercer
received approximately $172,500 in fees for insurance brokerage 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 other services provided
by Mercer and other MMC affiliates and, after consideration of such services and other factors prescribed by the
SEC for purposes of assessing the independence of compensation consultants, has determined that no conflicts of
interest exist between the Company and Mercer (or any individuals working on the Company’s account on
Mercer’s behalf). In reaching this determination, the Company considered the following factors, all of which
were confirmed by Mercer:

• Other than the services identified above, Mercer and all other affiliates of MMC provided no services

to the Company during 2013;

• The aggregate amount of fees paid or payable by the Company to MMC for 2013 represented (or are

reasonably certain to represent) less than 1% of MMC’s total revenue for 2013;

• Mercer has established Global Business Standards to manage potential conflicts of interest for

executive rewards consulting services, which policies and procedures were provided to the Company;

• There are no business or personal relationships between our Mercer executive remuneration advisors
and any member of the Compensation Committee other than in respect of (1) the services provided to
the Company by Mercer as described above, or (2) work performed by Mercer for any other company,
board of directors or compensation committee for which such Compensation Committee member also
serves as an independent director;

• Our Mercer executive remuneration advisors do not own stock in the Company; and

• There are no business or personal relationships between our Mercer executive remuneration advisors,
Mercer, or other MMC affiliates and any executive officer of the Company other than in respect of the
services provided to the Company as described above.

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.

Historically, the Compensation Committee, with assistance from Mercer, has selected a peer group of
companies to provide a basis of comparison for the Company’s executive compensation programs. During 2013,
the Compensation Committee, upon Mercer’s recommendation, considered that certain peers included in the
2012 peer group were no longer appropriate comparators. In particular, recent M&A activity and changes in
revenue levels within the 2012 peer group resulted in certain companies no longer being size-appropriate or no
longer being publicly traded. The selection criteria implemented in 2013 included similar criteria used in the
past:

• U.S. publicly traded companies;

• Companies of comparable size with revenue within a range of approximately 0.5 to 2 times the

Company’s projected 2013 revenue;

• Companies in technology-related industries: Communications Equipment, Computer Storage &

Peripherals, Computer Hardware, Office Electronics and Systems Software; and

• Companies with similar business models and characteristics: business to business sales, manufacturing

capabilities, software products and/or integrated solutions/services.

As a result of the reevaluation, the companies in the 2013 peer group consisted of the following:

3D Systems Corporation
Arris Group, Inc.
Avid Technology, Inc.
Commvault Systems, Inc.
Emulex Corporation
F5 Network, Inc.
Netgear, Inc.

Progress Software Corporation
QLogic Corporation
Quantum Corporation
Silicon Graphics International Corporation
Synaptics, Inc.
Zebra Technologies Corporation

Median revenue of the peer group was approximately $622 million based on the most recent trailing four

quarters of revenue as of December 31, 2013, compared to the Company’s 2013 fiscal year revenue of $728
million.

Executive Compensation Elements

For the 2013 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.

In determining each element of executive compensation, the Compensation Committee considers 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 2013 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 fixed, annual base salary. 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 Company 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 2013, the Compensation Committee reviewed the base salary levels for Messrs. Gecht and
Pilette. The executives recommended, and the Compensation Committee agreed, that no changes would be made
to these levels for 2013. Accordingly, the base salaries established for Messrs. Gecht and Pilette for 2013
remained at $620,000 and $350,000, respectively. 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.

In August 2013, Mr. Pilette resigned, and Mr. Olin was appointed as Interim Chief Financial Officer
effective September 3, 2013. For his period of service as Interim Chief Financial Officer, Mr. Olin’s base salary
rate was increased to the same level as Mr. Pilette’s base salary rate at the time of his resignation ($350,000 per
year) to reflect his assumption of Mr. Pilette’s duties in that position.

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 based on performance against the pre-established goals. The Compensation
Committee believes that the payment of bonuses, whether in cash or equity, provides incentives that help 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 2013, the Compensation Committee approved the 2013 performance-based equity and cash
bonus program (the “2013 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
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vincent Pilette . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

105%
70%

For each executive, the target short-term incentive opportunity for the 2013 fiscal year remained unchanged
from the prior fiscal year. The difference in short-term incentive percentages between Mr. Gecht and Mr. Pilette
correlated with their roles and level of responsibility within the Company. In connection with his appointment as
Interim Chief Financial Officer, Mr. Olin participated in the 2013 Program for the last four months of 2013. Prior
to that, Mr. Olin served in a non-executive capacity and participated in the Company’s bonus program for
members of senior management below the executive level. For 2013, this program was similar to the 2013
Program for executive officers, except that the vesting of equity awards granted under the program is determined
in some cases based on the performance of the participant’s business unit (as opposed to the Company as a
whole), and members of senior management are eligible for a discretionary cash bonus equal to his or her target
equity bonus. This program is administered at the Chief Executive Officer’s discretion. For 2013, Mr. Olin’s
bonus awards were determined on a prorated basis between these two programs, and his target bonus under each
program was 70% of his base salary.

Under the 2013 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
2013 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 Company’s stock price. Fifty percent of the
executive’s stock units were eligible to vest based on the Company’s non-GAAP operating income for 2013
relative to the performance target established by the Compensation Committee, and the remaining 50% 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 2013). In the case of Mr. Olin’s award prior to September 3, 2013, the vesting of his award was
determined based on the financial performance of his business unit.

The maximum number of restricted stock units that may vest under a 2013 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 2013 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 cash bonus under the 2013
Program. As with the equity bonus opportunity, the cash bonus opportunity under the 2013 Program was based
50% on the Company’s non-GAAP operating income for 2013 and 50% on the Company’s revenue for 2013 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 2013 Program, the Company would need to achieve levels for both
performance metrics above the Company’s operating plan for 2013 approved by the Board of Directors.

In determining that the 2013 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 2013 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 and 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. These adjustments are specified in Unaudited
Non-GAAP Financial Information section of the Company’s annual and quarterly reports filed with the SEC for

the applicable fiscal period. 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.

The performance targets selected by the Compensation Committee for the 2013 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 2013 Program was
established. The threshold and target performance levels for each of the restricted stock unit and cash bonus
components of the 2013 Program are set forth in the table below.

Goals

Weighting

RSU
Threshold

RSU
Target

Cash
Threshold

Cash
Target

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

50% $652.0
—

50%

$700.0

$750.0

100%

50% $ 78.0

$ 87.5

$93.75

—

50%

100%

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With respect to the equity bonus component of the 2013 Program, the minimum threshold for non-GAAP
operating income for 2013 established by the Compensation Committee was $78.0 million. None of the restricted
stock units granted under the 2013 Program would vest if this minimum threshold for non-GAAP operating
income was not achieved, and none of the restricted stock units that were tied to revenue would vest if the
minimum threshold for revenue set forth above was not achieved. If the minimum threshold level for non-GAAP
operating income was achieved, the restricted stock units related to non-GAAP income would vest with respect
to between 50% and 100% of the units, with 50% of the units vesting at the “RSU Threshold” level for non-
GAAP operating income in the table above with the vesting increasing on a pro-rata basis up to 100% of the units
vesting if the “RSU Target” level for non-GAAP operating income in the table above were met or exceeded. If
the minimum threshold level for both non-GAAP operating income and revenue was achieved, the restricted
stock units related to revenue would vest with respect to between 50% and 100% of the units, with 50% of the
units vesting at the RSU threshold level with the vesting increasing on a pro-rata basis up to 100% of the units
vesting if the “RSU Target” level for revenue in the table above were met or exceeded. With respect to the cash
bonus component of the 2013 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 pro-rata on a straight-line basis up between the
applicable levels of the table above. In no event would an executive be entitled to vest in more than 100% of the
target number of restricted stock units subject to his award under the 2013 Program or to receive payment of a
cash bonus greater than 100% of his target cash bonus amount.

During the first quarter of 2014, the Compensation Committee compared the Company’s total 2013 fiscal
year revenue and non-GAAP operating income to the 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. For purposes of the 2013 Program, the Company’s revenue was
$741.9 million, and the Company’s non-GAAP operating income was $105.7 million. These amounts were
determined after giving effect to certain adjustments deemed appropriate by the Compensation Committee.
Specifically, the Company’s revenue as determined under GAAP (which was $727.7 million for 2013) and non-
GAAP operating income (which was $98.4 million as reflected in the Unaudited Non-GAAP Financial
Information section of the Company’s Form 10-K) for 2013 were each adjusted to include certain revenues with
respect to orders completed during 2013 that were not recognized on a GAAP basis until early 2014 because the
Company did not have the inventory to ship the orders until early 2014 or because the revenue related to the
orders was required to be deferred until 2014 in accordance with GAAP (with the understanding that such
revenue would not be included in determining the Company’s performance for 2014 for purposes of its incentive
programs) and to remove the impact of revenue from entities acquired during 2013 that were not contemplated
when the targets were established.

Accordingly, the Compensation Committee determined that 100% of the restricted stock units granted to

Mr. Gecht under the 2013 Program had vested and that he would be awarded 92% of his target cash bonus
amount under the 2013 Program. For Mr. Olin, the Compensation Committee determined that, based on the
performance during 2013 of the Productivity Software business unit for which Mr. Olin served as General
Manager, 80% of the restricted stock units granted to him under the 2013 executive leadership program had
vested and that the percentage vesting would be increased to 86% based on Mr. Olin’s service as Interim Chief
Financial Officer in 2013. In addition, the Compensation Committee determined that Mr. Olin would be eligible
for a pro-rated cash bonus for his time as Interim Chief Financial Officer. Mr. Pilette was not eligible for any
vesting or payment of his awards under the 2013 Program as a result of his resignation during the year.

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 awards 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.

To provide additional incentives for performance, the Company also grants equity awards that vest based
upon the Company’s achievement of pre-established financial performance. These performance-based equity
awards also assist in aligning the interests of the named executive officers with those of stockholders. The
Company’s current practice is to grant its executive officers a combination of performance-based restricted stock
units and time-based restricted stock units. 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.

2013 Awards

In August 2013, the Compensation Committee approved the grant of restricted stock unit awards to each of
Messrs. Gecht, Olin 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 third quarter of
fiscal year 2014, the Company achieves
revenue of $747 million and non-GAAP
operating income of $97 million (which
goals reflect increases of 10% and 12% over
the Company’s revenue and non-GAAP
operating income for the four quarters ended
June 30, 2013, respectively). If these goals
are not met by the third quarter of fiscal year
2014, this one-third tranche will vest if, for
the period of four consecutive fiscal quarters
ending with the fourth quarter of fiscal year
2014, the Company achieves revenue of
$762 million and non-GAAP operating
income of $103 million (which goals reflect
increases of 12% and 18% over the
Company’s revenue and non-GAAP
operation income for the four quarters ended
June 30, 2013, respectively).

• 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 2016, the Company achieves
revenue of $802 million and non-GAAP
operating income of $106 million (which
goals reflect increases of 18% and 22% over
the Company’s revenue and non-GAAP
operating income for the four quarters ended
June 30, 2013, respectively).

• 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 2017, the Company achieves
revenue of $842 million and non-GAAP
operating income of $113 million (which
goals reflect increases of 24% and 30% over
the Company’s revenue and non-GAAP
operating income for the four quarters ended
June 30, 2013, respectively).

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 sustain high levels of growth 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 42 of this Proxy Statement, the
Compensation Committee allocated approximately two-thirds of the total grant-date value (determined in
accordance with generally accepted accounting principles) of each executive’s equity award for 2013 to restricted
stock units that vest based on the Company’s achievement of the performance goals identified above and
approximately one-third 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 of Mr. Gecht’s and Mr. Pilette’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 and total direct
compensation 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. At the time, Mr. Olin received a similar award as a
member of our senior management team. 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.

Vesting of 2012 Performance Awards

As described in the Company’s 2013 proxy statement, the Company granted performance-based restricted

stock unit awards to Mr. Gecht and Mr. Pilette in May 2012. At the time, Mr. Olin received an award as a
member of our senior management team. As with the performance-based awards granted in February 2013
described above, the vesting of each of these awards is contingent on the Company’s achievement of specified
levels of revenue and non-GAAP operating income (as defined above under “Short-Term Incentive
Compensation”). Specifically, one-third of the award vests if, for any period of four consecutive fiscal quarters
ending no later than the second quarter of fiscal year 2013, the Company’s revenue exceeds $680 million and its
non-GAAP operating income exceeds $82 million (which goals reflect increases of 15% and 19% over the
Company’s 2011 levels of revenue and non-GAAP operating income, respectively). 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 $725 million and its non-GAAP operating income exceeds $87 million
(which goals reflect increases of 23% and 26% over the Company’s 2011 levels of revenue and non-GAAP
operating income, respectively). 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 2015, the Company’s revenue exceeds
$769 million and its non-GAAP operating income exceeds $92 million (which goals reflect increases of 30% and
33% over the Company’s 2011 levels of revenue and non-GAAP operating income, respectively).

In August 2013, the Compensation Committee determined that, for the period from the third quarter of fiscal

2012 through the second quarter of fiscal 2013, the Company’s revenue was $680 million and the Company’s
non-GAAP operating income was $87 million. Accordingly, one-third of the units of the awards vested upon the
Compensation Committee’s determination. The balance of Mr. Pilette’s award terminated upon his resignation at
the end of August 2013. In January 2014, the Compensation Committee determined that, for the period from the
first quarter of fiscal 2013 through the fourth quarter of fiscal 2013, the Company’s revenue was $728 million
and the Company’s non-GAAP operating income was $98 million, in each case as described under “Short-Term
Incentive Compensation” above. Accordingly, one-third of the units of the awards granted to Mr. Gecht and
Mr. Olin vested upon the Compensation Committee’s determination.

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Vesting of 2011 Performance Awards

As described in the Company’s 2012 proxy statement, the Company granted performance-based restricted

stock unit awards to Mr. Gecht and Mr. Pilette in August 2011. At the time, Mr. Olin received a similar award as
a member of our senior management team. As with the other performance-based awards described above, the
vesting of each of these awards is contingent on the Company’s achieving specified levels of revenue and non-
GAAP operating income. Specifically, one-third of the award vests 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 vests 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 at 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 vests 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%. In May 2012, the Compensation Committee determined that the first tranche of each of these awards
had vested. In August 2013, the Compensation Committee determined that, for the period from the third quarter
of fiscal 2012 through the second quarter of fiscal 2013, the Company’s revenue was $680 million (representing
an increase of 35% over its revenue level for 2010) and the Company’s non-GAAP operating income was $87
million (representing an increase of 143% over its non-GAAP operating income level for 2010). Accordingly,
one-third of the units of the awards vested upon the Compensation Committee’s determination. The balance of
Mr. Pilette’s award terminated upon his resignation at the end of August 2013.

2009 Performance-Based Awards

As previously disclosed in the Company’s 2009 proxy statement, the Company granted Mr. Gecht 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 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 vest when the average stock price equals or exceeds $16.16 (150% of
the grant date stock price); 25% of these options 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 vest when the average stock price
equals or exceeds $24.23 (225% of the grant date stock price). All tranches of the option, each representing 25%
of the total grant, vested and became exercisable on April 27, 2011, January 14, 2013, February 11, 2013, and
March 25, 2013, respectively.

The vesting of the other performance-based option granted in 2009 is determined based on the Company’s

annual return on equity percentage, on a non-GAAP basis, (the “Annual ROE Percentage”), as compared with the
Company’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 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 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 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 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 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 charges and non-recurring charges and gains, and the tax

effect of these adjustments. These adjustments are specified in the Unaudited Non-GAAP Financial Information
section of the Company’s annual and quarterly reports filed with the SEC for the applicable fiscal period. The first
tranche of the option grant (representing 20% of the total grant) vested and was certified by the Compensation
Committee in February 2012 based on the Company’s Annual ROE Percentage of 9.4% for the 2011 fiscal year.

Severance Arrangements

Each of the named executive officers currently employed by the Company is a party to an employment
agreement with the Company that 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 58 through 60 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.

Subsequent Committee Actions

In January 2014, Mr. Olin was appointed the Company’s Chief Operating Officer, and David Reeder joined

the Company as its Chief Financial Officer. In connection with these appointments, the Compensation
Committee approved employment agreements with each executive. Each agreement provides that the executive’s
employment is at-will and that the executive will be entitled to receive a base salary, an annual bonus opportunity
and certain performance-based and time-based restricted stock unit awards. In connection with these
appointments, the Compensation Committee approved performance-based and time-based RSU awards. For each
executive, a portion of the performance-based awards will vest only if we achieve specified stock-price levels,
and the balance of the performance-based awards will vest only if we meet specified targets for revenue and
non-GAAP earnings by December 31, 2016. Each agreement also provides that the executive will be entitled to
severance benefits on certain terminations of employment similar to the severance protections in effect for our
executives in 2013 as described below under “Employment Agreements” and “Potential Payments Upon
Termination or Change in Control.”

In January 2014, the Compensation Committee approved the 2014 performance-based equity and cash
bonus program (the “2014 Program”) for Messrs. Gecht, Reeder and Olin. Each of these executives is eligible for
an equity bonus up to 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 January 2014 to each executive, with the total number of stock units of the executive’s award determined
by dividing the executive’s target bonus by the closing price of the Company’s common stock on January 17,
2014. In addition, each executive has an opportunity to receive a cash bonus up to the executive’s target cash
bonus amount if the Company achieves financial results above the Company’s 2014 operating plan approved by
the Board of Directors. Each of Mr. Gecht’s equity and cash bonus target amounts is 105% of his base salary,
(the same target bonus levels for Mr. Gecht under the 2013 Program). For Messrs. Reeder and Olin each of the
equity and cash target bonus is 70% of the executive’s base salary.

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As under the 2013 Program, the performance metrics under the 2014 Program will be the Company’s

revenue and non-GAAP operating income, with each metric being weighted 50% and the Compensation
Committee establishing threshold and target levels for each metric for vesting of the RSU and cash components
of the program. Under the 2014 Program, if the minimum non-GAAP operating income threshold is met, the
RSUs in the executive’s equity bonus award will vest between 0% and 100%, with 0% vesting at the applicable
threshold level and increasing on a pro-rata, straight-line basis up to 100% at the applicable target level. As under
the 2013 Program, the cash component is intended to reward performance above the target level, so the cash
bonus threshold for each metric is equal to the RSU target level for that metric. If both cash bonus thresholds are
met, the cash bonus will be determined as percentage of the executive’s cash target bonus amount, with 0% of the
cash bonus paid at the applicable threshold level and increasing on a pro-rata, straight-line basis up to 100% at
the applicable target level.

Tax Considerations

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. Although 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 programs
described above) are intended to qualify as performance-based compensation exempt from Section 162(m) of the
Internal Revenue Code, the Compensation Committee retains complete discretion to approve compensation
arrangements for 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 three years of first becoming a director, 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.

Compensation Committee Interlocks and Insider Participation

None of the members of the Compensation Committee has at any time been one of the Company’s 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 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 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 2013

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

December 31, 2013, 2012, and 2011 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)

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Chief Executive
Officer . . . . . . . . . . 2013 $620,000 $ — $4,738,484 $ —
620,000 — 2,912,060 —
620,000 — 2,611,393 —

2012
2011

$598,583
—
464,903

$ —
—
—

$ 5,100
5,380
5,380

$5,962,167
$3,537,440
3,701,676

Vincent Pilette,

Chief Financial
Officer(6) . . . . . . . . 2013
2012
2011

Marc Olin, Interim
Chief Financial
Officer(7) . . . . . . . . 2013

234,679 — 1,573,801 —
350,000 — 1,024,474 —
350,000 — 2,929,079 —

—
—
174,963

293,332 —

901,786 —

56,855

—
—
—

—

4,694
2,808
2,808

1,813,174
1,377,282
3,456,850

29,358

1,281,331

(1) All cash compensation earned by each named executive officer in 2013, 2012, and 2011 is reflected in the “Salary,”

“Bonus,” “Non-equity incentive plan compensation,” or “All other compensation” columns of this table. There were no
deferred salaries or other cash compensation in 2013, 2012, or 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 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, 2013 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 and market-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 and market-based conditions
applicable to the awards. The probable grant date fair value for these awards was determined assuming that the highest
level of performance conditions would be achieved and that all amounts reported in “Stock awards” and “Option awards”
columns would vest.

(4) The named executive officer bonuses that were awarded under our executive bonus program are payable in cash and
shares of stock and, with respect to 2013, are reflected in the “2013 Grants of Plan-Based Awards Table” below. As
described in the Compensation Discussion and Analysis above, the executives were awarded the stock component of the
bonus for 2013 and a portion of the cash component (which was paid in 2014 upon certification by the Compensation
Committee). These awards are reflected in the “Stock awards” column (for 2013, 2012, and 2011) and the “Non-equity
incentive plan compensation” column (for 2013 and 2011) of the table above.

(5) For fiscal year 2013, “All other compensation” includes, for Mr. Olin, $26,391 in housing expenses as well as $1,200 in

payments made by the Company to Mr. Olin in lieu of providing him with health insurance. “All other compensation”
also includes 401(k) employer matching contributions as follows:

401(k) matching contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$5,100

$4,694

$1,767

(6) Mr. Pilette resigned as our Chief Financial Officer in August 2013 effective as of September 3, 2013.
(7) Mr. Olin served as our Interim Chief Financial Officer from September 3, 2013 until January 15, 2014, and was

appointed as our Chief Operating Officer effective January 16, 2014.

Guy
Gecht

Vincent
Pilette

Marc
Olin

2013 Grants of Plan-Based Awards

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

December 31, 2013 to each of the Company’s named executive officers were are follows:

Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards

Estimated Future Payouts
Under Equity Incentive Plan
Awards

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
(#)

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

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

2/22/2013(1)(3)
2/22/2013(1)(4)
2/22/2013(1)(5)
8/15/2013(6)
8/15/2013(7)

Performance-based RSUs
Performance-based RSUs
Cash Accelerator
Performance-based RSUs
Restricted Stock Units

Marc Olin

2/22/2013(1)(8)
2/22/2013(1)(9)
2/22/2013(1)(10)
8/15/2013(6)
8/15/2013(7)

Performance-based RSUs
Performance-based RSUs
Cash Accelerator
Performance-based RSUs
Restricted Stock Units

Vincent Pilette

2/22/2013(1)(3)(11) Performance-based RSUs
2/22/2013(1)(4)(11) Performance-based RSUs
2/22/2013(1)(5)(11) Cash Accelerator
8/15/2013(6)(11)
8/15/2013(7)(11)

Performance-based RSUs
Restricted Stock Units

$ — $ — $ —
—
651,000

—
—
—
—

—
651,000
—
—

7,042 14,084
7,042 14,084
—
—
— 29,600 88,800
—
—
—

—
—
—
—
—

—
—
185,500
—
—

—
—
245,000
—
—

—
—
185,500
—
—

—
—
245,000
—
—

2,007
2,007
—

4,013
4,013
—
5,250 15,750
—

—

2,650
2,650
—

5,300
5,300
—
9,620 28,860
—

—

14,084
14,084
—
88,800

—
—
—
—
— 44,400

4,013
4,013
—
15,750
—

—
—
—
—
7,565

5,300
5,300
—
28,860

—
—
—
—
— 14,430

—
—
—
—
—

— $ 329,284
— $ 329,284
—
— $
— $2,719,944
— $1,359,972

93,824
— $
93,824
— $
— $
—
— $ 482,423
— $ 231,716

— $ 123,914
— $ 123,914
— $
—
— $ 883,982
— $ 441,991

(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 for awards granted in February 2013 represent amounts payable under our 2013
annual target bonus program. Threshold achievement results in 50% bonus payout, while Target and Maximum achievement results in 100%
bonus payout, with pro rata payouts for achievement between these Threshold and Target levels.

(2) Grant Date Fair Value of Stock and Option Awards represents the grant date fair value of the applicable award at the target award level 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, 2013 regarding assumptions underlying the valuation of equity awards.

(3) These RSUs vest based on achievement of 2013 revenue targets with pro rata vesting between the threshold of $652 million (50% vesting) and the

target of $700 million (100% vesting). The Compensation Committee certified on January 24, 2014 that 100% of these RSUs would vest on that
date based on actual 2013 revenue for purposes of the bonus program of $741.9 million.

(4) These RSUs vest based on achievement of 2013 non-GAAP operating income targets with pro rata vesting between the threshold of $78.0 million
(50% vesting) and the target of $87.5 million (100% vesting). The Compensation Committee certified on January 24, 2014 that 100% of these
RSUs would vest on that date based on actual 2013 non-GAAP operating income for purposes of the bonus program of $105.7 million. As
described in more detail in the Compensation Discussion and Analysis, “non-GAAP operating income” is defined as operating income determined
in accordance with GAAP, adjusted to remove the impact of certain expenses.

(5) The cash accelerator is payable based on a weighting of 50% toward achievement of 2013 revenue targets with pro rata vesting between the

threshold of $700 million (0% vesting) and the target of $750 million (100% vesting) and 50% toward achievement of 2013 non-GAAP operating
income targets with pro rata vesting between the threshold of $87.5 million (50% vesting) and the target of $93.75 million (100% vesting). The
Compensation Committee certified on January 24, 2014 that 92% of the cash accelerator vested on that date based on actual 2013 revenue and
non-GAAP operating income for purposes of the bonus program of $741.9 and $105.7 million, respectively.

(6) These RSUs will vest by one-third of the target number of RSUs subject to the award upon the Company’s achievement of $747 million in

revenue and $97 million in non-GAAP operating income during any four consecutive quarters between the first quarter of 2013 and the third
quarter of 2014. If these goals are not met by the third quarter of 2014, then, alternatively, this one-third tranche will vest upon the Company’s
achievement of $762 million in revenue and $103 million in non-GAAP operating income during any four consecutive quarters between the first
quarter of 2013 and the fourth quarter of 2014. An additional one-third of the target RSUs will vest upon the Company’s achievement of
$802 million in revenue and $106 million in non-GAAP operating income during any four consecutive quarters between the first quarter of 2013
and the second quarter of 2016. An additional one-third of the target RSUs will vest upon the Company’s achievement of $842 million in revenue
and $113 million in non-GAAP operating income during any four consecutive quarters between the first quarter of 2013 and the second quarter of
2017.

(7) Each RSU award vests with respect to one-third of the units on the first, second, and third anniversaries of the date of grant.
(8) Mr. Olin was Senior Vice President and General Manager of the Productivity Software operating segment throughout 2013 in addition to his role
as Interim Chief Financial Officer effective September 2013. As described in the Compensation Discussion and Analysis, these RSUs vest based
on achievement of 2013 Productivity Software revenue targets with pro rata vesting between the threshold of $113.0 million (50% vesting) and
the target of $124.4 million (100% vesting). The Compensation Committee certified on January 24, 2014 that these RSUs were 82% vested on
that date based on actual 2013 revenue from the Productivity Software operating segment.

(9) As described in the Compensation Discussion and Analysis, these RSUs vest based on achievement of Productivity Software non-GAAP

operating income with pro rata vesting between the threshold of $35.1 million (50% vesting) and the target of $42.6 million (100% vesting). The
Compensation Committee certified on January 24, 2014 that these RSUs were 77% vested on that date based on actual 2013 non-GAAP operating
income for the Productivity Software segment. In recognition of Mr. Olin’s role as Interim Chief Financial Officer effective September 2013, the
Compensation Committee determined to increase the vesting of this award and the performance-based award described in note (8) above so that
Mr. Olin vested in a total of 86% of the units subject to these two awards.

(10) The cash accelerator is payable based on a weighting of 50% toward achievement of 2013 revenue targets with pro rata vesting between the

Compensation Committee certified on January 24, 2014 that 92% of the cash accelerator vested on that date based on actual 2013 revenue and
non-GAAP operating income for purposes of the bonus program of $741.9 and $105.7 million, respectively. Mr. Olin’s cash accelerator was pro-
rated for the four months that he served as Interim Chief Financial Officer during 2013.

(11) Mr. Pilette resigned as our Chief Financial Officer in August 2013 effective as of September 3, 2013. Accordingly, he was not eligible for vesting

or payment under these awards.

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 2009 Plan. Awards granted under the
2009 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.

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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 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 (RSUs). Grants of time-based RSUs made in 2013 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 2013 are
described in the footnotes to the table above and in the “Long-Term Equity Incentive Program” section of the
Compensation Discussion and Analysis. RSUs are payable on vesting in an equal number of shares of the
Company’s common stock. The named executive officers do not have the right to vote or dispose of the RSUs
and do not have any dividend rights with respect to the RSUs.

Performance Awards under Bonus Program. As described above, the named executive officers’ 2013
bonus opportunities were granted in the form of RSU awards, supplemented by a cash accelerator, under our
annual bonus program. These awards were granted in February 2013 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 RSU awards, which vest based on long-term revenue and non-GAAP operating income
targets. These awards were granted in August 2013 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.”

Outstanding Equity Awards at 2013 Fiscal Year-End

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

executive officers as of December 31, 2013 is as follows:

Option
exercise
price
per
share
($)
(e)

Option
expiration
date
(f)

$15.88 2/26/2015
$10.77 8/28/2016
$10.77 8/28/2016
$11.40 8/20/2017

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)

350,000
—
32,138
123,500
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—

—
—
—
6,500
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—

—
3,885
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—

Name
(a)

Grant
Date

Guy Gecht . . . . 2/26/2008(2)
8/28/2009(3)
8/28/2009(4)
8/20/2010(4)
8/15/2011(5)
8/15/2011(1)
5/18/2012(6)
5/18/2012(1)
2/22/2013(7)
2/22/2013(8)
8/15/2013(9)
8/15/2013(1)
Marc Olin . . . . . 8/15/2011(5)
8/15/2011(1)
5/18/2012(6)
5/18/2012(1)
2/22/2013(7)
2/22/2013(8)
8/15/2013(9)
8/15/2013(1)

—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—

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

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)

—
—
—
—
—

—
—
—
—
—
—
—
—
— 23,833
—
— 26,583
—
—
—

— 29,600

—
2,963
—
4,035
—
—
—
5,250
—

—

—
— 19,500 $ 755,235
—
— 43,500 $1,684,755
— 14,084 $ 545,473
— 14,084 $ 545,473
—
— 44,400 $1,719,612
—
—
5,928 $ 229,591
—
—
—
— 11,052 $ 428,044
4,013 $ 155,423
—
4,013 $ 155,423
—
—
—
$
7,565 $ 292,992
—

—

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

—
—
—
—
$ 923,052
—
$1,029,560
—
—
—

$1,146,408

—
$ 114,757
—
$ 156,276
—
—
—

$ 203,333

—

(1) One-third of the RSUs of each award vests on the first, second, and third anniversary of the date of grant.
(2) One-third of this option grant vests on the first anniversary of the date of grant and the balance of the option vests at a rate of 2.23% of

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

(3) This option award initially covered 19,425 shares. The option vests in five equal installments when the Company’s annual non-GAAP

return on equity percentage 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 two 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 shares. These options were exercised on January 25,
2013. 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.

(4) 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.

(5) These RSUs will vest upon the Company’s achievement of 40% revenue growth and 15% non-GAAP operating income growth during

four consecutive quarters between the first quarter of 2011 and the second quarter of 2014.

(6) These RSUs will vest upon the Company’s achievement of $725 million in revenue and $87 million in non-GAAP operating income
during any four consecutive quarters between the first quarter of 2012 and the second quarter of 2014. An additional number of RSUs
equal to the number of unvested RSUs will vest upon the Company’s achievement of $769 million in revenue and $92 million in non-
GAAP operating income during any four consecutive quarters between the first quarter of 2012 and the second quarter of 2015.

(7) These RSUs vest based on achievement of 2013 revenue targets with pro rata vesting between the threshold of $652 million (50%

vesting) and the target of $700 million (100% vesting). The Compensation Committee certified on January 24, 2014 that these RSUs
were 100% vested on that date based on actual 2013 revenue for purposes of the bonus program of $741.9 million. Vesting of the RSUs
was contingent upon the executive’s continued employment with the Company through the later of the date of the Compensation
Committee’s determination or the first anniversary of the grant date.

(8) These RSUs vest upon the Company’s achievement of 2013 non-GAAP operating income targets with pro rata vesting between the
threshold of $78.0 million (50% vesting) and the target of $87.5 million (100% vesting). The Compensation Committee certified on
January 24, 2014 that these RSUs were 100% vested on that date based on actual 2013 non-GAAP operating income for purposes of the
bonus program of $105.7 million. As described in more detail in the Compensation Discussion and Analysis, “non-GAAP operating
income” is defined as operating income determined in accordance with GAAP, adjusted to remove the impact of certain expenses.
Vesting of the RSUs was contingent upon the executive’s continued employment with the Company through the later of the date of the
Compensation Committee’s determination or the first anniversary of the grant date.

(9) These RSUs will vest upon the Company’s achievement of $747 million in revenue and $97 million in non-GAAP operating income
during any four consecutive quarters between the first quarter of 2013 and the third quarter of 2014. If these RSUs do not vest by the
third quarter of 2013, then, alternatively, these RSUs will vest upon the Company’s achievement of $762 million in revenue and
$103 million in non-GAAP operating income during any four consecutive quarters between the first quarter of 2012 and the fourth
quarter of 2014. An additional number of RSUs equal to this number of unvested RSUs will vest upon the Company’s achievement of
$802 million in revenue and $106 million in non-GAAP operating income during any four consecutive quarters between the first quarter
of 2013 and the second quarter of 2016. An additional number of RSUs equal to this number of RSUs will vest upon the Company’s
achievement of $842 million in revenue and $113 million in non-GAAP operating income during any four consecutive quarters between
the first quarter of 2013 and the second quarter of 2017.

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Option Exercises and Stock Vested in 2013

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

December 31, 2013 were as follows:

Name
(a)

Guy Gecht . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marc Olin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vincent Pilette . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Option Awards

Stock Awards

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

263,122
—
—

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

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

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

155,774
$3,260,468
44,662
—
— 122,739

$4,468,574
1,244,485
3,009,569

(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 (other than under the Company’s 401(k) plan) to its

employees.

Nonqualified Deferred Compensation

The Company does not provide any nonqualified deferred compensation plans to its employees.

Employment Agreements

The Company has entered into employment agreements with each of its named executive officers. As noted
in the Compensation Discussion and Analysis above, Mr. Gecht entered into a new employment agreement with
the Company in January 2014 to eliminate his right under his prior employment agreement to be reimbursed by
the Company for any tax liability imposed under Section 409A of the U.S. Internal Revenue Code and to update
his agreement to be on the same form as the Company’s other agreements with its executive officers. Mr. Gecht’s
new agreement does not otherwise materially change the compensation, severance benefits or other terms of his
employment with the Company and, consistent with his prior agreement, has a one-year term that automatically
renews for additional one year periods unless terminated by either party upon sixty days written notice prior to
the expiration of the agreement. The employment agreements with Messrs. Reeder and Olin were entered into in

January 2014 and each agreement has a three-year initial term with automatic one-year renewal unless terminated
by either party upon sixty days written notice prior to the expiration of the agreement. 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,
employer subsidized health benefit continuation under COBRA, and outplacement services;

if the named executive officer becomes entitled to receive severance and except as otherwise provided
in the award document, 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;

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.

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.

Quantitative severance benefits that would be provided to each of the Company’s named executive officers
employed by the Company on December 31, 2013 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 2013, with benefits being valued using the closing sales price of the
Company’s common stock on such date ($38.73) and determined based on each executive’s employment
agreement in effect on December 31, 2013. 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.

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 officer, in either case
other than during the period of 24 months following a change of control, as follows:

Lump sum
severance
payment
($)(1)

Outplacement
benefits
($)(2)

Continued
health
care
coverage
benefits
($)(3)

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

Total ($)

Name

Guy Gecht . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marc Olin . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,929,530
602,260

$35,000
35,000

$28,163
546

$3,226,813
660,824

$6,219,506
1,298,630

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(1) The amounts shown are the lump sum severance payment that consists of 24 months of base salary for
Mr. Gecht and six months of base salary plus 1.5 weeks for each year of service for Mr. Olin, plus an
amount equal to the value of the bonus (including, as applicable, the vesting of any equity awards and/or the
payment of any cash bonus opportunity awarded under the bonus program) that the named executive officer
would have earned in 2013 based upon the level of performance targets applicable to the bonus that were
actually attained for 2013. 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 and Olin would each be entitled to outplacement services up to a maximum of $35,000.
(3) Messrs. Gecht and Olin would each be entitled to premium reimbursement for health insurance coverage

under COBRA for Mr. Gecht for up to 18 months and for Mr. Olin for up to six months plus 1.5 weeks for
each year of service.

(4) Other than RSU awards related to the 2013 executive bonus program, which would be treated as described
above in Note 1, Messrs. Gecht and Olin would be entitled to accelerated vesting of options and RSUs with
respect to that number of shares that would otherwise have vested during the six month period following the
termination date. For time-based options and RSUs that vest on an annual basis, credit is given as if the
vesting accrued monthly. Awards that are subject to performance requirements may vest to the extent the
performance conditions are met within a specified period after the termination. The value of the accelerated
options and RSUs is calculated based on the Company’s closing stock price at December 31, 2013 of $38.73
per share, less the exercise price with respect to accelerated options. The number of stock options and RSUs
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, 2013, were as follows:

Guy Gecht . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marc Olin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Name

Stock
Options
(#)

6,500
—

Restricted
Stock
Units
(#)

78,729
17,062

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, in either
case within 24 months following a change of control, as follows:

Lump sum
severance
payment
($)(1)

Outplacement
benefits
($)(2)

Continued
health
care
coverage
benefits
($)(3)

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

Total
($)

Name

Guy Gecht
. . . . . . . . . . . . . . . . . . . . . . . . . .
Marc Olin . . . . . . . . . . . . . . . . . . . . . . . . . . .

$3,601,947
905,847

$35,000
35,000

$28,163
546

$11,193,141
1,987,933

$14,858,251
2,929,326

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

Mr. Gecht and 12 months of base salary for Mr. Olin, plus an amount equal to the value of the bonus
(including, as applicable, the vesting of any equity awards and/or the payment of any cash bonus
opportunity awarded under the bonus program) that the named executive officer would have earned in 2013
assuming that 100% of any performance targets applicable to the bonus were attained.

under COBRA for Mr. Gecht for up to 18 months and for Mr. Olin for up to six months plus 1.5 weeks for
each year of service.

(4) Messrs. Gecht and Olin would be entitled to accelerated vesting on 100% of all unvested options and RSUs
as of their termination date without giving consideration to performance conditions, if any. The value of the
accelerated options and RSUs is calculated based on the Company’s closing stock price at December 31,
2013 of $38.73 per share, less the exercise price with respect to accelerated options. The number of stock
options and RSUs 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, 2013 (assuming such
termination was within 24 months after a change of control) are as follows:

Guy Gecht
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marc Olin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Name

Stock
Options
(#)

22,040
—

Restricted
Stock
Units
(#)

301,367
59,354

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 2013, the Compensation Committee, with the
assistance of Mercer, reviewed the elements of (i) the Company’s compensation programs and practices for all
employees and (ii) of executive compensation for fiscal year 2012 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. Base salaries

are fixed to provide executives with a stable cash income, which allows them to focus on the
Company’s issues and objectives as a whole. Short- and long-term compensation are designed to both
reward the named executive officers for the Company’s overall performance and align interests 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;

• Awards to our named executive officers under our annual bonus program for fiscal year 2013 for their
on-target bonus amounts were made in the form of performance-based RSU 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 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 2013

consisted of approximately 67% performance-based RSUs and approximately 33% time-based RSUs.
The value of RSUs is tied directly to our stock price to help further align our executives’ interests with
those of our stockholders. As with the performance-based RSUs 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; and

• As of April 4, 2014, Mr. Gecht owns approximately 0.9% 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, the 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, 2013, 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 statement on Auditing
Standards No.61, as amended (AICPA, Professional Standards, Vol. 1. AU Section 380), 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 applicable

requirements of the PCAOB regarding the independent accountant’s communications with the Audit Committee
concerning independence 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, 2013 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 14, 2014

[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, 2013
‘ 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.)

6750 Dumbarton Circle, Fremont, CA 94555
(Address of principal executive offices) (Zip Code)
(650) 357-3500
(Registrant’s telephone number, including area code)
303 Velocity Way, Foster City, California 94404
(Former name or former address, if changed since last report)

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 È No ‘
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. ‘
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 È
Non-accelerated filer ‘

‘
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, 2013 was $1,174,449,533.**

The number of shares outstanding of the registrant’s common stock, $.01 par value per share, as of January 28, 2014 was 46,960,514.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement to be delivered to stockholders in connection with the 2014 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, 2013, the last business day of the
registrant’s second quarter of the 2013 fiscal year. Excludes 4,930,877 shares of common stock held by directors, executive officers, and stockholders 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 Disclosures

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

ITEM 15
Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EXHIBIT INDEX
EXHIBIT 12.1
EXHIBIT 21
EXHIBIT 23.1
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 101

2
21
38
38
40
42

43
46
48
88
91
164
164
165

166
166

166
167
167

168
173

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,”
“continue,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “seek,” “should,” “will,” 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

References to “EFI,” the “Company,” “we,” “us,” and “our” mean Electronics For Imaging, Inc. and its
subsidiaries, unless the context indicates 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 headquarters are located at 6750 Dumbarton Circle, Fremont, California 94555.

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

Our products include industrial super-wide, wide format, and label and packaging digital inkjet printers that
utilize our digital ink, ceramic tile decoration digital inkjet printers, digital inkjet printer parts, and professional
services; print production workflow, web-to-print, cross-media marketing, and business process automation
solutions; and color digital front ends (“DFEs”) creating an on-demand digital printing ecosystem. Our award-
winning business process automation solutions are integrated from creation to print and are vertically integrated
with our digital industrial inkjet printers. Our inks include digital ultra-violet (“UV”) and light emitting diode
(“LED”) ink, of which we are the largest world-wide manufacturer, textile dye sublimation, and thermoforming
ink. Our product portfolio includes industrial inkjet products (“Industrial Inkjet”) including VUTEk super-wide
and EFI wide format industrial digital inkjet printers and related ink, Jetrion label and packaging digital inkjet
printing systems and related ink, and Cretaprint digital inkjet printers for ceramic tile decoration; print
production workflow, web-to-print, cross-media marketing, and business process automation software
(“Productivity Software”), which provides corporate printing, label and packaging, publishing, and mailing and
fulfillment solutions for the printing industry; and Fiery DFEs (“Fiery”). 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

Industrial Inkjet

Our Industrial Inkjet products address the high-growth industrial digital inkjet markets where significant
conversion of production from analog to digital inkjet printing is occurring. Industrial Inkjet products consist of
our VUTEk super-wide and EFI wide format industrial digital inkjet printers and related ink, Jetrion label and
packaging digital inkjet printing systems and related ink, Cretaprint digital inkjet printers for ceramic tile
decoration, digital inkjet printer parts, and professional services. Printing surfaces include paper, vinyl,
corrugated, textile, glass, plastic, ceramic tile, and many other flexible and rigid substrates.

Our industry-leading VUTEk super-wide format UV, LED, textile dye sublimation, and thermoforming industrial
digital inkjet printers and ink are used by commercial photo labs, large sign shops, graphic screen printers,
specialty commercial printers, and digital and billboard graphics providers serving the 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 sell EFI
hybrid and flatbed UV wide format graphics printers to the mid-range industrial digital inkjet printer market. We
sell Jetrion label and packaging digital inkjet printing systems, custom high-performance integration solutions,
and specialty inks to the converting, packaging, and direct mail industries. We sell Cretaprint ceramic tile
decoration digital inkjet printers to the ceramic tile industry.

We launched next generation models and new finishing modules for our GS series of high-speed, high-resolution
super-wide format industrial digital inkjet printers in 2013, 2012, and 2011. We launched the HS100 Pro UV
inkjet press, which is a super-wide format industrial digital UV inkjet press incorporating LED technology that
represents an alternative to analog presses, in 2013. LED technology is a green technology that saves many of
our customers money by reducing their consumables waste and energy consumption. This technology also
provides higher uptime with greater reliability because it uses no traditional heat in the curing process.

The 3.2-meter GS3250LXr Pro was launched in 2013. It is the first dedicated roll-to-roll printer to use LED
technology. Our EFI roll-to-roll, hybrid, and flatbed entry level production UV wide format inkjet printers are
developed, manufactured, and marketed to the entry-level and mid-range industrial digital inkjet printer market.

VUTEk printers primarily use UV and LED curable ink, of which we are the largest world-wide manufacturer,
although our solvent ink printers remain in use in the field. We were first to market with digital UV ink
incorporating “cool cure” LED technology for use in high-end production super-wide and wide format and label
and packaging digital inkjet printing systems. The TX3250r, our textile dye sublimation printer, allows textile
and soft signage makers and printing companies to print directly onto textile surfaces. Our range of versatile
printing options for the super-wide format market was expanded in 2013 with the launch of our thermoforming
digital UV-curable ink, which enables sign makers and printing companies to print directly onto thermoplastic
sheet materials, which can then be formed into deep draw, high elongation parts while retaining hue and opacity.
Formulated for use in the GS2000 Pro-TF and the GS3250 Pro-TF digital inkjet printers, pre-decorating with
thermoforming ink eliminates labor-intensive, costly methods such as hand airbrushing when working with
shaped and irregular surfaces. Our ink provides a recurring revenue stream generated from sales to our existing
customer base of installed printers.

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
and LED ink to the label, packaging, and converting industries. Our Jetrion 4950LX printer, which incorporates
full LED curing and an image quality of 1247 dpi, was launched in 2013. Our Jetrion 4900M, which is a modular
upgradeable version of the Jetrion 4900, was launched in 2012. Our Jetrion 4900, which combines digital
printing and finishing in a single end-to-end system, was launched in 2011.

Our Cretaprint ceramic tile decoration digital inkjet printers are utilized by the ceramic tile industry. The ceramic
tile decoration market is rapidly transitioning from analog to digital inkjet printing technology. We are applying
our inkjet technology expertise to further enhance Cretaprint output quality, software control, and color

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management. Our digital experience and award winning imaging technology in combination with Cretaprint
leading digital ceramic tile decoration products enables us to provide the ceramic tile industry with expanded
offerings, workflow software, and world-wide support. This capability was demonstrated in 2013 by the launch
of the Fiery proServer, which is the first dedicated color management solution for the ceramic tile decoration
market that automates ceramic tile design, prototyping, and color separation while enabling the decoration of
ceramic color tiles at different print locations under varying conditions including glazing, ink application,
resolution, and kiln temperature.

Our next generation Cretaprint C3 ceramic tile decoration digital inkjet printer was launched in September 2012.
This printer features a single chassis that accommodates up to eight print bars, which are accessed via a new
slide-bar design, and can be independently configured for printing and special decoration effects. This
multipurpose printer offers over 1,000 customizable settings controlling print width, speed, printer direction, and
ink discharge.

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

Printer Type

Models

Capabilities

Application Examples

VUTEk super-wide format HS, GS, and QS Series
printers EFI and 3M(R)
co-branded, UltraTex dye
sublimation, and
thermoforming UV ink

EFI wide format

R family roll-to-roll
H family hybrid printers
T family flatbed printers

Jetrion label & packaging

4950LX
4900-330
4900

Cretaprint ceramic tile
decoration

Cretaprinter C3
Cretaplotter
Cretavision

Super-wide format
banners, signage, building
wraps, flags, point of
purchase and exhibition
signage, backlit displays,
fleet graphics, photo-
quality graphics, art
exhibits, customized
architectural elements,
billboards, and
thermoplastic decoration.

Wide format indoor and
outdoor graphics with
photographic image
quality. Entry-level and
mid-range market.

Primary and secondary
label applications,
Industrial label or flexible
packaging Custom high
performance integration
solutions .

Ceramic tile industry.

Printing widths of 2 to 5
meters; up to two inch
thickness; 6, 7, and 8
colors, plus white and
greyscale; up to 1000 dpi;
flexible and rigid
substrates; UV curable,
LED “cool cure,” dye
sublimation, and
thermoforming digital UV
inks.

Speeds up to 87.2 square
meters per hour (roll-to-
roll) and 44.5 square
meters per hour (hybrid &
flatbed), up to 1200 dpi, 4
or 5 colors, up to 5
centimeter thickness.

Print resolutions up to
1247 dpi; 4 or 5 colors;
printing width up to 13.5
inches . UV curable, LED
“cool cure,” and specialty
inks . The 4900 platform
enables digital printing
and finishing in a single
end-to-end system.

Single chassis
accommodates up to 8
print bars. 1,000
customizable settings
controlling printer widths
up to 1.4 meters, speed,
direction, and discharge.

Productivity Software

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 Productivity Software operating segment includes (i) our business process automation software, Monarch
and Metrics; (ii) Pace, our business process automation software that is available in a cloud-based environment;
(iii) Digital StoreFront, our cloud-based e-commerce solution that allows print service providers to accept,
manage, and process printing orders over the internet; (iv) Radius, our business process automation software for
label and packaging printers; and (v) other business process automation and e-commerce solutions designed for
the printing and packaging industries.

We sell 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; and Digital StoreFront to customers desiring e-
commerce, web-to-print, and cross-media marketing solutions.

We released Smart Sign Analytics in 2013, which is a webcam and software system that anonymously analyzes
signage viewership and engagement data. The system detects people within viewing range and uses eye-tracking
tools to calculate how much time is spent viewing signage as well as demographic data.

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.

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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 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, PSI, Logic,
PrintSmith, PrintFlow, Radius,
PrintStream, Prism, Metrics,
Technique, Lector, GamSys, 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,
direct mail, 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
printing companies. Government
printing operations.

Imposition solutions for estimating,
planning and integration into
prepress and postpress solutions:
Metrix

Imposition solutions for a broad
range of product types and sizes
and printing processes.

Cloud-based order entry and order
management systems, along with
cross-media marketing: Digital
StoreFront, Online Print Solutions,
PrinterSite, and PrintSmith Site

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

Customers desiring a solution to
bridge the gap between business
process automation and prepress
that are not served by the Fiery and
Fiery XF imposition tools.

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

Signage viewership and
engagement:

Fiery

Webcam and software system that
anonymously analyzes signage
viewership, engagement, and
demographic data.

Signage and billboard providers and
retail marketers.

Our Fiery brand consists of DFEs, which transform digital copiers and printers into high performance networked
printing devices for the office and commercial printing markets. 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 direct relationships with several leading printer
manufacturers. We work closely together to design, develop, and integrate Fiery DFE 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 DFE and
software solutions drives demand for Fiery products through the printer manufacturers.

Fiery products are comprised of (i) stand-alone DFEs connected to digital printers, copiers, and other peripheral
devices, (ii) embedded DFEs and design-licensed solutions used in digital copiers and multi-functional devices,
(iii) optional software integrated into our DFEs such as Fiery Central, Command WorkStation, 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.

In 2013, Fiery FS100 Pro became the first, and currently only, DFE to achieve certification from both the VIGC
(the Flemish Innovation Center for Graphic Communication) and the Job Definition Format (“JDF”) 1.3
Integrated Digital Printing Interoperability Conformance Specification. We launched Fiery XF, version 5, which
is a DFE and color management workflow for super-wide and wide format printing and proofing; and new
versions of Fiery proServer, which is a DFE and color management workflow for the super-wide format and
ceramic tile decoration digital inkjet printer market.

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

Platform

Printer Manufacturers or Customers

User Environments

Fiery external Digital Front Ends
(“DFEs”)

Canon/Oce, Fuji Xerox, Konica
Minolta, Kyocera Mita, Ricoh,
Sharp, Toshiba, Xerox

Fiery embedded DFEs and design-
licensed solutions

Canon/Oce, Epson, Fuji Xerox,
Intec, Konica Minolta, Kyocera
Mita, OKI Data, Ricoh, Sharp,
Toshiba, Xerox

Fiery Central, MicroPress Fiery
Workflow Suite

Canon/Oce, Konica Minolta,
Ricoh

Entrac

FedEx Office, Staples

PrintMe PrintMe Mobile

Canon/Oce, Channel Build
Solutions, individual hotels,
smaller channel resellers

Production Inkjet and Proofing
software: ColorProof XF, Fiery FS
100 Pro, Fiery XF, Fiery proServer,
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, and
transactional & commercial Printers

Office, print for pay, and quick
turnaround 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, college campuses, 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, ceramic tile,
decoration, and super-wide & wide
format print providers

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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, fulfillment systems, cross-media marketing, imposition solutions, ceramic tile
decoration, and commercial printing. We expect to continue to expand the scope and sophistication of our
products and gain access to new markets and channels of distribution by applying our expertise in these areas.

Industrial Inkjet

Our Industrial Inkjet products are sold primarily through our direct sales force augmented by some select
distributors. Any interruption of either of these distribution channels could negatively impact us in the future.

The ceramic tile industry is undergoing a shift from southern Europe (e.g., Spain and Italy) to the emerging
markets of China, India, Brazil, and Indonesia. As a result, we opened a Cretaprint sales and support center in
Foshan, Guangdong, China. Foshan is home to the largest concentration of tile manufacturers in China.

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 1,500 customers in attendance at our annual EFI
Connect trade show, which generates leads for the Industrial Inkjet and Productivity Software operating segments
and generates end user demand for the Fiery segment. Cretaprint participated in the Ceramics China Guangzhou
trade show in 2013, which attracted more than 60,000 visitors from 20 countries.

Productivity Software

Our enterprise resource planning and collaborative supply chain business process automation software solutions
within our Productivity Software portfolio are primarily sold directly to end users by our direct sales force. An
additional distribution channel for our Productivity 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.

We have distribution agreements with some customers, including Canon/Oce, Konica Minolta, Ricoh, Xerox,
and xpedx (which is in the process of merging with Unisource Worldwide (“Unisource”). 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.

Our acquisitions of GamSys Software SPRL (“GamSys”) and Lector Computersysteme GmbH (“Lector”) in
2013 allowed our Productivity Software operating segment to enter the French and German-speaking regions of
Europe and Africa, respectively. Our acquisition of Metrics Sistemas de Informação, Serviços e Comércio Ltda.
and Metrics Sistemas de Informação e Serviço Ltda. (collectively, “Metrics”) in 2012 and Prism Group Holdings
Limited (“Prism”) in 2011 allowed our Productivity Software operating segment to enter emerging markets in
Latin America and Asia Pacific (“APAC”), respectively.

Fiery

The primary distribution channel for our Fiery products is through our direct relationships with several leading
printer manufacturers. We work closely together to design, develop, and integrate Fiery DFE 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 DFE and software solutions drives demand for Fiery products through the printer manufacturers.

Although end customer and reseller channel preference for Fiery products drives demand, most Fiery revenue
relies on these significant printer manufacturers/distributors to design, develop, and integrate Fiery technology
into their print engine as described above. See Item 1A: Risk Factors— We do not typically have long-term
purchase contracts with the printer manufacturer customers that purchase our Fiery DFE and software
solutions. 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 have relationships with the following significant printer manufacturers: Canon/Oce, Epson, Fuji Xerox, Intec,
Konica Minolta, Kyocera Mita, OKI Data, Ricoh, Sharp, Toshiba, and Xerox. Subsequent to December 31, 2013,
we entered into an agreement with Landa Corporation pursuant to which we will develop a DFE for Landa’s end-
to-end Nanographic Printing™ solution. Nano-sized pigments are powerful colorants, which enable an entirely
new kind of digital printing.

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, and Hewlett-Packard
(“HP”). There can be no assurance that we will continue to successfully distribute our products through these
channels.

Growth and Expansion Strategies

The growth and expansion of our revenue will be derived from (i) product innovation, (ii) increasing market
coverage, (iii) expanding the addressable market, and (iv) establishing enterprise coherence and leveraging
industry standardization.

We expect to expand and improve our offerings of new generations of Industrial Inkjet products, including super-
wide and wide format industrial digital inkjet printers, label and packaging digital inkjet printers, and ceramic tile
decoration digital inkjet printers. We expect to expand and improve our Productivity Software offerings,
including new product lines related to digital printing, graphic arts, fulfillment systems, cross-media marketing,
workflow, and print management. We plan to continue to introduce new generations of Fiery DFEs, self-service
and payment solutions, and mobile printing solutions.

We are increasing our market coverage through deeper penetration of our sales and distribution networks,
expansion into the French and German-speaking regions of Europe and Africa through our acquisitions of
GamSys and Lector in 2013, and expansion into emerging markets in Latin America, China, India, Australia, and
New Zealand through the acquisitions of Creta Print S.L. (“Cretaprint”), Metrics, and Prism in 2012.

We are expanding our addressable market by extending into new markets within each of our operating segments
such as ceramic tile decoration imaging, thermoplastic pre-decoration imaging, textile dye sublimation printing,
viewership engagement analysis, imposition solutions, various cloud-based software solutions, self-service and
payment solutions, and mobile printing.

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 with technology that is synergistic with our product lines and may be attractive to our customers. As
more fully discussed under “Increasing Market Coverage,” we also acquire businesses in order to expand our
customer base. Although there can be no assurance that acquisitions will be successful, acquisitions have allowed
us to broaden our product lines. Examples include:

Acquired Business

Acquired Product or Product Line

2013

Outback Software Pty. Ltd. doing business as
Metrix Software (“Metrix”)

Imposition solutions for customers not served
by the Fiery and Fiery XF imposition tools.

2012

Creta Print S.L. (“Cretaprint”)

Ceramic tile decoration digital inkjet printers

Online Print Marketing Ltd. and DataCreation
Pty. Ltd. together doing business as Online
Print Solutions (“OPS”)

Web-to-print, publishing, and cross-media
marketing Integrated with Digital StoreFront
and Fiery DFE

2011

Streamline Development, LLC (“Streamline”)

PrintStream business process automation
software specialized to support mailing and
fulfillment services

Entrac Technologies, Inc. (“Entrac”)

Self-service and payment solutions

We acquired four businesses in 2013. As indicated above, the Metrix acquisition expanded our product offerings
and increased our customer base. Our acquisitions of PrintLeader Software (“PrintLeader”), GamSys, and Lector
expanded our customer base.

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We acquired five businesses in 2012. As indicated above, the Cretaprint and OPS acquisitions expanded our
product offerings and increased our customer base. Our acquisition of the FXcolors (“FX Colors”) business
provided access to software and technology for industrial printing. Our acquisitions of Technique, Inc. and
Technique Business Systems Limited (collectively, “Technique”) and Metrics expanded our customer base.

We acquired four businesses in 2011. As indicated above, the Streamline and Entrac acquisitions expanded our
product offerings and increased our customer base. Our acquisitions of Prism and Alphagraph expanded our
customer base.

We will continue to be acquisitive in the future in an opportunistic way supporting our product innovation and
total addressable market expansion strategy.

Industrial Inkjet. Product innovation in the Industrial Inkjet operating segment has been accomplished through
internal development of our super-wide and wide format industrial digital inkjet printers and label and packaging
digital inkjet printing systems. We entered the ceramic tile decoration digital inkjet printer market through our
acquisition of Cretaprint in 2012 and launched its next generation printer later in 2012.

We launched the HS100 Pro UV super-wide format industrial digital inkjet press in 2013. The HS100 is an
alternative to analog presses, incorporates LED technology, and utilizes an upgraded operating system platform.
LED technology is a green technology that reduces cost by reducing consumables waste and energy
consumption. This technology also provides higher uptime with greater reliability because it uses no traditional
heat in the curing process.

The GS family of super-wide format industrial digital inkjet printers offers the highest quality and productivity in
a super-wide format. We launched next generation models and new finishing modules for our GS series of high-
speed, high-resolution super-wide format industrial digital inkjet printers in 2013, 2012, and 2011. The 3.2-meter
GS3250LXr Pro was launched in 2013. It is the first dedicated roll-to-roll printer to use LED technology. The
Pro-TF and GS3250 Pro-TF industrial digital inkjet printers were launched in 2013 utilizing thermoforming
digital UV-curable ink, which enables sign makers and printing companies to print directly onto thermoplastic
sheet materials. Pre-decorating with thermoforming ink eliminates labor-intensive, costly methods such as hand
airbrushing when working with shaped and irregular surfaces.

We launched the TX3250r textile dye sublimation digital inkjet printer, which was developed for the textile and
soft signage printing market in January 2012. In 2011, we launched the GS3250LX roll-to-roll UV-curing digital
inkjet printer incorporating LED technology and increased productivity as well as the GS3250r, which is a roll-
to-roll printer developed to bring the cost savings and flexibility of solvent-based inks to a UV-curable platform.

The QS family of super-wide format industrial digital inkjet printers offers high quality and mid-range
productivity in a super-wide format. In 2012, we launched the QS2Pro and QS3Pro UV hybrid digital inkjet
printers. These competitively-priced printers are driven by the HS100 operating system platform and combine
greyscale print quality with production-level speeds for more color critical and higher premium printing than was
previously available in our QS family of super-wide format printers.

Our wide format industrial digital inkjet roll-to-roll, hybrid, and flatbed printers offer entry-level and midrange
solutions for print businesses of all sizes and budgets. In 2012, we launched our R3225 roll-to-roll wide format
(3.2 meter) industrial digital inkjet UV printer for the sign, banner, point-of-purchase, and graphics markets.

Our Jetrion products specialize in label and packaging digital inkjet printing. Our Jetrion 4950LX printer was
launched in 2013 incorporating full LED curing and an image quality of 1247 dpi. In 2012, we launched the
4900M and 4900M-330 UV digital inkjet printing systems, which provide a modular format that is upgradable
for business growth as the label market continues to evolve from analog to digital. The 4900M-330 features a
larger 13 inch print width. In 2011, we launched the Jetrion 4900, a UV digital inkjet label and packaging
printing system combining digital printing with in-line laser finishing for label converters.

Our Cretaprint products are leading inkjet printers for ceramic tile decoration. The Cretaprint C3, a next
generation ceramic tile decoration digital inkjet printer was launched in September 2012 and features a single
chassis that accommodates up to eight print bars, which are accessed via a new slide-bar design and can be
independently configured for printing and special decoration effects. This multipurpose printer offers over 1,000
customizable settings controlling print width, speed, printer direction, and ink discharge.

In 2013, we launched the Fiery proServer for Cretaprint, which is the first dedicated color management solution
for the ceramic tile decoration market that automates ceramic tile design, prototyping, and color separation while
enabling the decoration of ceramic color tiles at different print locations under varying conditions including
glazing, ink application, resolution, and kiln temperature. The original Fiery ProServer, which is a high-
performance DFE production solution for the complete line-up of VUTEk super-wide format UV digital inkjet
printers, was launched in 2011.

Productivity Software. Product innovation in the Productivity Software operating segment has been
accomplished through new version releases of each of our software products and new product offerings as a
result of strategic business acquisitions. New versions of our PrintSmith, PrintFlow, Monarch, Pace, Radius, and
Digital StoreFront software were released in 2013 and 2012.

In 2013, we acquired Metrix, which is a leading innovator in imposition solutions for estimating, planning, and
integrating into prepress and postpress solutions. Metrix has a pending release that will support wide format
imposition. This technology acquisition enhances our existing functionality and allows us to extend our portfolio
offerings to bridge the gap between our business process automation software and prepress to customers that are
not served by our Fiery and Fiery XF software offerings.

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In 2012, we acquired OPS, which is a cloud-based e-commerce provider of web-to-print, publishing, and cross-
media marketing solutions. OPS will be integrated with Digital StoreFront and our Fiery DFE in the future. We
have expanded the OPS product offering with MPrint, a transactional application for smart phones that enables
commercial printers to offer their clients a mobile platform for editing, proofing, ordering, and approving print
jobs; and CallTarget, a module for turning printed items of all types into trackable marketing pieces via unique
phone numbers.

In 2011, we acquired Streamline, which provides PrintStream business process automation software for mailing
and fulfillment services in the printing industry and has been integrated with Pace and Monarch.

Fiery. We internally develop new DFEs that are “scalable,” which means they meet the changing needs of users
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. We have continued to upgrade and introduce DFEs for new print engines within our printer
manufacturer relationships.

In 2013, the FS100 Pro became the first, and currently only, DFE to achieve certification from both the VIGC
and the JDF 1.3 Integrated Digital Printing Interoperability Conformance Specification. We launched Fiery XF,
version 5, which is a DFE and color management workflow for super-wide and wide format printing and
proofing and new versions of Fiery proServer, which is a DFE and color management workflow for the super-
wide format and ceramic tile decoration digital inkjet printer market.

In 2012, we launched Fiery Workflow Suite, which is an integrated set of Fiery products, including Fiery Central,
Fiery JobFlow, and Fiery JobMaster, among others, to deliver a fully integrated workflow from job submission
and business management to scheduling, preparation, and production. We also launched FS100 Pro, which is our
next generation DFE, and Fiery Dashboard, which is a cloud-based service providing real-time access to print
production data from any Internet browser, including mobile phones and tablets.

In 2011, we launched a next generation Fiery platform, “Fiery System 10”. The new platform 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.

PrintMe Connect 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 2013, we launched PrintMe 2.4, which enables our customers to manage their
mobile print infrastructure and enable mobile printing across hundreds of printers regardless of brand. In 2012,
we launched PrintMe Mobile L100, which is a Linux-based appliance that provides secure Wi-Fi printing for
guests from mobile devices outside the corporate network to printers inside the corporate firewall and PrintMe
Mobile 2.1 and 2.2, which provides the ability to better control and manage printing from tablets and
smartphones. In 2011, we launched PrintMe Mobile, an enterprise solution that lets business users print directly
from Apple, Android, and Blackberry tablets and smart phones to any networked printer.

In 2011, we acquired the Entrac business, 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. In 2012, we launched the M500, which accepts credit cards, campus cards,
and cash cards at the device, thereby eliminating the need for coin-operated machines. The M500 is a flexible
and scalable system for college campuses and libraries, which addresses student demands for printing from any
mobile device as well as from popular cloud storage services.

Increasing Market Coverage

We are increasing our market coverage through deeper penetration of our sales and distribution networks,
expansion into the French and German-speaking regions of Europe and Africa through our acquisitions of
GamSys and Lector in 2013, and geographic expansion into emerging markets in Latin America, China, India,
Australia, and New Zealand through the acquisitions of Cretaprint, Metrics, and Prism in 2012. We also explore
business acquisitions as a means of expanding our product lines and customer base.

Industrial Inkjet and Productivity Software. Our Industrial Inkjet and Productivity Software products are sold
through our direct sales force and via distribution arrangements to all sizes of print providers. The acquisitions of
GamSys, Metrix, and Lector in 2013; Cretaprint, Metrics, OPS, and Technique in 2012; and Prism and
alphagraph team GmbH (“Alphagraph”) in 2011 have led to an increased international presence for our
Productivity Software 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, and xpedx (which is in the process of merging with Unisource),
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.

We have announced our continuing intention to explore additional acquisition opportunities in the Productivity
Software operating segment to further consolidate the business process automation and cloud-based order entry
and order management software industries, including cross-media marketing and imposition solutions, in both
the Americas and world-wide. Significant additions to our customer base were made through the acquisitions of
PrintLeader, GamSys, Metrix, and Lector in 2013; Metrics, OPS, and Technique in 2012; and Streamline, Prism,
and Alphagraph in 2011. For example, Lector’s software solutions are used in over 1,000 facilities in Europe and
Alphagraph’s software solutions are used in over 6,000 facilities in 15 countries.

Fiery. We have a direct relationship with several leading printer manufacturers. We work closely together to
design, develop, and integrate Fiery DFE 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 DFE 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/Oce,
Epson, Fuji Xerox, Intec, Konica Minolta, Kyocera Mita, OKI Data, Ricoh, Sharp, Toshiba, and Xerox.
Subsequent to December 31, 2013, we established a relationship with Landa.

These relationships are based on business relationships that have been established over time. Our agreements
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. Canon is a significant
distributor and reseller of our PrintMe software application. Office workers, college students, and others can now
print from virtually any mobile device to Canon’s multifunction printers with PrintMe technology. PrintMe is
available globally in 2014.

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We are increasing the market coverage of our Entrac self-service and payment solution through the launch of the
M500 through which the software is marketed to college campuses and libraries.

Expanding Addressable Market

Industrial Inkjet. The Industrial Inkjet market consists 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 EFI digital industrial inkjet product line, the label and
packaging digital inkjet printer market, which we address via our Jetrion label and packaging digital inkjet
product line, and the ceramic tile decoration market, which we address via our Cretaprint ceramic tile decoration
digital inkjet printers.

The Industrial Inkjet super-wide and wide format addressable market is best measured through the growth of the
signage market. We believe the overall printed signage market is expected to grow at a compound annual growth
rate of 2 to 3% annually, according to internal market estimates. We expect the high end UV digital inkjet
signage market to grow more rapidly at a compound annual growth rate of 7% 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. Despite the growth in the
digital industrial inkjet market, we estimate that digital inkjet is currently less than 40% of the signage market
with analog comprising the remaining 60%, which is indicative of a significant opportunity to expand the
addressable digital industrial inkjet super-wide and wide format market.

The addressable signage 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 the digital UV ink that is used in our digital UV
industrial inkjet printers in the world.

The addressable label and packaging digital inkjet market growth can be measured through the 25% compound
annual growth rate in the label and packaging digital inkjet printing market and the 5% compound annual growth
rate in U.S. label demand, respectively, since 2009, according to internal market estimates). Despite the growth
in the label and packaging digital inkjet printing market, we estimate that digital inkjet is currently less than 10%
of the label and packaging market with analog comprising the remaining 90%.

The ceramic tile decoration addressable market is best measured through the growth of the decorated ceramic tile
market. We believe the analog ceramic tile decoration market is expected to grow at a compound annual growth
rate of 6% annually, according to internal market estimates. We expect the digital ceramic tile decoration market
to grow more rapidly at a compound annual growth rate of 20% annually, according to internal market estimates.
We are participating in this transition from analog to digital ceramic tile decoration technology and increasing
our market share through the introduction of innovative high speed and high performance ceramic tile decoration
digital inkjet printers. In the ceramic tile decoration digital inkjet market, we estimate that digital ceramic tile
decoration is currently between 35 to 40% of the market, with analog comprising the remaining 60 to 65%.

Productivity Software. The addressable Productivity Software 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 15% in the Americas. Outside of the Americas, the market is extremely fragmented with
numerous small sub-scaled software vendors, but we believe our market share in Europe is approximately 20%.
These markets consist 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, fulfillment services, marketing professionals, digital print shops, and the
packaging industry. We are the largest provider of business process automation software for the printing industry
as measured in terms of revenue and number of installations world-wide.

The addressable Productivity Software market is growing primarily through the opportunity for our customers to
develop a more efficient, integrated, and profitable business utilizing our software products. We help drive our
customers’ business success with a scalable digital product solution and service portfolio that can increase their
profits, reduce cost, improve productivity, and optimize their performance on every job from creation to print.
Our growth in this market is being generated both externally, through our PrintLeader, GamSys, Metrix, and
Lector acquisitions in 2013; our Metrics, OPS, and Technique acquisitions in 2012; and our Streamline, Prism,
and Alphagraph acquisitions in 2011, 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.

Fiery. The addressable market for the Fiery operating segment consists of commercial print, medium print-for-
pay, and quick print businesses. The compound annual growth rate for the production digital print market has
been 7.4% since 2008, 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.

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

Establish Enterprise Coherence and Leverage Industry Standardization

Our 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.

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, which ultimately provides end users with
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.

In 2013, FS100 Pro became the first, and currently only, DFE to achieve certification from both the VIGC and
the JDF 1.3 Integrated Digital Printing Interoperability Conformance Specification. In 2012, our DFE became the
first in the industry to achieve JDF certification for digital printing. 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 super-wide 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 2013 were
Canon/Oce, Epson, Fuji Xerox, Intec, Konica Minolta, Kyocera Mita, OKI Data, Ricoh, Sharp, Toshiba, and
Xerox. Sales to Xerox accounted for approximately 12% of our 2013 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

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end customer. We recognize the importance of, and strive 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: Risk Factors— 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, as amended from time to time. 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 renewed automatically on each anniversary date for additional
one year periods until April 1, 2013, when a renewal agreement was executed through March 31, 2018. The
agreement can be terminated by either party 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.

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® software and
our financial condition and results of operations could be significantly harmed for a period of time. See Item 1A:
Risk Factors— We license software used in most of our Fiery products and certain Productivity Software
products from Adobe and the loss of these licenses would prevent shipment of these products.

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 UV 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: Risk Factors— 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, 2013, we employed 2,523 full time employees. Approximately 721 were in sales and
marketing (including 276 in customer service), 298 were in general and administrative, 493 were in
manufacturing, and 1,011 were in research and development. Of the total number of employees, 1,441 employees
were located in the Americas (primarily the U.S. and Brazil) and 1,082 were located outside of the Americas.

Research and Development

Research and development expense was $128.1, $120.3, and $115.9 million for the years ended December 31,
2013, 2012, and 2011, respectively. As of December 31, 2013, 1,011 of our 2,523 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 expect to continue to develop new platforms and ink formulations for Industrial Inkjet print technologies and
ceramic tile decoration as the industry continues and accelerates its transition from analog to digital technology
and from solvent-based printing to UV curable ink printing. We are developing new software applications
designed to maximize workflow efficiencies and meet the needs of the graphic arts and commercial print
professions, including business process automation, web-to-print, e-commerce, cross-media marketing,
imposition, and proofing solutions. We are developing products to support additional printing devices including
high-end color copiers and multi-functional devices. We have research and development sites in 12 U.S.
locations, as well as in India, Europe, the United Kingdom (“U.K.”), Brazil, Canada, New Zealand, China,
Australia, and Japan. 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 super-wide and wide
format digital industrial inkjet printers. 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 dependent on the ability of our subcontractors to produce the products we sell. 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”).

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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: Risk Factors— 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 super-wide format industrial digital inkjet printers are primarily manufactured in a single location in
our Meredith, New Hampshire facility. We have encountered difficulties in hiring and retaining adequate skilled
labor and management because Meredith is not located in a major metropolitan area. Our digital UV ink that is
used in our super-wide and wide format industrial digital inkjet printers and Jetrion label and packaging digital
inkjet printing systems are manufactured in a single location in our Ypsilanti, Michigan facility. Our industrial
digital inkjet ceramic tile decoration printers are manufactured a single location in our Castellon, Spain facility.
Most components used in manufacturing our 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
our Industrial Inkjet locations, we use hazardous materials to formulate and store digital UV ink. The storage,
use, and disposal of those materials must meet the requirements of various environmental regulations.

See Item 1A: Risk Factors— If we are not able to hire and retain skilled employees, we may not be able to
develop and manufacture products, or meet demand for our products, in a timely fashion; We manufacture our
industrial digital inkjet printers and formulate our digital UV ink primarily in single locations. Any significant
interruption in the manufacturing process at any of these facilities could adversely affect our business and our
customer’ business; 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
Controls for Automation
Ink pigment suppliers
Columbia Tech
Roberts Tool
SEI, S.p.A
Shenzen Runtianzhi Tech
Seiko
Xaar
Progress Software
Printable and XMPie

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 RFID (radio frequency identification)
UV ink pigments and photoinitiators
Inkjet sub-assemblies
Inkjet sub-assemblies
Laser finishing and winders
Inkjet sub-assemblies
Inkjet print heads
Inkjet print heads
Monarch and Radius operating system
Digital StoreFront modular offerings

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 many 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 a high quantity of components. 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: Risk Factors—
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 significant 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.

Industrial Inkjet

Our super-wide and wide format digital industrial inkjet printers compete with printers produced by Agfa,
Domino, Durst, Canon/Oce, HP, Inca, Mimaki, Roland, and Mutoh 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 viable alternatives in most other markets. Our UV ink is sold to users
of our UV industrial inkjet printers, which have advanced quality control systems to ensure that correct color and
non-expired ink is used to prevent damage to the printer. This results in most ink used in our printers being sold
by us. While third party ink is available, its use may compromise the printer’s quality control system and also
voids most provisions of our printer warranty and service contracts. We believe that our broad product line and
leading technology provide a competitive advantage.

Our Cretaprint ceramic tile decoration digital inkjet printer competes with ceramic tile decoration printers
manufactured in Spain (KERAjet), Austria (Durst), Italy (Technoferrari, Projecta (B&T), Intesa (Sacmi), and
Systeme), China (Flora, Hope, Meijia, and Teckwin), and smaller emerging competition in other markets such as
Indonesia. The ceramic tile industry is currently experiencing an ongoing relocation from southern Europe to the
emerging markets of China, India, Brazil, and Indonesia. Competition in the Chinese market consists of small
Chinese ceramic tile decoration printers and European manufacturers that are reducing prices to gain market
share. In 2012, we opened a Cretaprint sales and support center in Foshan, Guangdong, China, which is home to
the largest concentration of tile manufacturers in China.

Most ceramic tile decoration digital inkjet printer manufacturers have a background in analog equipment for
ceramic tile plants and tile manufacturing facilities, while Durst and Flora entered the ceramic tile decoration
market from the digital graphic arts business. Our ceramic tile decoration competitors are a mix of large,
medium, and small ceramic tile decoration printer manufacturers, which are primarily privately owned.
Cretaprint is the only vendor with a background in both digital inkjet graphic arts and traditional analog ceramic
equipment. Success in the market is based on product development, competitive pricing, strong direct sales,
customer service, and support.

Productivity Software

Our Productivity Software operating segment, which includes our business process automation, cloud-based
order entry and order management systems, cross media marketing, and imposition solution 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, business process automation printing products including HP, Epicor, and SAP. We
face competition from Oracle, SAP, Solarsoft, and Heidelberg in the packaging software space.

Fiery

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.

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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 DFE and software technology into their print engines to
maximize their quality and capability, our primary competitors for stand-alone color DFEs, embedded DFEs, 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 DFEs, is
small; however, we are the largest third party DFE developer. 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 DFEs 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 DFE and software solutions drives demand for Fiery products through the
printer manufacturers.

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 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.

Corporate Headquarters

As more fully disclosed in Note 8—Commitments and Contingencies of the Notes to Consolidated Financial
Statements, the building was subject to a synthetic lease agreement. The synthetic lease agreement was
terminated in conjunction with the sale of the building to Gilead on November 1, 2012.

On April 26, 2013, we purchased an approximately 119,000 square feet cold shell building located at 6750
Dumbarton Circle, Fremont, California, the related land, and certain other property improvements from John
Arrillaga Survivor’s Trust, represented by John Arrillaga, Trustee, and Richard T. Peery Separate Property Trust,
represented by Richard T. Peery, Trustee (the “Trusts”), for a total purchase price of $21.5 million. We also
entered into a 15-year lease agreement with the Trusts, pursuant to which we leased approximately 59,000 square
feet of a building located at 6700 Dumbarton Circle, Fremont, California, which is adjacent to the building that
we purchased from the Trusts. The lease commenced on September 1, 2013. These facilities currently serve as
our corporate headquarters.

See Note 8—Commitments and Contingencies of the Notes to Consolidated Financial Statements.

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 to our intellectual property, when and as we deem appropriate. For a discussion of risks
relating to our intellectual property, see Item 1A: Risk Factors— We may be unable to adequately protect our
proprietary information and may incur expenses to defend our proprietary information.

Financial Information about Foreign and Domestic Operations and Export Sales

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

Item 1A: Risk Factors

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

The printing equipment industry is extremely competitive. Our super-wide and wide format industrial digital
inkjet 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, Domino, Durst, Canon/Oce, HP, Inca, Mimaki, Roland, and Mutoh.
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.

The local competitors in the Chinese and Korean markets are developing, manufacturing, and selling inexpensive
printers mainly to the local markets. 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 that we can
compete effectively with any such products.

The market for our ceramic tile decoration digital inkjet printers is very competitive.

Our Cretaprint ceramic tile decoration digital inkjet printer competes with ceramic tile decoration printers
manufactured in Spain, Italy, Brazil, China, and smaller emerging competition in other markets such as
Indonesia. Competition in the Chinese market consists of small Chinese ceramic tile decoration printers and
European manufacturers that are reducing prices to gain market share.

Most ceramic tile decoration digital inkjet printer manufacturers have a background in analog equipment for
ceramic tile plants and tile manufacturing facilities, while Durst and Flora entered the ceramic tile decoration
market from the digital graphic arts business. Our ceramic tile decoration imaging competitors are a mix of large,
medium, and small ceramic tile decoration printer manufacturers, which are primarily privately owned.
Cretaprint is the only vendor with a background in both digital inkjet graphic arts and traditional analog ceramic
equipment. Nevertheless, our competitors could develop new products, with existing or new technology, that
could be more competitive in our market than our ceramic tile decoration digital inkjet printers. We cannot assure
that we can compete effectively with any such products.

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We face strong competition for printing supplies such as ink.

We compete with independent manufacturers in the ink market.

Our UV ink is sold to users of our super-wide and wide format UV industrial inkjet printers, which have
advanced quality control systems to ensure that correct color and non-expired ink is used to prevent damage to
the printer. This results in most ink used in our super-wide and wide format printers being sold by us. While third
party ink is available, its use compromises the printer’s quality control system and also voids most provisions of
our printer warranty and service contracts.

Nevertheless, 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 face strong competition in our Productivity Software operating segment.

Our Productivity Software operating segment, which includes our business process automation, cloud-based
order entry and order management, cross-media marketing, and imposition solution 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, business process automation printing products including HP, Epicor, and SAP. We face competition
from Oracle, SAP, Solarsoft, and Heidelberg in the packaging software market.

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, our revenue could decline.

We sell our Industrial Inkjet and Productivity Software products to both distributors and directly to end users.
Our Industrial Inkjet products are sold by a direct sales force in North America and Europe and by distributors
world-wide. Our Productivity Software products are primarily sold directly to end users by our direct sales force
world-wide.

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

We do not typically have long-term purchase contracts with the printer manufacturer customers that
purchase our Fiery DFE and software solutions. 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 DFE and software solutions drives demand,
most Fiery revenue relies on printer manufacturers to design, develop, and integrate Fiery technology into their
print engines. We have established direct relationships with several leading printer manufacturers and work
closely with them to design, develop, and integrate Fiery DFE 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.A significant portion of our revenue is, and has been, generated by sales of our Fiery
DFE and software solutions to a relatively small number of leading printer manufacturers. Xerox provided 12%

of our revenue for the years ended December 31, 2013 and 2012. 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. Because sales of our Fiery products constitute a significant portion of our revenue and there are a limited
number of printer manufacturers producing 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 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 end
customers, 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 that utilize our Fiery DFE technologies and software solutions in a
timely and cost-effective manner. Our success in the DFE 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 specifications 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 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 products 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.

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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.

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 by
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
end customers that do not incorporate our technologies. As has occurred in the past, if 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.

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 price reductions with increased sales volume, our
results of operations could be adversely affected.

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

Our revenue and profitability depend 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 Industrial 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, including 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. 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.

Recently, economic uncertainty is particularly acute in Europe and especially the “southern European” countries
(i.e., Spain, Portugal, Italy, and Greece) and in Ireland. We have no European sovereign debt investments. Our
European debt and money market investments consist of non-sovereign corporate debt included within money
market funds and corporate debt securities of $24.6 million, which represents 14% of our money market funds
and corporate debt securities at December 31, 2013. Our European debt investments are with corporations
domiciled in the northern and central European countries of Sweden, Germany, Netherlands, Switzerland,
Luxembourg, Norway, France, Belgium, and the U.K. We do not have any investments in the higher risk
“southern European” countries (i.e., Spain, Portugal, Italy, and Greece) or in Ireland. We believe that we do not
have significant exposure with respect to our money market and corporate debt investments in Europe.
Nevertheless, we do have some exposure due to the interdependencies 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 28% of our
receivables are with European customers as of December 31, 2013. Of this amount, 25% of our European
receivables (7% of consolidated net receivables) are in the higher risk southern European countries (mostly
Spain, Portugal, and Italy), which are adequately reserved. The ongoing relocation of the ceramic tile industry
from southern Europe to the emerging markets of China, India, Brazil, and Indonesia will reduce our exposure to
credit risk in southern Europe. Nevertheless, if the ongoing economic uncertainty continues in southern Europe
and spreads among all the European Union countries, we may experience 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:

•

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

varying demand for our Fiery products from the leading printer manufacturing companies due to their
product development and marketing efforts, financial and operating 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 Industrial Inkjet product introductions;

market penetration in the ceramic tile decoration digital inkjet printer market, the shift of the ceramic
tile industry from southern Europe to emerging markets, and growth in the ceramic tile industry;

•

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 super-wide and wide format
industrial digital inkjet printers;

delay, cancellation, or rescheduling of orders or projects;

delays or shortages in the 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;

synergy and contribution of acquisitions and integration of acquired 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 between higher and lower gross profit products such as:

•

shifts within the Industrial Inkjet operating segment from higher to lower gross profit printers;

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

shifts between the higher gross profit Fiery and Productivity Software operating segments to the
lower gross profit Industrial Inkjet operating segment;

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

costs to comply with applicable governmental regulations;

costs associated with possible SEC and regulatory actions;

costs related to our entry into new markets (e.g., our Cretaprint operation in China);

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

commencement of litigation or adverse results in pending litigation; and

other risks described elsewhere in this Annual Report on Form 10-K.

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 in new markets, such as print
management business process automation software, document scanning solutions, ceramic tile decoration UV
ink, 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 Productivity Software 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 DFE, and other Adobe software for certain Productivity Software 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.

We manufacture our industrial digital inkjet printers and formulate our digital UV ink primarily in single
locations. Any significant interruption in the manufacturing process at any of these facilities could
adversely affect our business and our customers’ business.

Our VUTEk super-wide format industrial digital inkjet printers are primarily manufactured in a single location in
our Meredith, New Hampshire, facility. Our digital UV ink that is used in our super-wide and wide format
industrial digital inkjet printers and Jetrion label and packaging digital inkjet printing systems are manufactured
in a single location in our Ypsilanti, Michigan, facility. Our industrial digital inkjet ceramic tile decoration
printers are manufactured a single location in our Castellon, Spain, facility. Any significant interruption in the
manufacturing process at any of these facilities could affect the supply of our product, our ability to meet
customer demand, and our ability to maintain market share.

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We are developing contingency plans utilizing the capabilities of certain contract manufacturers in the event of a
significant interruption in the manufacturing process at any of the aforementioned facilities. Until those plans are
complete, disruptions in the manufacturing process at any of our sole source internal facilities could adversely
affect our business.

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, wide format, label and packaging, and ceramic tile decoration 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 are unable to obtain the print heads that we currently use, we would be required to redesign our
printers to use different print heads. If we are unable to obtain the required pigments, we would need to
reformulate our digital UV 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 certain of 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 DFEs has been manufactured at a single subcontractor location, Avnet in San Jose,
California. Certain solvent ink is formulated by Nazdar. Certain Industrial Inkjet sub-assemblies are
manufactured by three subcontractors. One of these subcontractors has a very limited customer base. 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.

We may face increased risk of inventory obsolescence, excess, or shortages related to our Industrial Inkjet
printers and ink.

We procure raw materials and internally manufacture our super-wide format digital industrial inkjet printers and
digital UV ink and ceramic tile decoration digital inkjet printers 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 and manufacture
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,
chemists and chemical engineers and other technical professionals with specialized skills. We are headquartered
in the Silicon Valley and have research and development facilities in 12 U.S. locations. We have research and
development offices in India, Europe, the U.K., Brazil, Canada, New Zealand, China, Australia, and Japan.
Competition 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.

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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.

Growing market share in the Productivity Software and Industrial 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 Productivity Software and
Industrial Inkjet operating segments sell primarily through a direct sales force to a broader base of customers
than Fiery. Many of the Productivity Software and Industrial Inkjet customers are smaller and potentially less
creditworthy. Our ceramic tile decoration digital inkjet customer base is primarily located in geographic regions,
which have recently been subject to economic challenges including southern Europe (primarily Spain, Italy, and
Portugal) and emerging markets in APAC. Furthermore, if we increase the percentage of Productivity Software
and Industrial 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 Industrial Inkjet and Productivity Software 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 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 (as was the case with respect to each of
our acquisitions during the past three years) will reduce cash reserves;

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;

changes in the fair value of contingent consideration;

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 negatively impacting stock analyst ratings;

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

inability to protect or secure technology rights; and

possible overruns of direct acquisition and integration 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 goodwill and long-lived assets annually and, based on a
combination of factors (i.e., triggering events), we may be required to perform an interim analysis.

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, 2013 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 2014 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. No
foreshadowing events have occurred as of December 31, 2013.

No assurance can be given that any future impairment would not affect our financial performance and valuation
of assets and, as a result, harm our operating results, financial condition, or stock price.

We face risks from currency fluctuations.

Approximately $315.6 (43%), $298.0 (46%), and $246.3 (42%) million of revenue for the years ended
December 31, 2013, 2012, and 2011, respectively, shipped to locations outside the Americas, primarily to
Europe, Middle East, and Africa (“EMEA”) and APAC. We expect that sales shipped outside the Americas will
continue to represent a significant portion of total revenue.

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, Chinese
renminbi, British pound sterling, Japanese yen, Brazilian real, 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, Indian rupee, Japanese yen, Brazilian real, British pound sterling, Chinese renminbi, 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 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 $2.5 million at
December 31, 2013. As of December 31, 2013, 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.

Forward contracts not designated as hedging instruments with notional amounts of $24.7 million are used to
hedge foreign currency balance sheet exposures related to Euro-denominated intercompany loans at
December 31, 2013. They are not designated for hedge accounting treatment since there is a natural offset for the
remeasurement of the underlying foreign currency denominated asset or liability.

As of December 31, 2013, we had not entered into hedges against any other currency exposures, but we may
consider hedging against movements in other currencies 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.

We face risks from our international operations.

We are subject to certain risks because of our international operations as follows:

•

restrictions on our ability to access cash generated by international operations, especially in China and
Brazil, due to restrictions on the repatriation of dividends, distribution of cash to shareholders outside
of such countries, foreign exchange control, and other restrictions,

customer credit risk, especially in emerging or economically challenged regions, with accompanying
challenges to enforce our legal rights should collection issues arise.

changes in governmental regulation, including labor regulations, 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,

violations of governmental regulation, including labor regulations, 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,

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•

international labor regulations may be substantially different than the regulations we are accustomed to
in the U.S., which may negatively impact labor efficiency and workforce relations,

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,

adverse tax consequences, including imposition of withholding or other taxes on payments by
subsidiaries,

potential changes in the tax structures of European countries necessitated by the recent global
economic downturn, and

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.

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, then 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, especially in southern Europe, 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 are subject to numerous federal, state, and foreign employment laws and may face claims in the future
under such laws.

We are subject to numerous federal, state, and foreign employment laws and from time to time face claims by
our employees and former employees under such laws. There are no material claims pending or threatened
against us under federal, state, or foreign employment laws, but we cannot assure 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.

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 that any such licenses could be obtained on acceptable terms, if
at all.

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 digital UV 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 or warehouse 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. For example, as a
result of the natural disaster that occurred in Japan in March 2011, some of the leading printer manufacturers
with operations in Japan 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 decreased by 15% in 2011 as compared with the prior
year, partially due to this impact.

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.

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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 locations. At these facilities, we
formulate and store UV, solvent, thermoforming, and dye sublimation ink. The formulation and storage of
solvent ink 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.

We do not sell or formulate the solvent-based ink that is used in our ceramic tile decoration imaging digital inkjet
printers, but we plan to expand our business to include this recurring revenue stream in the future. We have not
determined how much of the ink formulation process will be outsourced or performed with internal resources.

Future sales of our hardware products could be limited if we do not 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 re-engineer 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.

Regulations related to “conflict minerals” may force us to incur additional expenses, may make our supply
chain more complex, and may result in damage to our reputation with customers.

On August 22, 2012, under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-
Frank”), the SEC adopted requirements for companies that use certain minerals and metals in their products,
known as “conflict minerals,” whether or not these products are manufactured by third parties. These
requirements require companies to perform due diligence, disclose, and report whether such minerals originate
from the Democratic Republic of Congo and adjoining countries. We will have to perform due diligence to
determine whether such minerals are used in the manufacture of our products.

The implementation of these requirements could adversely affect the sourcing, availability, and pricing of such
minerals if they are found to be used in the manufacture of our products. We will incur additional costs to
comply with the disclosure requirements, including costs related to determining the source of the relevant
minerals and metals used in our products. Since our supply chain is complex, we may not be able to sufficiently
verify the origins of these minerals and metals used in our products through the due diligence procedures that we
implement, which may harm our reputation. In such event, we may also face difficulties in satisfying customers
who require that all of the components of our products are certified as conflict mineral free. The first report is
due on May 31, 2014 for the 2013 calendar year.

Our products may contain 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
defects. We have in the past discovered software and hardware defects in certain of our products after their
introduction, resulting in warranty expense and other expenses incurred in connection with rectifying such

defects or, in certain circumstances, replacing the defective product, which may damage our relationships with
our customers. Defects could be found in new versions of our products after commencement of commercial
shipment and any such defects could result in a loss or delay in market acceptance of such products and thus
harm our reputation and revenue. Defects in our products (including defects 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 Industrial Inkjet printer and Fiery DFE 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 recorded an
accrual of $11.0 million at December 31, 2013, for estimated warranty costs that are 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 or repair 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 preventive 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 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.

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 thousand per enrollee unless specific exposures are separately insured. We have accrued a contingent
liability of $2.6 and $1.4 million as of December 31, 2013 and 2012, respectively, which are not discounted,
based on an examination of historical trends, our claims experience, industry claims experience, actuarial
analysis, and estimates. Although we do not expect that we will ultimately pay claims significantly different from
our estimates, self-insurance reserves, net income, and cash flows could be materially affected if future claims
experience differs significantly from our historical trends and assumptions.

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.

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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, 2013, the price of our common stock as reported on The NASDAQ Global Select Market
ranged from a low of $18.97 to a high of $39.87. 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;

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 price 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 November 2013, our board of directors authorized $200 million for the repurchase of our outstanding common
stock. This authorization expires in November 2016. 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 negatively 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 the design and operating effectiveness of our
internal control structure and procedures for financial reporting on an ongoing basis. Although no known
material weaknesses are believed to exist at this time, it is possible that material weaknesses may exist. If we are
unable to identify and 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 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. Intercompany transaction pricing can
impact our tax liabilities. We are potentially subject to tax audits in various countries and tax authorities may
disagree with our tax treatments, including intercompany pricing 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.

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, allowance for doubtful accounts, inventory reserves and purchase commitments, warranty
obligations, litigation, restructuring reserves, self-insurance, fair value of financial instruments, stock-based
compensation, income taxes, intangible assets and goodwill, business combinations, build-to-suit lease,
contingencies, and the determination of functional currencies. 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 financial position, cash flows, and 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.

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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, 2013, 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

Fremont, California (6750

119

100%*

Owned

Dumbarton Circle) . . . . . . . . .

Corporate
& Fiery

Fremont, California (6700

100%** Leased

Fiery

Dumbarton Circle) . . . . . . . . .

Meredith, New Hampshire . . . . .

163

100%

Owned

Industrial
Inkjet

Corporate offices, design

engineering, product testing,
sales, marketing, customer
service

Administrative offices, design
engineering, product testing

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

100%

Leased

All

APAC corporate offices, design

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

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

100%

Leased

Egan, Minnesota . . . . . . . . . . . . .

100%

Owned

Castellon, Spain . . . . . . . . . . . . .

100%

Leased

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

Laconia, New Hampshire . . . . . .

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

100%

Leased

100%

Leased

100%

Leased

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

58%*** Leased

engineering, sales

Manufacturing (digital UV ink),
design engineering, sales,
customer service

Design engineering, customer

service, software engineering

Manufacturing, (Cretaprint),
administrative, design
engineering, sales, customer
service

Sales, Industrial Inkjet
demonstration center

Warehouse

Design engineering, sales,

customer service, quality
assurance, and software
engineering

Administrative, customer service

Industrial
Inkjet

Fiery &
Productivity
Software

Industrial
Inkjet

Fiery &
Productivity
Software

Location

Square
Footage

Percent
Utilized

Leased or
Owned

Operating Segment

Principal Uses

100%

Leased

Fiery

Software engineering, sales,

Richmond Hill, Ontario,

100%

Leased

Fiery

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

Pittsburgh, Pennsylvania . . . . . .

Schiphol-Rijk, The

Netherlands . . . . . . . . . . . . . . .

Sao Paolo, Brazil

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

Canada . . . . . . . . . . . . . . . . . .

Parsippany, New Jersey . . . . . . .

West Lebanon, New

Hampshire . . . . . . . . . . . . . . .

Essen, Germany . . . . . . . . . . . . .

Monchengladbach, Germany . . .

Shanghai, China . . . . . . . . . . . . .

Jacksonville, Florida . . . . . . . . . .

Foshan, China . . . . . . . . . . . . . . .

Auckland, New Zealand . . . . . . .

Dronnfield, United Kingdom . . .

Plymouth, Massachusetts . . . . . .

100%

Leased

100%

Leased

100%

Leased

Productivity
Software

Industrial
Inkjet

Industrial
Inkjet &
Productivity
Software

customer service

Software engineering, sales

EMEA corporate offices, sales,

support services

Design engineering, software

engineering, sales, customer
service

Manufacturing, (Entrac), design
engineering, sales, customer
service

100%

Leased

100%

Leased

100%

Leased

100%

Leased

100%

Leased

100%

Leased

100%

Leased

100%

Leased

100%

Leased

Fiery

Design and engineering

Productivity
Software

Industrial
Inkjet

Productivity
Software

Industrial
Inkjet

Productivity
Software

Software engineering

Design engineering, software

engineering, sales, customer
service

Design engineering, software

engineering, sales, customer
service

Sales, Industrial Inkjet
demonstration center

Software engineering

Sales, ceramic tile decoration
digital inkjet demonstration
center

Design engineering, software

engineering, sales, customer
service

Design engineering, software

engineering, sales, customer
service

Design engineering, software

engineering, sales, customer
service

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On April 26, 2013, we purchased an approximately 119,000 square feet cold shell building located at 6750
Dumbarton Circle, Fremont, California, the related land, and certain other property improvements from the
Trusts for a total purchase price of $21.5 million. See Note 8—Commitments and Contingencies of the
Notes to Consolidated Financial Statements.

** We entered into a 15-year lease agreement with the Trusts, pursuant to which we leased approximately

59,000 square feet of a building located at 6700 Dumbarton Circle, Fremont, California, which is adjacent to
the building that we purchased from the Trusts. The lease commenced on September 1, 2013. See Note 8—
Commitments and Contingencies of the Notes to Consolidated Financial Statements.

*** Non-utilized square footage in Arizona has been fully reserved.

We leased 19 additional domestic and international regional operations and sales offices and we own one
additional international sales office building, excluding facilities that have been fully reserved and subleased. 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

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, 2013, we are subject to the various claims, lawsuits, investigations, or proceedings discussed
below.

Componex Corporation (“Componex”) vs. EFI

Componex is a manufacturer of rolls used in machines handling continuous sheets of product and is a supplier for
certain products in our VUTEk product line. On May 30, 2013, Componex filed an action in the United States
District Court for the Western District of Wisconsin alleging that rolls supplied to EFI by another vendor infringe
two patents held by Componex. Because this proceeding is still in its preliminary stages, we have not completed
our evaluation of the allegations, determine whether the loss is probable or reasonably possible or, if it is
probable or reasonably possible, estimate the amount or range of loss that may be incurred.

Digitech Image Technologies, LLC (“Digitech”) Patent Litigation

On August 16, 2012, Digitech initiated litigation against EFI; Konica Minolta Holdings, Inc., Konica Minolta
Holdings, U.S.A., Inc., and Konica Minolta Business Solutions, U.S.A., Inc. (collectively, “Konica Minolta”);
and Xerox Corporation (“Xerox”) for infringement of a patent related to the creation of device profiles in digital
image reproduction systems in the United States District Court for the Central District of California (“District
Court”).

In addition to its own defenses, EFI has contractual obligations to indemnify certain of its customers to varying
degrees subject to various circumstances, including Konica Minolta, Xerox, and others. We do not believe that
our products infringe any valid claim of Digitech’s patent. We filed our response to the action, denying
infringement and in July 2013, the District Court granted summary judgment that the patent at issue is invalid.
On August 6, 2013, the District Court entered judgment in favor of EFI and the other defendants and Digitech
filed its notice of appeal to the United States Court of Appeals for the Federal Circuit (“Court of Appeals”). The
appeal is currently pending.

We do not believe that Digitech’s patent or infringement claims based on that patent are valid and we do not
believe it is probable that we will incur a material loss in this matter. However, it is reasonably possible that our
financial statements could be materially affected if the Court of Appeals reverses the District Court’s summary
judgment and the District Court subsequently reaches a different conclusion from its decision that the patent is
invalid. We are currently assessing whether we can provide a reasonable estimate of the range of loss. Such an
evaluation includes, among other things, a determination of the total sales of the implicated systems in the United
States and what a reasonable royalty, if any, might be under the circumstances.

Durst Fototechnik Technology GmbH (“Durst”) v. Electronics for Imaging GmbH (“EFI GmbH”) and
EFI, et al.

On or about June 14, 2011, Durst filed an action against EFI GmbH and EFI in the Regional Court of Dusseldorf,
Germany (“Regional Court”), alleging infringement of a German patent. The Regional Court preliminarily
determined that the white base coat printing method in our GS and QS super-wide format printer product lines
infringes the Durst patent. We appealed this decision to the Higher Regional Court of Dusseldorf.

In a separate action filed in the German Federal Patent Court, we challenged the validity of the Durst patent,
which we believe is invalid in light of prior art. The Federal Patent Court held a hearing on the validity of the
patent on October 23, 2013 and, following the hearing, declared the relevant claims in Durst’s patents to be
invalid. Durst has the right to appeal the ruling.

On November 12, 2013, following the Federal Patent Court’s decision invalidating the patent, the Higher
Regional Court of Dusseldorf stayed Durst’s infringement action until a final decision in EFI’s nullity
proceeding. A hearing previously scheduled for March 20, 2014 has been canceled.

As a result of the Federal Patent Court’s decision, we do not believe that there is any remaining basis for Durst’s
infringement claims and we do not believe it is probable that we will incur a material loss in this matter. It is
reasonably possible, however, that our financial statements could be materially affected if the Federal Patent
Court’s decision were to be reversed and there is a subsequent assessment of damages or issuance of an
injunction in the infringement action. We are currently assessing whether we can provide a reasonable estimate
of the range of loss. Such an evaluation includes, among other things, a determination of the number of printers
in Germany with the relevant feature at the time the court makes its final determination of infringement, and an
assessment of the cost related to an injunction, if an injunction is ultimately issued.

N.V. Perfectproof Europe (“Perfectproof”) v. BEST GmbH

On December 31, 2001, Perfectproof filed a complaint against BEST GmbH, currently EFI GmbH 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 EU
0.6 million for such termination and additional damages of EU 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 questioned its jurisdiction over the claim. Perfectproof appealed, and by
decision dated November 30, 2004, the Court d’Appel of Brussels (the “Court of Appeal”) rejected the appeal
and remanded the case 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 again 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; that the “exclusive” agreement
required reasonable notice prior to termination; and that Perfectproof is entitled to damages. The court appointed
an expert to review the parties’ records and address certain questions relevant in assessing Perfectproof’s
damages claim. On October 19, 2011, the expert issued its final report itemizing damages that are, in the
aggregate, significantly less than the amount claimed by Perfectproof. The final determination of damages will
not be binding until it is approved or adopted by the court. A decision of the Court of Appeal is pending.

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. The court may approve the expert’s final
report and pronounce the final amount of damages to be paid by us, or require additional analysis, or consider
further challenges to the final determination of damages. 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 May 2011, Jose Vicente Tomas Claramonte, the President of 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 Mr. Claramonte. In conjunction with our acquisition of Cretaprint, which closed on January 10,
2012, we assumed potential liability in this lawsuit.

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A trial was held on October 4, 2012. On January 2, 2013, the court ruled in favor of Cretaprint, concluding that
the Cretaprint products do not infringe the Claramonte patent. Mr. Claramonte appealed the ruling on January 30,
2013. On July 15, 2013, the Spanish Court of Appeal affirmed the trial court’s conclusion that the Cretaprint
products do not infringe the Claramonte patent. Mr. Claramonte did not appeal the ruling of the Spanish Court of
Appeal. Accordingly, EFI no longer has any potential liability in this matter.

In conjunction with our defense of the claims by Mr. Claramonte, EFI filed affirmative actions against
Mr. Claramonte in the U.K., Italy, and Germany alleging, among other things, that the Claramonte patent is not
valid and/or that Cretaprint’s products do not infringe the patent. The court in the U.K. has issued a default
judgment of non-infringement by Cretaprint. The actions in Italy and Germany remain pending.

Because the former owners of Cretaprint agreed to indemnify EFI against any potential liability in the event that
Mr. Claramonte were to prevail in his action against Cretaprint, we accrued a contingent liability based on a
reasonable estimate of the legal obligation that was probable as of the acquisition date and we accrued a
contingent asset based on the portion of any liability for which the former Cretaprint owners would indemnify
EFI. The net obligation accrued in the opening balance sheet on the acquisition date is EU 2.5 million (or
approximately $3.3 million). We have reversed this liability during the year ended December 31, 2013, which
resulted in a reduction of general and administrative expense.

SkipPrint LLC (“SkipPrint”) Patent Litigation

SkipPrint is a non-practicing entity with certain rights to a number of patents related to web-to-print, order
management, and business process automation software in the print industry. SkipPrint has alleged infringement
of these patents by several companies. Although SkipPrint has neither made any claims against nor contacted EFI
directly, SkipPrint has made claims against several EFI customers, including customers to whom EFI has
contractual indemnification obligations to varying degrees. Although we are not a party to any of the pending
litigation and we do not believe that our software infringes the patents-at-issue, it is reasonably possible that we
may be obligated to indemnify certain customers under these contractual arrangements.

Each of Skip Print’s actions against third parties is in its preliminary stages and EFI has neither been named as a
party to any action nor been contacted directly by SkipPrint. Accordingly, we are not yet in position to fully
evaluate the scope of the allegations, if any, that might be made against EFI or our products. We are therefore not
in a position to determine whether a loss is probable or reasonably possible, or if it is probable or reasonably
possible, the estimate of the amount or range of loss that may be incurred. Such an evaluation includes, among
other things, an evaluation of our indemnification obligations, any circumstances or conditions limiting our
indemnification obligations, our products that might be implicated, whether our software is combined or used
with customer or other third party software, an evaluation of the patents at issue, and other matters.

Other Matters

As of December 31, 2013, we were 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 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 Disclosures

Not applicable.

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 2013 and 2012.

2013

2012

High . . .
Low . . .

$26.15
$18.97

$29.62
$23.82

$32.19
$28.55

$39.87
$30.48

$17.90
$12.89

$18.99
$14.32

$17.06
$13.95

$19.10
$16.00

As of January 29, 2014, there were 134 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 2013 or 2012. 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 business
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 Note 12, Employee Benefit Plans, of the
Notes to Consolidated Financial Statements and Item 12, Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters, of this Annual Report on Form 10-K and is incorporated herein
by reference.

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Repurchases of Equity Securities

Repurchases of equity securities during the twelve months ended December 31, 2013 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 2013 . . . . . . . .
February 2013 . . . . . . .
March 2013 . . . . . . . . .
April 2013 . . . . . . . . . .
May 2013 . . . . . . . . . .
June 2013 . . . . . . . . . .
July 2013 . . . . . . . . . . .
August 2013 . . . . . . . .
September 2013 . . . . . .
October 2013 . . . . . . . .
November 2013 . . . . . .
December 2013 . . . . . .

321
175
31
217
34
—
111
254
—
105
45
48

$21.02
22.95
25.62
24.86
25.98
—
29.92
30.28
—
32.70
35.64
38.49

Total

. . . . . . . . . .

1,341

188
55

—
201
—
—
111
56

—
105
44
48

808

$ 73,387
72,146
72,146
67,146
67,146
67,146
63,834
62,147
62,147
58,705
199,226
197,390

$197,390

(1)

(2)

In August 2012, our board of directors authorized the repurchase of $100 million of outstanding common
stock. Under this publicly announced plan, we repurchased 0.7 and 1.3 million shares for an aggregate
purchase price of $19.3 and $22.9 million during the years ended December 31, 2013 and 2012,
respectively.

In November 2013, our board of directors cancelled $58 million remaining for repurchase under the 2012
authorization and approved a new authorization to repurchase $200 million of outstanding common stock.
This authorization expires in November 2016. Under this publicly announced plan, we repurchased
0.1 million shares for an aggregate purchase price of $2.5 million during the year ended December 31, 2013.
Includes 0.5 million shares of common stock surrendered by employees to satisfy their tax withholding
obligations that arise on the vesting of restricted stock units (“RSUs”), the exercise price of stock options by
certain employees, and any tax withholding obligations incurred in connection with such exercises.

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 our 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, 2013. 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

$700

$600

$500

$400

$300

$200

$100

12/08

12/09

12/10

12/11

12/12

12/13

Electronics For Imaging, Inc.

NASDAQ Composite

NASDAQ Computer Manufacturers

*$100 invested on 12/31/08 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.

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Item 6: Selected Financial Data

The following table summarizes selected consolidated financial data as of and for the five years ended
December 31, 2013. 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)

2013

2012

2011

2010

2009

Operations(1)
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Gross profit(2)

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

Income (loss) from operations(2)(3) . . . . . . . . . . . . .

$ 727,693

$ 652,137

$591,556

$504,007

$401,108

395,166

174,648

354,821

330,983

267,685

211,483

33,886

27,333

(276)

12,974

Net income (loss)(2)(3)(4)

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

$ 109,107

83,269

$ 27,465

7,487

$ (2,171)

Earnings per share
Net income (loss) per basic common share . . . . . .

Net income (loss) per diluted common share . . . . .

2.34

2.26

1.79

1.74

0.59

0.58

0.16

(0.04)

Shares used in basic per-share calculation . . . . . . .

Shares used in diluted per-share calculation . . . . .

46,643

48,359

46,453

46,234

45,387

49,682

47,734

47,579

47,152

49,682

(in thousands)

2013

2012

2011

2010

2009

December 31,

Financial Position
Cash, cash equivalents, and short-term

investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Working capital (5)
. . . . . . . . . . . . . . . . . . . . . . . . .
Total assets (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . .

$ 355,041
399,694
1,026,384
767,450

$ 364,962
262,821
1,074,971
650,793

$219,158
244,824
739,734
564,783

$229,663
265,250
706,581
551,749

$204,201
246,652
661,181
522,426

(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, 2013, 2012, and 2011.

(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 during the year ended
December 31, 2010.
Income (loss) from operations includes the following:

(3)

•

Amortization of acquisition-related intangibles of $19.4, $18.6, $11.2, $12.4, and $18.5 million for the
years ended December 31, 2013, 2012, 2011, 2010, and 2009, respectively.

Stock-based compensation expense of $25.8, $19.7, $23.4, $15.9, and $18.6 million for the years ended
December 31, 2013, 2012, 2011, 2010, and 2009, respectively.

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 Industrial Inkjet operating segment, assets impaired related to an Inkjet facility closure, and the
impairment of our remaining equity method investees.

•

Restructuring and other charges of $4.8, $5.8, $3.3, $3.6, and $9.0 million for the years ended
December 31, 2013, 2012, 2011, 2010, and 2009, respectively.

Litigation reserve reversals of $3.1 million during the year ended December 31, 2013, relate primarily
to the reversal of the reserve related to the Kerajet vs Cretaprint litigation discussed more fully in
Item 3: Legal Proceedings.

Acquisition-related costs of $1.4, $2.2, $2.3, and $1.2 million for the years ended December 31, 2013,
2012, 2011, and 2010, respectively, associated with businesses acquired and anticipated transactions,
subsequent to the effective date of the new business combination accounting guidance, which requires
such costs to be expensed.

Change in fair value of contingent consideration, net of accretion, of $(5.7), $(1.4), $1.5, and $0.4
million for the years ended December 31, 2013, 2012, 2011, and 2010, respectively. Accounting
Standards Codification (“ASC”) 805, Business Combinations, requires that we estimate the fair value
of acquisition-related contingent consideration based on the probability of performance target
achievement. Differences between the contingent consideration liability included in the determination
of fair value at the acquisition date and the amount ultimately earned via achievement of the required
performance targets must be charged to earnings.

Gain on sale of building and land of $117 and $80 million for the years ended December 31, 2013 and
2009, respectively, resulting from the gain recognized on the sale of our Foster City, California campus
to Gilead. The gain on sale of building and land is recognized as a component of income from
operations as required by ASC 360-10-45-5, Property, Plant, and Equipment — Other Presentation
Matters. The 303 Velocity Way building and 4 acres of land were sold in November 2012 and the 301
Velocity Way building and 40 acres of land were sold in January 2009 for $179.7 and $137.3 million,
respectively. The gain related to the 2012 transaction was deferred until October 2013 as explained
more fully in Note 13—Gain on Sale of Building and Land of the Notes to Consolidated Financial
Statements. Imputed interest expense and depreciation, net of accrued sublease income, of $1.6 million
was expensed through October 31, 2013, related to the deferred property transaction, partially offset by
capitalized interest of $1.1 million related to build out of the Fremont facility.

(4) Net income (loss) includes the following:

•

Tax benefit from the release of previously unrecognized tax benefits of $5.8, $11.8, $2.6, and $8.5
million for the years ended December 31, 2013, 2012, 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.

Tax provision of $19.4 million during the year ended December 31, 2013 to establish a valuation
allowance related to the realization of tax benefits from existing California deferred tax assets.

Tax benefit of $43.6 million during the year ended December 31, 2012 resulting from a capital loss
related to the liquidation of a wholly-owned subsidiary.

Tax benefit of $6.5 million during the year ended December 31, 2012 resulting from the increased
valuation of acquired intangibles for tax purposes due to an operational restructuring in Spain.

Tax benefit of $3.2 million for the year ended December 31, 2013, resulting from the retroactive
renewal of the U.S. federal research and development tax credit on January 2, 2013 retroactive to 2012
pursuant to the American Taxpayer Relief Act of 2012. ASC 740-10-45-15, Income Taxes, requires the
effects of a change in tax law or rates be recognized in the period that includes the enactment date.

Gain on sale of minority investments in privately-held companies. 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. In 2013 and 2011, we sold two of these investments for $0.1 and $2.9 million,
respectively, because they were no longer considered to be strategic.

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(5)

In accordance with ASC 805, Business Combinations, we revised previously issued post-acquisition
financial information to reflect adjustments to the preliminary accounting for business acquisitions as if the
adjustments occurred on the acquisition date. Accordingly, we have increased goodwill and accrued and
other liabilities by $1.2 million in the aggregate at December 31, 2012 to reflect opening balance sheet
adjustments related to our acquisitions of Cretaprint, OPS, and Technique.

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 2013 were as follows:

•

Our results for the year ended December 31, 2013 reflect revenue growth, consistent gross profit, and
decreased operating expenses as a percentage of revenue, which resulted in improved profitability. Our
revenue growth was driven by increased revenue in all three operating segments. We completed our
acquisitions of PrintLeader, GamSys, Metrix, and Lector in 2013. We completed our acquisitions of
Cretaprint, Metrics, OPS, and Technique in 2012. We completed our acquisitions of Streamline,
Entrac, Prism, and Alphagraph in 2011. Their results are included in our results of operations
subsequent to their respective acquisition dates.

Our consolidated revenue increased by approximately 12% or $75.6 million, from $652.1 million for
the year ended December 31, 2012 to $727.7 million for the year ended December 31, 2013. Industrial
Inkjet, Productivity Software, and Fiery revenue increased by $34.4, $14.9, and $26.3 million,
respectively, in 2013 compared with 2012.

•

Industrial Inkjet revenue increased by 11% during 2013 compared with 2012. The Industrial Inkjet
revenue increase was led by significantly increased UV and LED ink revenue, strong demand for
our GS3250LX and GS2000LX UV-curing digital inkjet printers incorporating “cool cure” LED
technology, acceptance of our QS2Pro and QS3Pro UV hybrid digital inkjet printers, our HS100
digital UV inkjet press incorporating LED technology and representing an alternative to analog
presses, and our next generation Cretaprint ceramic tile decoration digital inkjet printer.

Productivity Software revenue increased by 14% during 2013 compared with 2012. Our
Productivity Software revenue is benefiting from the need for printing companies to improve
productivity and efficiency through business process automation, which resulted in increased
Monarch, Radius, and Pace revenue, as well as revenue from recently acquired businesses.
Metrics, which closed during the second quarter of 2012; OPS and Technique, which closed
during the fourth quarter of 2012; GamSys and PrintLeader, which closed during the second
quarter of 2013; and Metrix and Lector, which closed during the fourth quarter of 2013,

contributed to our revenue growth. The acquisitions of Metrix, Lector, GamSys, OPS, Technique,
Metrics, Prism, and Alphagraph have increased the international presence of our Productivity
Software business. Our acquisitions have significantly increased our recurring maintenance
revenue base.

•

Fiery revenue increased by 11% during 2013 compared with 2012. 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. The
Fiery revenue increase is primarily due to new product launches by these printer manufacturers
resulting in increased stand-alone and embedded DFE revenue, improved market share for Fiery
versus competing DFEs in certain markets that we serve, as well as the launch of the Fiery FS100
Pro DFE platform. Our customers have also benefited from recent integration of our Fiery
products with certain of our Productivity Software products.

Our gross profit percentage, excluding stock-based compensation, was comparable at 54% during the
years ended December 31, 2013 and 2012. Comparable revenue mix and gross profit percentages
among our three operating segments resulted in a comparable overall gross profit percentage between
the periods.

Operating expenses as a percent of revenue decreased from 49% in 2012 to 30% in 2013. Operating
expenses decreased by $100.4 million between 2012 and 2013 primarily due to the gain on sale of
building and land of $117.2 million. Excluding the gain on sale of building and land, operating
expenses decreased as a percentage of revenue from 49% to 46% primarily due to the 12% increase in
revenue during the corresponding periods. The increase in operating expenses of $16.8 million,
excluding the gain on sale of building and land, was primarily due to head count increases related to
our business acquisitions and geographic expansion in China, variable compensation due to improved
profitability, commission payments resulting from increased revenue, trade show expenses,
restructuring and other charges, acquisition expenses, legal fees, amortization of intangible assets,
depreciation expense related to our deferred property transaction, and stock-based compensation,
partially offset by targeted head count reductions undertaken to lower our quarterly operating expense
run rate in the Fiery operating segment during the first quarter of 2013, targeted head count reductions
in the Industrial Inkjet operating segment, head count reductions in the Productivity Software operating
segment driven by the integration of acquired entities, the release of reserves related to the Kerajet
litigation, changes in fair value of contingent consideration, and imputed sublease income related to the
deferred property transaction.

Interest and other income (expense), net, decreased by $2.6 million from a gain of $1.1 million in 2012
to a loss of $1.5 million in 2013. This decrease primarily consists of imputed interest expense of $3.0
million (net of $1.1 million of capitalized interest related to the build-out of our new corporate
headquarters) in 2013, compared to $0.6 million in 2012, related to the deferred property transaction, a
$0.3 million foreign exchange loss in 2013, resulting from the revaluation of our foreign currency
denominated net assets (mainly denominated in Euros, British pounds sterling, Brazilian reais, and
Indian rupees) compared with a $0.6 million foreign exchange gain in 2012, $0.3 million interest
expense related to the imputed build-to-suit financing obligation, and lower investment returns.

•

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• We recorded a tax provision of $64.0 million in 2013 on pre-tax income of $173.1 million compared to

a tax benefit of $48.2 million in 2012 on pre-tax income of $35.0 million. We recognized a tax charge
of $19.4 million in 2013 to establish a valuation allowance for certain existing California deferred tax
assets. The effective tax rate was positively impacted in 2013 by the renewal of the U.S. federal
research and development tax credit retroactive to 2012. ASC 740-10-45-15 requires that the effects of
a change in tax law or rates be recognized in the period that includes the enactment date. Accordingly,
the portion of the retroactive credit that related to 2012 was entirely recognized on January 2, 2013. We
recognized $5.8 million of previously unrecognized tax benefits in 2013 as compared to $11.8 million
in 2012. The tax benefit in 2012 was primarily due to the $43.6 million benefit related to the capital
loss from the liquidation of a wholly-owned subsidiary and the $6.5 million benefit related to the
operational restructuring in Spain.

Results of Operations

The following table presents items in our consolidated statements of operations as a percentage of total revenue
for 2013, 2012, and 2011. These operating results are not necessarily indicative of results for any future period.

For the years ended December 31,

2013

2012

2011

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

100%

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses (gains):

Research and development . . . . . . . . . . . . . . . . . . . . . . . .
Sales and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of identified intangibles . . . . . . . . . . . . . . .
Restructuring and other
. . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of building and land . . . . . . . . . . . . . . . . . . .

Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest and other income (expense), net: . . . . . . . . . . . . . . . . .

Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefit from (provision for) income taxes . . . . . . . . . . . . . . . .

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17
19
6
3
1
(16)

24
—

24
(9)

15%

18
19
8
3
1

—

5
—

5
8

13%

20
20
9
2
1

—

4
1

5
(1)

4 %

Revenue

We classify our revenue, gross profit, assets, and liabilities in accordance with our three operating segments as
follows:

Industrial Inkjet, which consists of our VUTEk super-wide and EFI wide format industrial digital inkjet printers
and related ink, Jetrion label and packaging digital inkjet printing systems and related ink, Cretaprint digital
inkjet printers for ceramic tile decoration, digital inkjet printer parts, and professional services. Printing surfaces
include paper, vinyl, corrugated, textile, glass, plastic, ceramic tile, and many other flexible and rigid substrates.

Productivity Software, which consists of (i) our business process automation software, including Monarch and
Metrics; (ii) Pace, our business process automation software that is available in a cloud-based environment;
(iii) Digital StoreFront, our cloud-based e-commerce solution that allows print service providers to accept,
manage, and process printing orders over the internet; (iv) Radius, our business process automation software for
label and packaging printers; and (v) other business process automation and e-commerce solutions designed for
the printing and packaging industries.

Fiery, which consists of DFEs that 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 DFEs connected to digital printers, copiers, and other peripheral devices, (ii) embedded DFEs and design-
licensed solutions used in digital copiers and multi-functional devices, (iii) optional software integrated into our
DFE solutions such as Fiery Central, Command WorkStation, 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.

Revenue by Operating Segment

Our revenue by operating segment for the years ended December 31, 2013, 2012, and 2011 was as follows (in
thousands):

For the years ended December 31,

2013

2012

2011

% change

2013
over
2012

2012
over
2011

Industrial Inkjet . . . . . . . . . . . . . . . . . . . . . . . .
Productivity Software . . . . . . . . . . . . . . . . . . .
Fiery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$354,614
118,409
254,670

49% $320,228
103,466
16
228,443
35

49% $240,318
81,165
16
270,073
35

40% 11% 33%
14
46

27
(15)

14
11

Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . .

$727,693

100% $652,137

100% $591,556

100% 12% 10%

Overview

Revenue was $727.7, $652.1, and $591.6 million for the years ended December 31, 2013, 2012, and 2011,
respectively, resulting in a 12% increase in 2013 compared with 2012 and a 10% increase in 2012 compared with
2011. The $75.6 million increase in 2013 compared with 2012 consisted of increased Industrial Inkjet,
Productivity Software, and Fiery revenue of $34.4, $14.9, and $26.3 million, respectively.

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The $60.6 million increase in 2012 compared with 2011 consisted of increased Industrial Inkjet and Productivity
Software revenue of $79.9 and $22.3 million, respectively, partially offset by decreased Fiery revenue of $41.6
million.

Industrial Inkjet Revenue

Industrial Inkjet revenue increased by $34.4 million, or 11%, in 2013, compared with 2012, primarily due to
significantly increased UV and LED ink revenue, strong demand for our GS3250LX and GS2000LX UV-curing
digital inkjet printers incorporating “cool cure” LED technology, acceptance of our QS2Pro and QS3Pro UV
hybrid digital inkjet printers, which were launched in 2012, our HS100 digital UV inkjet press incorporating
LED technology and representing an alternative to analog presses, which was launched during the second quarter
of 2013, and our next generation Cretaprint ceramic tile decoration digital inkjet printer, which was launched
during the fourth quarter of 2012.

Industrial Inkjet revenue increased by $79.9 million, or 33%, in 2012 compared with 2011 primarily due to the
acquisition of Cretaprint, which closed during the first quarter of 2012 enabling our entry into the ceramic tile
decoration market, and increased sales of super-wide and wide format industrial digital inkjet UV printers and
UV ink. Our revenue benefited from strong demand for our GS3250LX UV–curing digital inkjet printer
incorporating “cool cure” LED technology, which was launched in 2011, and acceptance of our QS2Pro and
QS3Pro super-wide format UV hybrid digital inkjet printers, which were launched in 2012. The QS2Pro and
QS3Pro printers were re-designed based on GS technology to replace the QS product line, thereby resulting in
numerous operational efficiencies including interchangeability of components and consistent technology between

the GS and QS product lines. 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.

Productivity Software Revenue

Productivity Software revenue increased by $14.9 million, or 14%, in 2013 compared with 2012. Our
Productivity Software revenue is benefiting from the need for printing companies to improve productivity and
efficiency through business process automation, which resulted in increased Monarch, Radius, and Pace revenue,
as well as revenue from recently acquired businesses. Metrics, which closed during the second quarter of 2012;
OPS and Technique, which closed during the fourth quarter of 2012; GamSys and PrintLeader, which closed
during the second quarter of 2013; and Metrix and Lector, which closed during the fourth quarter of 2013,
contributed to our revenue growth. The acquisitions of Metrix, Lector, GamSys, OPS, Technique, Metrics, Prism,
and Alphagraph have increased the international presence of our Productivity Software business. Our
acquisitions have significantly increased our recurring maintenance revenue base.

Productivity Software revenue increased by $22.3 million, or 27%, in 2012 compared with 2011, primarily due to
our acquisition strategy in the Productivity Software operating segment, as well as increased revenue from
Monarch and Pace products and professional services. The economic downturn has benefited this operating
segment, which focuses on the automation of printing business functions thereby improving productivity and cost
reduction by our customers.

Fiery Revenue

Fiery revenue increased by $26.3 million, or 11% in 2013 compared with 2012. 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. The Fiery revenue increase is
primarily due to new product launches by these printer manufacturers resulting in increased stand-alone and
embedded DFE revenue, improved market share for Fiery versus competing DFEs in certain markets that we
serve, as well as the launch of the Fiery FS100 Pro DFE platform. Our customers have also benefited from recent
integration of our Fiery products with certain of our Industrial Inkjet and Productivity Software products.

Fiery revenue decreased by $41.6 million, or 15%, in 2012 compared with 2011 primarily due to delayed new
product launches by these printer manufacturers as well as the slowdown in the European economy.

Revenue by Geographic Area

Our revenue by geographic area for the years ended December 31, 2013, 2012, and 2011 was as follows (in
thousands):

For the years ended December 31,

2013

2012

2011

% change

2013
over
2012

2012
over
2011

Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EMEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
APAC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
APAC, ex Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$412,127
207,665
107,901
21,977
85,924

56% $354,114
195,397
29
102,626
15
27,870
3
74,756
12

54% $345,303
178,471
30
67,782
16
35,655
4
32,127
12

58% 16% 3%
6
30
5
12
(21)
6
15
6

9
51
(22)
133

Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . .

$727,693

100% $652,137

100% $591,556

100% 12% 10%

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.

2013 Compared with 2012

Our consolidated revenue increase of $75.6 million, or 12%, in 2013, compared with 2012, resulted from
increased revenue in the Americas, EMEA, and APAC, ex Japan, partially offset by decreased revenue in Japan.

Americas revenue increased by 16% in 2013 compared with 2012. Americas revenue increased in all three
operating segments as follows:

•

Industrial Inkjet revenue increased primarily due to sales of super-wide and wide format UV printers
and UV ink, as well as the effective introduction of our ceramic tile decoration digital inkjet printer
product into this market.

Productivity Software revenue increased primarily due to increased Monarch, Pace, and Radius
revenue.

Fiery revenue significantly increased primarily as a consequence of product launches by the leading
printer manufacturers, which had previously been delayed.

EMEA revenue increased by 6% in 2013 compared with 2012 primarily due to increased Productivity Software
revenue through growth of our Monarch, Radius, and Pace revenue from higher sales in various countries
including South Africa, U.K., and Germany. We also drove significant sales into the EMEA region through our
2012 business acquisitions of OPS and Technique and our 2013 business acquisitions of GamSys and Lector.
Fiery revenue in the EMEA region also benefitted from product launches by the leading printer manufacturers,
which had previously been delayed.

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Japan revenue decreased by 21% in 2013 compared with 2012 primarily due to the continuing decrease in Fiery
revenue in Japan as the leading printer manufacturers focused their efforts elsewhere. The Fiery revenue decrease
in Japan was partially offset by a modest amount of industrial digital inkjet printer sales.

APAC, excluding Japan, revenue increased by 15% in 2013 compared with 2012 primarily due to increased
ceramic tile decoration digital inkjet printer revenue, super-wide and wide format industrial digital inkjet printer
revenue, and product launches by the leading printer manufacturers in the Fiery operating segment.

2012 Compared with 2011

Our consolidated revenue increase of $60.6 million, or 10%, in 2012 compared with 2011, resulted from
increased revenue in the Americas, EMEA, and APAC, ex Japan, partially offset by decreased revenue in Japan.

Americas revenue increased by 3% in 2012 compared with 2011, primarily due to increased Industrial Inkjet and
Productivity Software revenue, partially offset by decreased Fiery revenue as follows:

•

Industrial Inkjet revenue increased primarily due to sales of super-wide and wide format UV printers
and UV ink.

Productivity Software revenue increased in the Americas primarily due to revenue realized from our
2011 acquisitions of Streamline and Prism, as well as increased Monarch, Pace, and Radius revenue.

Fiery revenue decreased primarily as a consequence of delayed product launches by the leading printer
manufacturers.

EMEA revenue increased by 9% in 2012 compared with 2011 primarily due to:

•

increased Industrial Inkjet revenue resulting from increased label and packaging digital UV printer
revenue , UV ink revenue, and the acquisition of Cretaprint, which closed during the first quarter of
2012, and

increased Productivity Software revenue primarily due to our acquisitions of Prism and Alphagraph,
supported by increased Radius revenue,

partially offset by decreased Fiery revenue.

Japan revenue decreased by 22% in 2012 compared with 2011 primarily due to decreased Fiery revenue resulting
from the slow economy in Japan and delayed product launches by the leading printer manufacturers.

APAC, excluding Japan, revenue increased by 133% in 2012 compared with 2011 primarily due to the Cretaprint
acquisition, which closed during the first quarter of 2012, our acquisition of Prism, which closed during the third
quarter of 2011, and our acquisition of Metrics, which closed during the second quarter of 2012. The shift of the
ceramic tile industry from southern Europe (e.g., Spain and Italy) to the emerging markets China, India, Brazil,
and Indonesia has accelerated revenue growth in this geographic region.

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. 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. The printer manufacturers act as
distributors and sell Fiery products to end customers through reseller channels. Xerox provided 12% of our
revenue for the years ended December 31, 2013 and 2012. 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. No
assurance can be given that our relationships with these and other printer manufacturers will continue or that we
will successfully increase the number of printer manufacturing customers or the size of our existing relationships.
We expect that if we continue to increase our revenue in the Industrial Inkjet and Productivity Software operating
segments, the percentage of our revenue from printer manufacturing customers will decrease.

Our reliance on revenue from the leading printer manufacturers decreased during 2013 and 2012 compared with
prior years due to the change in mix between our operating segments in 2013. In 2013, 67% of our revenue was
from other sources as compared with 68% and 57% from other sources in 2012 and 2011, respectively. 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 DFE 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.

Gross Profit

Gross profit by operating segment, excluding stock-based compensation, for the years ended December 31, 2013,
2012, and 2011 was as follows (in thousands):

For the years ended December 31,

2013

2012

2011

Industrial Inkjet

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit percentages . . . . . . . . . . . . . . . . . . . .

$354,614
140,095

$320,228
127,783

$240,318
92,738

39.5%

39.9%

38.6%

Productivity Software

$118,409
85,246

$103,466
74,426

$ 81,165
56,825

72.0%

71.9%

70.0%

Fiery

$254,670
171,642

$228,443
153,805

$270,073
183,084

67.4%

67.3%

67.8%

A reconciliation of operating segment gross profit to the consolidated statements of operations for the years
ended December 31, 2013, 2012, and 2011 is as follows (in thousands):

Segment gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . . . . .

$396,983
(1,817)

$356,014
(1,193)

$332,647
(1,664)

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$395,166

$354,821

$330,983

For the years ended December 31,

2013

2012

2011

Overview

Our gross profit percentages were 54.3%, 54.4%, and 56.0% for the years ended 2013, 2012, and 2011,
respectively. Our gross profit percentage decreased by 0.1 percentage points in 2013, as compared with 2012,
primarily due to higher stock-based compensation in 2013 due to the impact of the increase in our stock price.

Our gross profit percentage decreased by 1.6 percentage points in 2012, as compared with 2011, primarily due to
the change in mix between our operating segments. Our lower margin Industrial Inkjet operating segment
revenue increased from 40% of consolidated revenue during the year ended December 31, 2011 to 49% of
consolidated revenue during the year ended December 31, 2012. Meanwhile, our higher margin Fiery operating
segment revenue decreased from 46% of consolidated revenue during the year ended December 31, 2011 to 35%
of consolidated revenue during the year ended December 31, 2012. The unfavorable impact of the change in mix
was partially offset by our improved gross profit percentage in the Industrial Inkjet and Productivity Software
operating segment.

Industrial Inkjet Gross Profit

The Industrial Inkjet gross profit percentage decreased from 39.9% in 2012 to 39.5% in 2013 primarily due to an
unfavorable mix shift between lower and higher margin printers, and freight costs.

The Industrial Inkjet gross profit percentage increased from 38.6% in 2011 to 39.9% in 2012 primarily due to
targeted cost reduction initiatives, achieving post-acquisition cost synergies in the Cretaprint business, fixed
manufacturing costs being spread over higher Industrial Inkjet revenue, higher sales prices for new products,
favorable product mix shift toward higher margin printers, and reduced warranty exposure, partially offset by
expenses related to engineering design modifications to improve quality.

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Productivity Software Gross Profit

The Productivity Software gross profit percentage increased from 71.9% in 2012 to 72.0% in 2013 primarily due
to efficiencies gained through increased revenue and the achievement of certain post-acquisition cost synergies.

The increase in the Productivity Software gross profit percentage from 70.0% in 2011 to 71.9% in 2012 was
primarily due to efficiencies gained through increased revenue and the achievement of certain post-acquisition
cost synergies. The increase in Productivity Software revenue aided the gross profit percentage due to the fixed
component included within the Productivity Software cost of revenue.

Fiery Gross Profit

The Fiery gross profit percentage increased from 67.3% in 2012 to 67.4% in 2013 primarily due to a mix shift
from lower margin embedded DFEs to higher margin stand-alone DFEs.

The Fiery gross profit percentage decreased from 67.8% in 2011 to 67.3% in 2012 primarily due to the impact of
fixed manufacturing overhead on lower volumes.

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.

Operating Expenses

Operating expenses for the years ended December 31, 2013, 2012, and 2011 were as follows (in thousands):

For the years ended December 31,

% change

2013

2012

2011

2013
over
2012

2012
over
2011

7% 4%

Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of identified intangibles . . . . . . . . . . . . . . . . . . . .
Restructuring and other
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of building and land . . . . . . . . . . . . . . . . . . . . . . . .

$ 128,124
137,583
47,755
19,438
4,834
(117,216)

$120,298
125,513
50,727
18,594
5,803
—

$115,901
119,487
53,756
11,248
3,258

10
(6)
5
(17)

5
(6)
65
78
— (100) —

Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 220,518

$320,935

$303,650

(31)% 6%

Operating expenses, net of gain on sale of building and land, decreased by $100.4 million, or 31%, in 2013 as
compared with 2012, and increased by $17.3 million, or 6%, in 2012 as compared with 2011.

Operating expenses decreased by $100.4 million, or 31%, between 2012 and 2013 primarily due to the gain on
sale of building and land of $117.2 million. Excluding the gain on sale of building and land, operating expenses
increased by $16.8 million, but decreased as a percentage of revenue from 49% in 2012 to 46% in 2013 due to
the 12% increase in revenue between the corresponding years. Operating expenses, excluding the gain on sale of
building and land, primarily due to head count increases related to our business acquisitions and geographic
expansion in China, variable compensation due to improved profitability, commission payments resulting from
increased revenue, trade show expenses, restructuring and other charges, acquisition expenses, legal fees,
amortization of intangible assets, depreciation expense related to our deferred property transaction, and stock-
based compensation, partially offset by targeted head count reductions undertaken to lower our quarterly
operating expense run rate in the Fiery operating segment during the first quarter of 2013, targeted head count
reductions in the Industrial Inkjet operating segment, head count reductions in the Productivity Software
operating segment driven by the integration of acquired entities, the release of reserves related to the Kerajet
litigation, changes in fair value of contingent consideration, and imputed sublease income related to the deferred
property transaction.

Operating expenses increased by $17.3 million between 2011 and 2012, but decreased as a percentage of revenue
from 52% in 2011 to 49% in 2012 due to the 10% increase in revenue between the corresponding years.
Operating expenses increased due to head count increases related to business acquisitions in all three operating
segments, commission payments resulting from increased revenue, and increased trade show and marketing
program spending, primarily due to Drupa, which is a European trade show that is held once every four years,
partially offset by the change in fair value of contingent consideration related to our Entrac and Alphagraph
acquisitions.

Research and Development

Research and development expenses include personnel, consulting, travel, research and development facilities,
and prototype materials expenses. Research and development expenses for the years ended December 31, 2013,
2012, and 2011 were $128.1 million, or 17% of revenue, $120.3 million, or 18% of revenue, and $115.9 million,
or 20% of revenue, respectively.

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Research and development expenses increased by $7.8 million, or 7%, in 2013 as compared with 2012.
Personnel-related expenses increased by $3.5 million primarily due to head count increases related to our
business acquisitions and variable compensation due to improved profitability. Prototypes and non-recurring
engineering, consulting, contractor, and related travel expenses were comparable to the prior year. Stock-based
compensation expense increased by $1.8 million. Facility and information technology expenses increased by $2.5
million.

Research and development expenses increased by $4.4 million, or 4%, in 2012 as compared with 2011.
Personnel-related expenses increased by $6.4 million primarily due to head count increases related to our
business acquisitions, partially offset by decreased variable compensation. Prototypes and non-recurring
engineering, consulting, contractor, and related travel expenses decreased by $1.3 million. Facility and
information technology expenses decreased by $0.7 million.

Research and development head count was 1,011, 967, and 944 as of December 31, 2013, 2012, and 2011,
respectively.

We expect that if the U.S. dollar remains volatile against the Indian rupee, Euro, British pound sterling, or
Brazilian real, 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, trade shows, marketing programs and promotional materials,
sales commissions, travel and entertainment, depreciation, and sales office expenses in the U.S., Europe, and

APAC. Sales and marketing expenses for the years ended December 31, 2013, 2012, and 2011 were $137.6
million, or 19% of revenue, $125.5 million, or 19% of revenue, and $119.5 million, or 20% of revenue,
respectively.

Sales and marketing expenses increased by $12.1 million, or 10%, in 2013 as compared with 2012. Personnel-
related expenses increased by $10.5 million primarily due to head count increases related to our business
acquisitions, increased commission payments resulting from increased revenue, and variable compensation due
to improved profitability. Trade show and marketing program spending, including related travel and freight,
increased by $1.4 million. Stock-based compensation expense increased by $1.2 million. Facility and information
technology expenses decreased by $1.0 million.

Sales and marketing expenses increased by $6.0 million, or 5%, in 2012 as compared with 2011. Personnel-
related expenses increased by $6.1 million primarily due to head count increases related to our business
acquisitions and increased commission payments resulting from increased revenue, partially offset by reduced
variable compensation. Trade show and marketing program spending, including related travel and freight,
increased by $1.6 million, primarily due to Drupa, which is a European trade show that is held once every four
years. Stock-based compensation expense decreased by $0.8 million. Facility and information technology
expenses decreased by $0.9 million.

Sales and marketing head count was 721, 613, and 583 as of December 31, 2013, 2012, and 2011, respectively,
including 276, 207, and 188 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, Brazilian real, Australian dollar, and
other currencies, sales and marketing expenses reported in U.S. dollars could fluctuate.

General and Administrative

General and administrative expenses consist primarily of human resources, legal, and finance expenses. General
and administrative expenses for the years ended December 31, 2013, 2012, and 2011 were $47.8 million, or 6%
of revenue, $50.7 million, or 8% of revenue, and $53.8 million, or 9% of revenue, respectively.

General and administrative expenses decreased by $3.0 million, or 6%, in 2013 as compared with 2012.
Personnel-related expenses increased by $2.5 million primarily due to head count increases related to business
acquisitions and increased variable compensation due to improved profitability. Stock-based compensation
expense increased by $2.4 million. Imputed sublease income increased by $2.6 million, partially offset by
increased imputed depreciation of $1.1 million, related to the deferred property transaction. Results for 2012
include a credit to general and administrative expenses of $1.2 million related to the actual sublease of a portion
of the facility prior to its sale to Gilead. Acquisition-related expenses decreased by $0.8 million. The fair value of
contingent consideration decreased by $7.1 million compared with $2.1 million in 2012, partially offset by
increased earnout accretion of $0.6 million. Legal fees increased by $1.7 million due to increased litigation
activity and settlements in the 2013. Litigation settlement expenses reduced general and administrative expenses
by $3.3 million compared with the 2012 primarily due to the settlement of the Kerajet patent infringement claim
(see Note 8 of the Notes to Consolidated Financial Statements). Facility and information technology expenses
decreased by $0.8 million

General and administrative expenses decreased $3.1 million, or 6%, in 2012 as compared with 2011. Stock-based
compensation expense decreased by $2.4 million. We incurred $0.5 million in settlement of a dispute with the
lessor of a facility in the U.K., which was partially offset by the receipt of an additional $0.3 million in insurance
proceeds, net of legal fees and costs, related to our securities derivative litigation, which was settled in 2008.
Imputed sublease income of $0.5 million, partially offset by imputed depreciation of $0.3 million, has been
accrued related to the deferred property transaction. Acquisition-related expenses decreased by $0.2 million due
to lower expenses related to the five acquisitions that closed during 2012, as well as other anticipated transactions

which were anticipated to close subsequent to December 31, 2012, compared with higher expenses related to four
acquisitions that closed during 2011. The fair value of contingent consideration decreased by $2.1 million,
partially offset by earnout accretion of $1.7 million.

We expect that if the U.S. dollar remains volatile against the Euro, British pound sterling, Indian rupee, Brazilian
real, or other currencies, general and administrative expenses reported in U.S. dollars could fluctuate.

Stock-based Compensation

Stock-based compensation expense for the years ended December 31, 2013, 2012, and 2011 were $25.8 million,
or 4% of revenue, $19.7 million, or 3% of revenue, and $23.4 million, or 4% of revenue, respectively.

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 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 increased by $6.1 million, or 31%, in 2013 as compared with 2012 due to
increased probability of achieving performance-based awards and the impact of our increased stock price on the
expense recognized for new grants.

Stock-based compensation expense decreased $3.7 million, or 16%, in 2012 as compared with 2011 due to
fluctuations in the number of awards granted between the periods and an adjustment to estimated forfeitures.

Amortization of Identified Intangibles

Amortization of identified intangibles for the years ended December 31, 2013, 2012, and 2011 was $19.4 million,
or 3% of revenue, $18.6 million, or 3% of revenue, and $11.2 million, or 2% of revenue, respectively.

Amortization of identified intangibles increased by $0.8 million, or 5%, in 2013 as compared with 2012. The
$0.8 million increase in 2013, as compared with 2012, is primarily due to amortization of intangible assets
identified through the business acquisitions that closed during 2013 and 2012, partially offset by decreased
amortization due to Jetrion and Pace intangibles becoming fully amortized.

The $7.4 million increase in 2012, as compared with 2011, is primarily due to amortization of intangible assets
identified through the business acquisitions that closed during 2012 and 2011, partially offset by decreased
amortization due to Vutek customer relationships becoming fully amortized.

Restructuring and Other

During the years ended December 31, 2013, 2012, and 2011, cost reduction actions were taken to lower our
operating expense run rate as we analyzed our cost structure. We announced restructuring plans to better align
our costs with revenue levels and to reconcile our cost structure following our business acquisitions. These
charges primarily relate to cost reduction actions taken to lower our quarterly operating expense run rate in the
Fiery operating segment during the first quarter of 2013, targeted head count reductions in the Industrial Inkjet
operating segment, and the integration of Productivity Software head count with acquired entities. Restructuring
and other consists primarily of restructuring, severance, retention, facility downsizing and relocation, and
acquisition integration expenses. Our restructuring and other plans are accounted for in accordance with ASC
420, Exit or Disposal Cost Obligations, ASC 712, Compensation – Non-Retirement Postemployment Benefits,
and ASC 820, Fair Value Measurement.

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Restructuring and other costs for the years ended December 31, 2013, 2012, and 2011 were $4.8, $5.8, and $3.3
million, respectively. Restructuring and other charges include severance costs of $2.2, $2.9, and $1.7 million
related to head count reductions of 106, 117, and 55 for the years ended December 31, 2013, 2012, and 2011,
respectively. Severance costs include severance payments, related employee benefits, retention bonuses,
outplacement fees, and relocation costs.

Facilities restructuring and other costs for the years ended December 31, 2013, 2012, and 2011 were $0.3, $0.3,
and $0.6 million, respectively. Facilities restructuring and other costs are primarily related to the relocation of
our corporate headquarters, Japan, Belgium, and certain manufacturing facilities in 2013, facilities downsizing
and relocation costs related to various facilities in the Fiery operating segment in 2012, decrease in estimated
sublease income necessitated by continuing weakness in the commercial real estate market where these facilities
are located of $0.2 million in 2011, and facilities relocations of $0.4 million in 2011.

Integration expenses for the years ended December 31, 2013, 2012, and 2011 of $1.4, $1.7, and $1.0 million,
respectively, were required to integrate our business acquisitions. Integration expenses relate primarily to the
Cretaprint, Metrics, OPS, Technique, and GamSys acquisitions in 2013; the Cretaprint and Prism acquisitions,
including the operational restructuring in Spain, in 2012; and the PrintStream, Entrac, Prism, and Alphagraph
acquisitions in 2011. Integration costs are expensed in the period incurred, which may be different from the
period that the acquisition closed.

Retention expenses of $0.9 million were accrued during the years ended December 31, 2013 and 2012 associated
with the Cretaprint acquisition.

Gain on Sale of Building and Land

On November 1, 2012, we sold the 294,000 square foot building located at 303 Velocity Way in Foster City,
California, which at that time served as our corporate headquarters, along with approximately four acres of land
and certain other assets related to the property, to Gilead for $179.7 million. We used the facility until
October 31, 2013, while searching for a new facility, building it out, and relocating our corporate headquarters,
for which period rent was not required to be paid. We accounted for this transaction as a financing related to our
continued use of the facility and a sublease receivable related to Gilead’s use of a portion of the facility. Our use
of the facility during the rent-free period constituted a form of continuing involvement that prevented gain
recognition. We imputed interest expense on the financing obligation, which resulted in total deferred proceeds
from property transaction of $183.2 million on October 31, 2013. We recorded sublease income and sublease
receivable at an implied market rate from Gilead. Because we vacated the facility on October 31, 2013, we have
no continuing involvement with the property and have accounted for the transaction as a property sale during the
fourth quarter of 2013, thereby recognizing a gain of approximately $117.2 million on the sale of the property.
We incurred imputed financing and depreciation expense, net of imputed sublease income, of approximately $1.6
million through October 31, 2013, which commenced during the fourth quarter of 2012, until we vacated the
building during the fourth quarter of 2013, partially offset by capitalized interest of $1.1 million related to the
Fremont facility.

Interest and Other Income (Expense), Net

Interest and other income (expense), net, includes interest income (expense), net, imputed interest expense
related to the deferred property transaction, 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. Interest and other income (expense), net, for the years ended December 31, 2013, 2012, and 2011 was
$(1.5), $1.1, and $3.1 million, respectively.

Interest and other income (expense), net, decreased by $2.6 million from a gain of $1.1 million in 2012 to a loss
of $1.5 million in 2013. The decrease primarily consists of imputed interest expense of $3.0 million (net of $1.1
million of capitalized interest related to the build-out of our new corporate headquarters) in 2013, compared to
$0.6 million in 2012, related to the deferred property transaction, a $0.9 million foreign exchange fluctuation,

$0.3 million interest expense related to the imputed build-to-suit imputed financing obligation, and lower
investment returns. The foreign exchange fluctuation was the result of a $0.3 million loss resulting from the
revaluation of our foreign currency denominated net assets (mainly denominated in Euros, British pounds
sterling, Brazilian reais, and Indian rupees), compared with a $0.6 million foreign exchange gain in 2012.

Interest and other income (expense), net, decreased by $2.0 million in 2012, as compared with 2011, primarily
due to the $2.9 million gain on sale of a minority interest in a privately-held company in the prior year, imputed
interest expense of $0.6 million related to the deferred property transaction, and $0.2 million decrease in interest
income due to lower cash equivalent and investment balances earlier in 2012, partially offset by a foreign
currency fluctuation of $1.7 million between the periods. The foreign currency fluctuation was the result of a
$0.6 million foreign exchange gain resulting from the revaluation of our foreign currency denominated net assets
(mainly denominated in Euros, British pounds sterling, Brazilian reais, and Indian rupees) compared with a $1.1
million foreign exchange loss in 2011.

Interest income for the years ended December 31, 2013, 2012, and 2011 was $1.1, $1.3, and $1.5 million,
respectively.

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, Goodwill—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 (Industrial Inkjet, Productivity
Software, and Fiery), which are consistent with our operating segments identified in Note 15—Segment
Information, Geographic Regions, and Major Customers of the Notes to Consolidated Financial Statements. We
determined the fair value of our reporting units as of December 31, 2013 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. Industrial Inkjet, Productivity Software, and Fiery fair values are
$540, $262, and $368 million, respectively, which exceed carrying value by 284%, 209%, and 398%,
respectively.

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 Industrial Inkjet, Productivity
Software, and Fiery valuations. The impact of a change in the market multiple of 1% results in either an increase
or decrease in Industrial Inkjet, Productivity Software, and Fiery fair values of 0.5%. Likewise, the impact of a
change in the discount rate of one percentage point results in either an increase in the Industrial Inkjet,
Productivity Software, and Fiery fair values of 10.0%, 8.8%, or 6.7%, respectively, or a decrease of 7.2%, 6.7%,
or 5.1%, 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.

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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. No asset impairment charges were recognized during the
years ended December 31, 2013, 2012, or 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. As of December 31, 2013, our investments
in privately-held companies were accounted for under the cost method.

We previously assessed each investee’s technology pipeline and market conditions in the industry and ability to
sustain an earnings capacity that would justify its carrying amount in accordance with ASC 323-10-35-32,
Investments—Equity Method and Joint Ventures. We determined it is no longer probable that they will generate
sufficient positive future cash flows to recover the carrying amount of each investment. Therefore, we previously
fully reserved our equity and debt investments in privately-held companies. We received proceeds from the sale
of certain of these investments of $0.1 and $2.9 million during the years ended December 31, 2013 and 2011,
respectively, as these investments are no longer considered to be strategic.

Income before Income Taxes

Income before income taxes for the years ended December 31, 2013, 2012, and 2011 were as follows (in
thousands):

U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$127,232
45,906

$ 5,615
29,408

$ 3,143
27,277

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

$173,138

$35,023

$30,420

For the years ended December 31,

2013

2012

2011

For the year ended December 31, 2013, pre-tax income of $173.1 million consisted of U.S. and foreign pre-tax
income of $127.2 and $45.9 million, respectively. Pre-tax income attributable to U.S. operations is net of
amortization of identified intangibles of $8.1 million, stock-based compensation expense of $25.8 million,
restructuring and other costs of $1.7 million, imputed net expenses related to the sale of building and land of $1.2
million, net of capitalized interest related to the build-out of our new corporate headquarters facility of $1.1
million, acquisition-related transaction costs of $0.6 million, and litigation settlements of $0.2 million, partially
offset by the change in fair value of contingent consideration of $1.5 million, net of accretion, gain on sale of a
minority interest in a privately-held company of $0.1 million, and gain on sale of building and land of $117.2
million. Pre-tax income attributable to foreign operations is net of restructuring and other costs of $3.1 million,
acquisition-related transaction costs of $0.8 million, and amortization of identified intangibles of $11.3 million,
partially offset by the change in fair value of contingent consideration of $4.2 million, net of accretion, and the
release of reserves related to the Kerajet patent litigation of $3.3 million.

For the year ended December 31, 2012, pre-tax income of $35.0 million consisted of U.S. and foreign pre-tax
income of $5.6 and $29.4 million, respectively. Pre-tax income attributable to U.S. operations is net of
amortization of identified intangibles of $7.3 million, stock-based compensation expense of $19.7 million,
restructuring and other costs of $3.2 million, imputed net expenses related to the sale of building and land of $0.4
million, and acquisition-related transaction costs of $1.6 million, partially offset by net litigation settlement of
$0.3 million and change in fair value of contingent consideration of $1.4 million. Pre-tax income attributable to
foreign operations is net of restructuring and other costs of $2.6 million, acquisition-related transaction costs of
$0.6 million, amortization of identified intangibles of $11.3 million, and litigation settlement of $0.5 million.

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.

Provision for (Benefit from) Income Taxes

We recorded a tax provision of $64.0 million in 2013 on pre-tax income of $173.1 million, compared to a tax
benefit of $48.2 million in 2012 on pre-tax income of $35.0 million, and a tax provision of $3.0 million in 2011
on a pre-tax income of $30.4 million.

The provisions for income taxes before discrete items were $11.5, $17.2, and $6.7 million for the years ended
December 31, 2013, 2012, and 2011, respectively. Primary differences between our recorded tax provision
(benefit) rate and the U.S. statutory rate of 35% include tax benefits related to credits for research and
development costs, lower taxes on permanently reinvested foreign earnings, changes in the valuation allowance
for financial reporting purposes, and the tax effects of stock-based compensation expense pursuant to ASC 718-
740, Stock Compensation—Income Taxes, which are non-deductible for tax purposes.

The following table reconciles our provision for income taxes before discrete items to our provision for (benefit
from) income taxes for the years ended December 31, 2013, 2012, and 2011 (in millions):

Provision for income taxes before discrete items . . . . . . . . . . . . .
Provision related to gain on sale of minority investment in a

For the years ended
December 31,

2013

2012

2011

$11.5

$ 17.2

$ 6.7

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privately held company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

Provision related to the election of California Single Sales

Factor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest related to unrecognized tax benefits . . . . . . . . . . . . . . . . .
Benefit related to the 2012 U.S. federal research and

development tax credit

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefit related to captial loss due to liquidation of subsidiary . . .
Benefit related to increased value of intangibles . . . . . . . . . . . . . .
Benefit related to restructuring and other expense . . . . . . . . . . . .
Benefit related to acquisition expenses . . . . . . . . . . . . . . . . . . . . .
Tax deductions related to Emloyee Stock Purchase Plan

—
0.4

(3.2)
—
—
(0.7)
(0.2)

—

—
0.3

1.1

0.6
0.4

—

—
(43.6) —
(6.5) —
(1.3)
—

(0.6)
(0.4)

(“ESPP”) dispositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(0.6)

Benefit related to reassessment of taxes related to filing of prior

year tax returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefit related to reversals of uncertain tax positions . . . . . . . . .
Benefit from reversals of accrued interest related to uncertain tax
positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Benefit related to net adjustments due to foreign audit

(0.1)
(5.8)

(1.9)
(10.5)

(1.6)
(1.8)

(0.5)

(0.2)

settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1.6)

(0.8)

(0.6)

Provision related to valuation allowance for California deferred

tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision related to gain on sale of building and land . . . . . . . . .

19.4
45.4

—
—

Provision for (benefit from) income taxes . . . . . . . . . . . . . . . . . . .

$64.0

$(48.2)

$ 3.0

We realized a benefit of $3.2 million resulting from the renewal on January 2, 2013, of the U.S. federal research
and development tax credit retroactive to 2012 pursuant to the American Taxpayer Relief Act of 2012. ASC 740-
10-45-15 requires the effects of a change in tax law or rates be recognized in the period that includes the
enactment date.

The benefit from reassessment of tax exposure related to the filing of prior year tax returns of $0.1 million for the
year ended December 31, 2013, in the table above consists of $1.8 million of tax expense required to correctly
state our prior year tax provision, which was partially offset by $1.9 million change in estimate for items
recognized in the prior year. The prior year adjustment is required to correctly state our tax provision subsequent
to the realignment of the ownership of our intellectual property that is described more fully below. We have
determined that the impact of the prior year adjustment is immaterial to our consolidated financial statements for
the years ended December 31, 2013, 2012, and 2011.

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, Spain, and Cayman Islands,
which are jurisdictions with tax rates materially lower than the statutory U.S. tax rate of 35%. In 2012, we
realigned the ownership of our Productivity Software and Cretaprint intellectual property to parallel our
worldwide intellectual property ownership. In addition to achieving operational synergies, one of the effects of
this reorganization was the recognition of a tax benefit of $6.5 million in 2012 related to an increase in the value
of intangible assets for Spanish statutory and tax reporting purposes. Our effective tax rate could fluctuate
significantly and be adversely impacted if anticipated earnings in the Netherlands, Spain, 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.

In 2012, we entered into a business reorganization and subsequent liquidation of VUTEk, Inc., a wholly-owned
U.S. subsidiary that we acquired in 2005 in a non-taxable stock acquisition. One of the effects of this
reorganization, in combination with other factors, was the recognition of a combined $43.6 million federal and
state tax benefit due to the realization of capital loss deductions related to the difference between a portion of our
original acquisition price of VUTEk, Inc., and its current fair value. In 2008, we recorded an impairment charge
related to the decreased value of our Industrial Inkjet reporting unit for financial reporting purposes, which
included VUTEk, Inc., for which a limited tax benefit was recognized given the legal form of our original
acquisition of VUTEk, Inc. and the nature of the impairment.

As a result of the sale of our Foster City corporate headquarters facility and related land in 2012, we recognized
taxable income of approximately $117.2 million and have recorded a deferred tax asset of $47.9 million. While
this gain is required to be reported in 2012 for income tax purposes it was also required to be deferred under
generally accepted accounting principles (“GAAP”) until we vacated the building in 2013.

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. To the extent we increase a valuation
allowance, we will include an expense within the tax provision in the Consolidated Statement of Operations in
the period in which such determination is made.

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 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 during the three years ended December 31, 2013. 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
2021. Finally, we considered that our results from operations have improved each year since 2008. In 2013, we
determined that it is more likely than not that our California deferred tax assets will not be realized based on the
size of the net operating loss and research and development credits being generated that exceed the utilization of
these tax attributes. As a result, we established a valuation allowance of $19.4 million for the estimate of state
deferred tax assets that may not be realized as of December 31, 2013.

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 established in 2013 related to the realization of
existing California deferred tax assets and valuation allowances established in prior years related to foreign tax
credits resulting from the 2003 acquisition of Best GmbH and compensation deductions potentially limited by
U.S. Internal Revenue Code (“IRC”) 162(m). The amount of deferred tax assets considered realizable could be
negatively impacted if sufficient taxable income is not generated in the carryforward period.

Unaudited Non-GAAP Financial Information

To supplement our consolidated financial results prepared in accordance with GAAP, we use non-GAAP
measures of net income and earnings per diluted share that are GAAP net income and GAAP earnings per diluted
share adjusted to exclude certain recurring and non-recurring costs, expenses, and gains.

We believe that the presentation of non-GAAP net income 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 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 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 our activities and other factors, facilitates
comparability of our 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.

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Use and Economic Substance of Non-GAAP Financial Measures

We compute non-GAAP net income and non-GAAP earnings per diluted share by adjusting GAAP net income
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 acquisition-
related transaction expenses and the costs to integrate such acquisitions into our business, changes in the fair
value of contingent consideration, litigation settlement charges and credits, gain on sale of our corporate
headquarters facility and related land, and imputed interest expense and depreciation, net of accrued sublease
income and capitalized interest, related to the sale of our corporate headquarters facility and related land.

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. Post-acquisition non-competition agreements are amortized
over their term.

Stock-based compensation expense recognized in accordance with ASC 718.

•

Non-recurring charges and gains, including:

•

Restructuring and other consists of:

•

Restructuring charges incurred as we consolidate the number and size of our facilities and
reduce the size of our workforce.

Acquisition-related executive deferred compensation costs, which are dependent on the
continuing employment of a former shareholder of an acquired company, are being amortized
on a straight-line basis.

Expenses incurred to integrate businesses acquired during the periods reported.

Acquisition-related transaction costs associated with businesses acquired during the periods
reported and anticipated transactions.

Changes in fair value of contingent consideration. Our management determined that we should
analyze the total return provided by the investment when evaluating operating results of an
acquired entity. The total return consists of operating profit generated from the acquired entity
compared to the purchase price paid, including the final amounts paid for contingent consideration
without considering any post-acquisition adjustments related to changes in the fair value of the
contingent consideration. Because our management believes the final purchase price paid for the
acquisition reflects the accounting value assigned to both contingent consideration and to the
intangible assets, we exclude the GAAP impact of any adjustments to the fair value of acquisition-
related contingent consideration from the operating results of an acquisition in subsequent periods.
We believe this approach is useful in understanding the long-term return provided by our
acquisitions and that investors benefit from a supplemental non-GAAP financial measure that
excludes the impact of this adjustment.

Imputed net expenses related to sale of building and land. On November 1, 2012, we sold the
294,000 square foot building located at 303 Velocity Way in Foster City, California, which at that
time served as our corporate headquarters, along with approximately four acres of land and certain
other assets related to the property, to Gilead for $179.7 million. We used the facility until
October 31, 2013, for which period rent was not required to be paid. This constituted a form of
continuing involvement that prevented gain recognition. Until we vacated the building, the
proceeds from the sale were recognized as deferred proceeds from property transaction on our
Consolidated Balance Sheet, which were $183.2 million, including imputed interest costs, at
October 31, 2013. Imputed interest expense and depreciation, net of accrued sublease income, of
$1.6 million has been accrued at October 31, 2013, related to the deferred property transaction,
partially offset by capitalized interest of $1.1 million related to the build-out of the Fremont
facility.

On November 1, 2012, we sold the aforementioned building and land to Gilead for $179.7 million.
We used the facility until October 31, 2013, while searching for a new facility, building it out, and
relocating our corporate headquarters, for which period rent was not required to be paid. Because
we vacated the facility on October 31, 2013, we have no continuing involvement with the property
and have accounted for the transaction as a property sale during the fourth quarter of 2013,
thereby recognizing a gain of approximately $117.2 million on the sale of the property.

•

Gain on sale of minority investments in privately-held companies. 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. In 2013 and 2011, we sold two of these investments for
$0.1 and $2.9 million, respectively, because they were no longer considered to be strategic.

In conjunction with our acquisition of Cretaprint, which closed on January 10, 2012, we assumed
a contingent liability related to the alleged infringement of certain patents owned by Jose Vicente
Tomas Claramonte, the President of Kerajet. Because the former owners of Cretaprint agreed to
indemnify EFI against any potential liability in the event that Mr. Claramonte were to prevail in
his action against Cretaprint, we accrued a contingent liability based on a reasonable estimate of
the legal obligation that was probable as of the acquisition date and we accrued a contingent asset
based on the portion of any liability for which the former Cretaprint owners would indemnify EFI.
The net obligation accrued in the opening balance sheet on the acquisition date was EU
2.5 million (or approximately $3.3 million). The Spanish Court of Appeal reached a final
determination on July 15, 2013, which resulted in EFI having no liability related to any potential
infringement of the Claramonte patent. Because this matter is no longer subject to appeal, we have
reversed this liability in 2013 by recognizing a credit against general and administrative expense.
Please refer to Note 8 – Commitments and Contingencies for additional information.

In 2013, we settled pre-acquisition litigation-related indemnification claims of $0.2 million. In
2012, we settled a dispute with the lessor of a facility in the U.K. for $0.5 million, which was
partially offset by the receipt of an additional $0.2 million in insurance proceeds, net of legal fees
and costs, related to our previously disclosed settlement of the shareholder derivative litigation
concerning our historical stock option granting practices.

•

Tax effect of non-GAAP adjustments as follows:

•

After excluding the items described above, we apply the principles of ASC 740 to estimate the
non-GAAP income tax benefit in each jurisdiction in which we operate.

To facilitate comparability of our operating performance between 2013 and 2012, we have
excluded the following from our non-GAAP net income:

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•

Tax benefit of $43.6 million during the year ended December 31, 2012 resulting from a
capital loss related to the liquidation of a wholly-owned subsidiary.

Tax benefit of $6.5 million during the year ended December 31, 2012 resulting from the
increase in value of acquired intangibles for tax purposes due to an operational restructuring
in Spain.

Tax charge of $19.4 million during the year ended December 31, 2013 resulting from the
establishment of a valuation allowance related to the realization of tax benefits from existing
California deferred tax assets.

Tax benefit of $5.8, $11.8, and $2.6 million for the years ended December 31, 2013, 2012,
and 2011, respectively, resulting from the release of previously unrecognized tax benefits.

Tax benefit of $3.2 million for the year ended December 31, 2013, resulting from the
retroactive renewal of the U.S. federal research and development tax credit on January 2,
2013 retroactive to 2012 pursuant to the American Taxpayer Relief Act of 2012. ASC 740-
10-45-15, requires the effects of a change in tax law or rates be recognized in the period that
includes the enactment date.

• We have excluded interest accrued on prior year tax reserves of $0.3, $0.3, and $0.4 million
from our non-GAAP net income for the years ended December 31, 2013, 2012, and 2011,
respectively.

•

Effective in the first quarter of 2014 and continuing for the balance of the year, we will be using a
constant Non-GAAP tax rate of 19%, which we believe reflects the long term average tax rate
based on our international structure and geographic distribution of revenue and profits.

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 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 upon 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 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 to Non-GAAP Net Income
(unaudited)

(millions, except per share data)

For the years ended December 31,

2013

2012

2011

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 109.1

$ 83.3

$ 27.5

Amortization of identified intangible assets . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . .
Restructuring and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of building and land . . . . . . . . . . . . . . . . . . . . . .
General and administrative:

Acquisition-related transaction costs . . . . . . . . . . . . . . . .
Change in fair value of contingent consideration . . . . . .
Litigation reserve releases, net of settlements . . . . . . . . .
Sublease income related to deferred property

19.4
25.8
4.8
(117.2)

1.4
(5.7)
(3.1)

18.6
19.7
5.8
—

2.2
(1.4)
0.3

transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3.1)

(0.5)

Depreciation expense related to deferred property

transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.4

0.3

11.2
23.4
3.3
—

2.3
1.5
—

—

Interest and other income (expense), net:

Interest expene related to deferred property

transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.9

0.6

—

Gain on sale of minority investment in a privately-held

companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax effect of non-GAAP net income . . . . . . . . . . . . . . . . . . . .

(0.1)
42.0

—
(67.4)

(2.9)
(13.2)

Non-GAAP net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 76.6

$ 61.5

$ 53.1

Non-GAAP net income per diluted share . . . . . . . . . . . . . . . .

$ 1.58

$ 1.29

$ 1.12

Shares for purposes of computing diluted non-GAAP net

income per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

48.4

47.7

47.6

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, build-to-suit lease, 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;

allowances for doubtful accounts,

inventory reserves and purchase commitments,

warranty reserves,

litigation accruals,

restructuring reserves,

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;

build-to-suit lease; and

determination of functional currencies for consolidating international operations.

Revenue recognition. We derive our revenue primarily from product revenue, which includes hardware (DFEs,
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. 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 DFEs, printers, and ink in accordance with the provisions of SEC Staff
Accounting Bulletin (“SAB”) 104, Revenue Recognition, 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.

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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;

if the sales arrangement is classified as a sales-type lease, revenue is recognized upon shipment;

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.

SAB Topic 13.A.3.c.Q3 requires that “If it is determined that the undelivered service is not essential to the
functionality of the delivered product, but a portion of the contract fee is not payable until the undelivered service
is delivered, the staff would not consider that obligation to be inconsequential or perfunctory. Generally, the
portion of the contract price that is withheld or refundable should be deferred until the outstanding service is
delivered because that portion would not be realized or realizable.” We deferred an immaterial amount of
revenue during the years ended December 31, 2013, 2012, and 2011 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 Industrial Inkjet and Productivity Software 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 stand-alone 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

We adopted 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)
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 sales price method of allocation. The sales price for each element
is determined using vendor-specific objective evidence of the fair value of the sales price (“VSOE”), when
available (including post-contract customer support, professional services, hosting, and training), or third party
evidence of the sales price (“TPE”) is used. If VSOE or TPE are not available, then the best estimate of the sales
price (“BESP”) is used when applying the relative sales 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 sales price in accordance with ASC 605-25. Thereafter, the
relative sales 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 sales 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 sales 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 sales price of our products. Due to the wide
range of pricing offered to our customers, we determined that sales 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 sales 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 2012 and twelve months of 2013 were included in the calculation of BESP.

When historical data is unavailable to calculate and support the determination of BESP on a newly launched 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.

We have insignificant transactions where tangible and software products are sold together in a bundled
arrangement. 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.

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Multiple element arrangements containing only software elements remain subject to the provisions of ASC 985-
605 and must follow the residual method. When several elements of a multiple element arrangement, 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.

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.

Leasing Arrangements

If the sales arrangement is classified as a sales-type lease, then revenue is recognized upon shipment. Leases that
are not classified as sales-type leases are accounted for as an operating lease with revenue recognized ratably
over the lease term.

A lease is classified as a sales-type lease with revenue recognized upon shipment if the lease is determined to be
collectible with no significant uncertainties and if any of the following criteria are satisfied:

•

present value of all minimum lease payments is greater than or equal to 90% of the fair value of the
equipment at lease inception,

noncancellable lease term is greater than or equal to 75% of the economic life of the equipment,

bargain purchase option that allows the lessee to purchase the equipment below fair value, or

transfer of ownership to the lessee upon termination of the lease.

Long-term Contracts Involving Substantial Customization

We have established our ability to produce estimates sufficiently dependable to require adoption of the
percentage of completion method with respect to certain fixed price contracts where we provide information
technology system development and implementation services.

Revenue on certain fixed price contracts 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.

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.

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

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 stand-
alone 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.

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 $130.7 million, net of
allowance for doubtful accounts and sales returns of $16.4 million, as of December 31, 2013. 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.

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Inventory reserves. Management estimates potential future inventory obsolescence and noncancellable 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 for any period, if management made different judgments or
utilized different estimates. Our inventories were $68.3 million, net of inventory reserves of $15.4 million, as of
December 31, 2013.

Warranty reserves. Our Industrial Inkjet printer and Fiery DFE 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 established 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 $11.0 million as of December 31,
2013.

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 by management 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;

likelihood of assertion of unasserted claims and assessments;

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. 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 thousand per enrollee unless specific exposures are separately insured. We have
accrued a contingent liability of $2.6 and $1.4 million as of December 31, 2013 and 2012, respectively, which is
not discounted.

Significant management judgment is required to evaluate historical trends, our claims experience, industry claims
experience, and related actuarial analyses and estimates. The primary estimates used in the development of our
accrual at December 31, 2013 and 2012 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.

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 on deposit with major banks in money market,
U.S. Treasury and government-sponsored entity, foreign government, corporate debt, municipal, asset-backed,
and mortgage-backed residential 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 Sheets.

We consider all highly liquid investments with an original 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 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. Realized
gains and losses on sales of financial instruments are recognized upon sale of the investments using the specific
identification method.

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. 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 provider. 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 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.

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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 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, 2013 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.

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, restricted stock awards (“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. 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. We estimate our actual current tax expense, including permanent charges and benefits, and temporary
differences resulting from differing treatment of items, such as deferred revenue for tax and book accounting
purposes. These temporary differences result in deferred tax assets and liabilities, which are included within 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. To the extent that we increase a
valuation allowance in a period, we include an expense in the Consolidated Statement of Operations in the period
in which such determination is made.

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 the three years ended December 31, 2013. 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
2021. Finally, we have considered that our results from operations have improved each year since 2008. In 2013,
we determined that it is more likely than not that our existing deferred tax assets in California would not be
realized based on the size of the net operating loss and research and development credits being generated
exceeding the utilization of these tax attributes.

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 established in 2013 related to the realization of
existing California deferred tax assets and valuation allowances established in prior years related to foreign tax
credits resulting from the 2003 acquisition of Best GmbH and compensation deductions potentially limited by
IRC 162(m). The realizability of deferred tax assets could be negatively impacted if sufficient taxable income in
the carryforward period is not generated.

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Current and noncurrent deferred tax assets, net of current and noncurrent deferred tax liabilities, as of
December 31, 2013 were $48.5 million, net of valuation allowance of $28.8 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 $33.0 million as of December 31, 2013. 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, 2013, we have permanently reinvested $70.5 million of unremitted foreign earnings. Should
these earnings be remitted to the U.S., the tax on these earnings would be $9.1 million.

As of December 31, 2013, the U.S. federal R&D credit and certain international tax provisions have expired.
Until these provisions are re-enacted, we will not recognize any benefits related to these provisions in 2014. We
estimate that the annual benefit for these items is approximately $3.5 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.

Significant management judgments are required in order to assess goodwill impairment, including the following:

•

identification of comparable companies to benchmark under the market approach giving due
consideration to the following factors:

•

financial condition and operating performance of the reporting unit being evaluated relative to
companies operating in the same or similar businesses,

economic, environmental, and political factors faced by such companies, and

companies that are considered to be reasonable investment alternatives.

impact of goodwill impairments recognized in prior years,

susceptibility of our reporting unit to fair value fluctuations,

reporting unit revenue, gross profit, and operating expense growth rates,

five-year financial forecasts,

discount rate to apply to estimated cash flows,

terminal values based on the Gordon growth methodology,

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, including consideration of the following:

•

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

weighted average and median control premiums offered in relevant industries,

industry specific control premiums, and

specific transaction control premiums.

•

significant events or changes in circumstances including the following:

•

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, 2013 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 2014 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.

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.

Business combinations. We allocate the purchase price of acquired companies to the tangible and intangible
assets acquired, including in-process research & development (“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.

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We account for business acquisitions as purchase business combinations in accordance with ASC 805. The
fundamental requirement of ASC 805 is that the acquisition method of accounting be used for all business
combinations. See Note 1—The Company and its Significant Accounting Policies of our Notes to Consolidated
Financial Statements for a summary of the requirements of this accounting pronouncement with respect to
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 our
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 measured 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 $1.4, $2.2, and $2.3 million were expensed during the years ended December 31,
2013, 2012 and 2011, respectively, associated with businesses acquired during the periods reported and
anticipated transactions.

See Note 3—Acquisitions of the Notes to the Consolidated Financial Statements for a description of the business
acquisitions completed during the years ended December 31, 2013, 2012, and 2011.

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.

Build-to-Suit lease. If we are deemed to be the accounting owner of the facility in accordance with.the
requirements of AC 840-40-55, Leases, then we are required to account for the property as a depreciable asset
and the related lease agreement must be accounted for as a financing. Significant judgments are required to make
this determination, which relate to actions, guarantees, and investments that we make as a lessee that may be
considered to be actions that only an owner would take.

ASC 840-40-55 applies to “construction projects,” but does not define this term. When leasing an existing
facility, we must consider whether the leased asset is fully functional and may be occupied by any lessee in its
current form without requiring improvement (commonly referred to as the “second tenant scope exception”). The
6700 Dumbarton Circle facility was not functional in its then current form; thus, the asset represents a
construction project subject to the guidance.

The guidance in ASC 840-40-55-6, excludes lessees under a lease agreement in which the lessee’s maximum
obligation, including guaranteed residual values, represents a minor amount of the construction project’s fair
value (“minor scope exception”). Based on the square feet of leased space (58,560 sqare feet) compared to the
total square feet of the building (108,166 square feet), the minor scope exception does not appear to be available.

The critical factor relating to our conclusion that we are the accounting owner of this facility is that we are
responsible for cost over-runs, if any, related to force majeure events including strikes, war, and material
availability. The landlord is responsible for any costs related to force majeure events that result in any damage to
the facility. Since we are responsible for cost overruns related to certain force majeure events, we are in
substance offering an indemnification to the landlord for events outside of our control. As such, we are deemed
to be the accounting owner of the facility. See Note 8—Commitments and Contingencies of the Notes to
Consolidated Financial Statements.

Determining functional currencies for the purpose of consolidating our international operations. We have a
number of foreign subsidiaries, which together account for approximately 48% of our net revenue, approximately
23% of our total assets, and approximately 45% of our total liabilities as of December 31, 2013. 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, Chinese renminbi, Japanese yen, Brazilian real,
Australian dollar, and New Zealand dollar) and operating expenses (primarily the Euro, Indian rupee, British
pound sterling, Chinese renminbi, Japanese yen, Brazilian real, and Australian dollar) in foreign countries.

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 interest and other income (expense), net. Net gains or losses
resulting from foreign currency transactions, including hedging gains and losses, are reported in interest and
other income (expense), net, and were a gain (loss) of $(0.3), $0.6, and $(1.2) million for the years ended
December 31, 2013, 2012, and 2011, 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, 2013 and 2012 was an unrealized gain (loss) of $(1.6)
and $0.1 million, respectively.

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 Brazilian subsidiary, Metrics, for which we consider the Brazilian real to be the subsidiary’s functional
currency; our German subsidiaries, EFI GmbH, Alphagraph, and Lector, 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; our Spanish subsidiary, Cretaprint, for
which we consider the Euro to be the subsidiary’s functional currency; our New Zealand subsidiary contains the
Prism operations in New Zealand for which we consider the New Zealand dollar to the functional currency; our
Australian subsidiary contains the Prism, OPS, and Metrix operations in Australia for which we consider the
Australian dollar to the functional currency; our U.K. subsidiaries, Electronics For Imaging United Kingdom
Limited and Technique, for which we consider the British pound sterling to be the subsidiaries’ functional
currency; and our subsidiary in the People’s Republic of China, which contains the operations of our Cretaprint
sales and support center for which we consider the renminbi to be the functional currency.

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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 $10.0 million to $355.0 million as of
December 31, 2013 from $365.0 million as of December 31, 2012. This decrease was primarily due to purchases
of property and equipment of $49.7 million, consisting primarily of our new corporate headquarters facility in
Fremont, California, the acquisitions of PrintLeader, GamSys, Metrix, and Lector for $13.5 million, net of cash
acquired, additional payments related to the acquisitions of Cretaprint, OPS, and Technique of $1.2 million,
acquisition-related contingent consideration payments of $15.1 million excluding the portion included in
operating activities, repayment of acquired business debt of $1.9 million, net settlement of shares for employee
common stock related tax liabilities and the stock option exercise price of $13.9 million, and treasury stock
purchases of $21.8 million, partially offset by cash flows provided by operating activities of $89.3 million,
proceeds from ESPP purchases of $7.1 million, and proceeds from common stock option exercises of $5.2
million.

Cash, cash equivalents, and short-term investments increased by $145.8 million to $365.0 million as of
December 31, 2012 from $219.2 million as of December 31, 2011. This increase was primarily due to $179.2
million proceeds from the sale of building and land , net of direct transaction costs, cash flows provided by
operating activities of $53.4 million, proceeds from ESPP purchases of $6.8 million, proceeds from common
stock exercises of $12.2 million, and proceeds from notes receivable of acquired business of $5.2 million,
partially offset by $61.6 million acquisition of Technique, OPS, Metrics, FX Colors, and Cretaprint, including the
Metrics non-competition agreements, net of cash acquired, earnout payments of $1.6 million, treasury stock
purchases of $22.9 million, net settlement of $12.3 million, purchases of property and equipment of $6.1 million,
and payment of acquired business debt of $6.9 million.

(in thousands)

2013

2012

2011

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 177,084
177,957

$283,996
80,966

$120,058
99,100

Total cash, cash equivalents, and short-term investments . . . . . . . . . . . .

$ 355,041

$364,962

$219,158

Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used for) investing activities . . . . . . . . . . . . . . . . . . . . .
Net cash used for financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of foreign exchange rate changes on cash and cash equivalents . . . . . .

$ 89,339
(161,862)
(33,390)
(999)

$ 53,354
133,115
(22,741)
210

$ 72,196
(40,378)
(37,636)
(487)

Increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . .

$(106,912) $163,938

$ (6,305)

As of December 31, 2013, we have approximately $70.5 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
$62.9 and $83.6 million as of December 31, 2013 and 2012, 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, capital expenditure,
investment, stock repurchase, 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 acquisitions, strategic investments to gain
access to new technologies, repurchases of shares of our common stock, and working capital. At December 31,
2013, cash, cash equivalents, and short-term investments available were $355.0 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 was $89.3, $53.4, and $72.2 million for the years ended December 31,
2013, 2012, and 2011, respectively.

Net cash provided by operating activities in 2013 consists primarily of net income of $109.1 million offset by
non-cash charges and credits of $1.8 million and the net change in operating asset and liabilities of $18.0 million.
Non-cash charges and credits of $1.5 million consist primarily of $28.8 million of depreciation and amortization,
$25.8 million of stock-based compensation expense, provision for inventory obsolescence of $4.5 million,
provision for allowance for bad debts and sales-related allowances of $9.6 million, and deferred tax expense of
$53.8 million, offset by $118.5 million gain on sale of building and land, net of relocation costs paid, $1.6
million of contingent consideration payments, and $4.2 million of other non-cash credits, charges, and
provisions. The net change in operating assets and liabilities of $18.3 million consists primarily of increases in

inventories, accounts receivable, and other current assets of $13.7, $4.4, and $7.1 million, respectively, and
decreases in net taxes payable of $4.6 million, partially offset by increases in accounts payable and accrued
liabilities of $11.8 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 61, 71, and 52 days at December 31, 2013, 2012, and 2011, 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.

DSOs decreased during the year ended December 31, 2013, compared with December 31, 2012, due to
improvements in the efficiency of Cretaprint’s cash conversion cycle and the deferral of annual Productivity
Software maintenance billings until 2014. We expect DSOs to vary from period to period because of changes in
the mix of business between 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 Industrial Inkjet and Productivity Software related revenue increases,
we expect DSOs may trend higher. Our DSOs related to the Industrial Inkjet and Productivity Software 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.

We have facilities in Spain that enable us to sell to third parties, on an ongoing basis, certain trade receivables
without recourse. The trade receivables sold without recourse are generally short-term receivables with payment
due dates of less than one year, which are secured by international letters of credit. We also have facilities in the
U.S. that enable us to sell to third parties, on an ongoing basis, certain trade receivables with recourse. The trade
receivables sold with recourse are generally short-term receivables with payment due dates of less than 30 days
from date of sale, which are subject to a servicing obligation.

Trade receivables sold cumulatively under these facilities were $8.3 and $12.9 million throughout 2013 on a
nonrecourse and recourse basis, respectively, which approximates the cash received. We report collections from
the sale of trade receivables to third parties as operating cash flows in the Consolidated Statements of Cash
Flows, because such receivables are the result of an operating activity and the associated interest rate risk is de
minimis.

Inventories

Our inventories are procured primarily in support of the Industrial Inkjet and Fiery operating segments. The
majority of our Industrial Inkjet products are manufactured internally, while Fiery production is primarily
outsourced. This results in lower inventory turnover for Industrial Inkjet inventories compared with Fiery
inventories.

Our net inventories increased by $10.0 million from $58.3 million in 2012 to $68.3 million in 2013 driven by
increased revenue. Inventory turnover was comparable at 5.3 turns during the quarter ended December 31, 2013
compared with 5.4 turns during the quarter ended December 31, 2012. We calculate inventory turnover by
dividing annualized current quarter cost of revenue by ending 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 $7.2, $8.9, and $9.3 million in 2013, 2012, and
2011, respectively. Our working capital, defined as current assets minus current liabilities, was $399.4 and
$262.8 million at December 31, 2013 and 2012, respectively.

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In accordance with ASC 805, our working capital was impacted at December 31, 2012, by the adjustment
required to reflect the preliminary accounting for business acquisitions as if the adjustments occurred on the
acquisition date. Accordingly, we have increased goodwill and accrued and other liabilities by $1.2 million in the
aggregate at December 31, 2012 to reflect opening balance sheet adjustments related to our acquisitions of
Cretaprint, OPS, and Technique.

Investing Activities

Purchases of short-term investments . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales and maturities of short-term

2013

2012

2011

$(145,088)

$ (64,528)

$ (99,155)

investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

47,375

80,992

101,716

Purchases, net of proceeds from sales, of property and

equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(49,815)

(6,147)

(9,828)

Proceeds from sale of building and land, net of direct

transaction costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

179,173

—

Businesses purchased, net of cash acquired, and post-

acquisition non-competition agreements . . . . . . . . . . . . . . . .

(14,688)

(61,591)

(36,690)

Proceeds from sale of minority investment in a privately-held

company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from notes receivable of acquired businesses . . . . . . .

75
188

—
5,216

2,866
713

Net cash provided by (used for) investing activities . . . . . . . . . .

$(161,862)

$133,115

$ (40,378)

Acquisitions

PrintLeader, GamSys, Metrix, and Lector were acquired in 2013 for $13.5 million in cash, net of cash acquired,
including accounts receivable payments of $0.6 million in 2013, which were dependent on collections, plus
additional future cash earnouts contingent on achieving certain performance targets.

Purchase price adjustments of $1.2 million were paid related to the Cretaprint, OPS, and Technique acquisitions
in 2013.

Technique, OPS, Metrics, FX Colors, and Cretaprint were acquired in 2012 for $60.6 million in cash, net of cash
acquired, including $0.6 million related to the Metrics post-acquisition non-competition agreements, plus
additional future cash earnouts contingent on achieving certain performance targets, FX Colors milestones, and
Cretaprint executive retention.

Alphagraph, Prism, Entrac, and Streamline were acquired in 2011 for $33.7 million in cash, net of cash acquired,
plus additional future cash earnouts contingent on achieving certain performance targets and accrued Streamline
working capital payments. The accrued working capital payment of $0.4 million was paid during 2012.

Earnout payments of $0.6 and $2.9 million were made during the years ended December 31, 2012 and 2011,
respectively, relating to previously accrued Pace Systems Group, Inc. (“Pace”) contingent consideration
liabilities. Pace was acquired prior to the effective date of ASC 805; consequently, related earnout payments are
classified as investing activities.

Property and Equipment

Net purchases of property and equipment were $49.8, $6.1, and $9.8 million in 2013, 2012, and 2011,
respectively, including the purchase of our corporate headquarters facility in Fremont, California. Our property
and equipment additions have historically been funded from operating activities. We anticipate that we will

continue to purchase necessary 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 is difficult to predict and is dependent
on a number of factors including the hiring of employees, the rate of change in computer hardware/ software used
in our business, and our business outlook.

On April 26, 2013, we purchased an approximately 119,000 square feet cold shell building in Fremont,
California, for $21.5 million. We have incurred build-out and construction costs, including furniture and
equipment, of $20.8 million as of December 31, 2013, excluding capitalized interest, related to this facility. We
also entered into a 15-year lease agreement, pursuant to which we will lease approximately 59,000 square feet of
an adjacent building for an aggregate amount of $18.4 million over the lease term. We have incurred tenant
improvement costs and expenses related to this facility of $4.9 million as of December 31, 2013, excluding
capitalized interest. Of the build-out and construction costs related to the purchased building, the tenant
improvements related to the leased building, and the furniture and equipment related to both buildings that were
incurred as of December 31, 2013 of $25.7 million, the amount paid as of December 31, 2013 was $18.5 million.

The first rent payment is not due until September 2016. Please refer to Note 8 – Commitments and Contingencies
for additional information. This location now serves as our worldwide corporate headquarters, as well as
engineering, marketing, and administrative operations for our Fiery operating segment. We relocated our former
headquarters prior to October 31, 2013.

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Investments

Purchases of marketable securities, net of proceeds from sales and maturities, were $97.7 million in 2013.
Proceeds from sales and maturities of marketable securities, net of purchases, were $16.5 and $2.6 million in
2012 and 2011, 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
fixed income debt 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. In 2013 and 2011, we sold two of these investments, which
we no longer considered to be strategic, and received the proceeds from the sale of $0.1 and $2.9 million,
respectively.

Restricted Cash

We are required to maintain restricted cash of $0.2 million as of December 31, 2013 related to customer
agreements that were obtained through the Alphagraph acquisition, which is classified as a current asset because
the restriction will be released within twelve months.

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 of $5.2, $12.2, and $1.9 million and employee purchases of ESPP shares of
$7.1, $6.8, and $6.1 million in 2013, 2012, and 2011, 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 2013, 2012, and 2011 was $35.7, $35.2, and $45.8 million,
respectively, of cash used to repurchase outstanding shares of our common stock including cash used for net
settlement of the exercise price of certain stock options and tax withholding obligations incurred in connection
with such exercises and employee common stock related tax liabilities. On August 31, 2012, our board of
directors approved the repurchase of $100 million of outstanding common stock. Under this publicly announced
plan, we repurchased 0.7 and 1.3 million shares for an aggregate purchase price of $19.3 and $22.9 million
during the years ended December 31, 2013 and 2012, respectively.

On November 6, 2013, the board of directors cancelled $58 million remaining for repurchase under the 2012
authorization and approved a new authorization to repurchase of $200 million of outstanding common stock.
This authorization expires in November 2016. Under this publicly announced plan, we repurchased 0.1 million
shares for an aggregate purchase price of $2.5 million during the year ended December 31, 2013.

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.

Earnout payments during the year ended December 31, 2013 of $8.9, $4.5, $1.9, $0.7, and $0.6 million,
respectively, related to previously accrued Cretaprint, Metrics, Radius, Alphagraph, and Streamline contingent
consideration liabilities. Earnout payments made in 2012 related to previously accrued FX Colors, Streamline,
and Radius contingent consideration liabilities of $0.1, $0.6, and $0.3 million, respectively. The portion of the
Radius earnout representing performance targets achieved in excess of amounts assumed in the opening balance
sheet as of the acquisition date was $1.6 million and is reflected as cash used for operating activities in the
Consolidated Statement of Cash Flows.

Earnout payments made in 2011 related to previously accrued Radius contingent consideration liabilities of $2.1
million. The portion of the Radius earnout representing performance targets achieved in excess of amounts
assumed in the opening balance sheet as of the acquisition date was $0.4 million and was reflected as cash used
for operating activities in the Consolidated Statement of Cash Flows.

Other Commitments

Our Industrial Inkjet inventories consist of raw materials 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. Our Fiery inventory
consists primarily of raw materials and finished goods, memory subsystems, processors, and ASICs, which are
sold to third party contract manufacturers responsible for manufacturing our products. Should we decide to
purchase components and manufacture Fiery DFEs internally, 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, 2013 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, 2013, with the exception of acquisition-
related contingent consideration liabilities.

(in thousands)

Operating lease obligations . . . . . . . . . . . . . . . . . . . . . . . . .
Contingent consideration liabilities(1) . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase obligations(2)

Payments due by period

Total

$35,564
21,052
25,452

Less than 1
year

Between
1-3 years

Between
3-5 years

More than
5 years

$ 5,110
14,803
25,452

$ 6,425
6,249
—

$6,486
—
—

$17,543
—
—

Total(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$82,068

$45,365

$12,674

$6,486

$17,543

(1) Represents the fair value of acquisition-related contingent consideration liabilities. The current fair value is
reflected in our Consolidated Balance Sheets under the caption “accrued and other liabilities” and represents
the fair value of the contingent consideration liabilities that are payable within one year. The noncurrent fair
value is reflected in our Consolidated Balance Sheets under the caption “noncurrent contingent and other
liabilities” and represents the fair value of the contingent consideration liabilities that are payable beyond
one year.
Excludes contractual obligations recorded on the balance sheet as current liabilities and certain purchase
orders as discussed below.

(2)

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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 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 $33.0 million, the timing of which is uncertain. See
Note 11—Income Taxes of the Notes to the Consolidated Financial Statements for additional discussion of
unrecognized tax benefits.

Off-Balance Sheet Financing

Synthetic Lease Arrangements

The Lease covering our Foster City office facility located at 303 Velocity Way, Foster City, California, was
terminated on November 1, 2012 in conjunction with the sale of building and land to Gilead. The Lease provided
a cost effective means of providing adequate office space for our corporate offices and was scheduled to expire
by its terms in July 2014. The Lease included an option allowing us to purchase the facility during or at the end
of the lease term for the amount that the lessor paid for the facility ($56.9 million). The funds pledged under the
Lease were in LIBOR-based interest bearing accounts, which were restricted as to withdrawal at all times.

On November 1, 2012, we sold the 294,000 square foot 303 Velocity Way building, along with approximately
four acres of land and certain other assets related to the property, for $179.7 million. We exercised our purchase
option with respect to the Lease in connection with the sale of the building and land and terminated the
corresponding Lease. We continued to use the facility until October 31, 2013 while we located, purchased, and
completed building improvements in the new corporate headquarters facility in Fremont, California. Rent was
not required to be paid to Gilead for our use of the Foster City facility during this period. This constituted a form
of continuing involvement that prevented gain recognition. Until we vacated the building, the proceeds from the
sale were accounted for as deferred proceeds from property transaction on our Consolidated Balance Sheet,
which was $180.2 million on December 31, 2012, including imputed interest costs. The $56.9 million of
previously pledged funds were classified as land, buildings, and improvements within property and equipment,
net, in the Consolidated Balance Sheet as of December 31, 2012.

We were in compliance with all financial and merger-related lease covenants prior to the termination of the
Lease. We had guaranteed to the lessor a residual value associated with the building equal to 82% of their
funding of the Lease. We were required to maintain a minimum net worth and tangible net worth as of the end of
each quarter as well as certain additional covenants regarding mergers. We were liable to the lessor for the
financed amount of the buildings if we defaulted on our covenants. We assessed our exposure relating to the first
loss guarantee under the Lease and determined there was no deficiency to the guaranteed value. Prior to the
termination of the Lease, we were treated as the owner of the building for federal income tax purposes. In
conjunction with the Lease, we had been leasing the land on which the building is located to the lessor of the
building. This separate ground lease was for approximately 30 years, but was terminated in conjunction with the
completion of the sale of the building and land to Gilead.

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 fluctuations, liquidity, and interest rate risks,
which may be exacerbated by the tight 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 $2.5 million at
December 31, 2013. We hedge balance sheet remeasurement exposures using forward contracts not designated as
hedging instruments with a notional amount of $24.7 million at December 31, 2013 consisting of Euro-
denominated intercompany loans.

We had not entered into hedges against any other currency exposures as of December 31, 2013, but we may
consider hedging against movements in other currencies 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 our consolidated balance sheets 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.

Hypothetical changes in the fair values of financial instruments held by us at December 31, 2013 that are
sensitive to changes in interest rates are presented below. 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 assuming
an interest rate
decrease of 100
basis points

$ 183,899

No change in
interest rates

$ 182,913

Valuation of
securities assuming
an interest rate
increase of 100
basis points

$ 181,189

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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, Brazilian real, Chinese
renminbi, 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, Brazilian real, Chinese renminbi, Australian dollar, and New Zealand dollar) and
operating expenses (primarily the Euro, British pound sterling, Chinese renminbi, Japanese yen, Indian rupee,
Brazilian real, 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 $2.5 million at December 31, 2013.
We also hedge balance sheet remeasurement exposures using forward contracts not designated as hedging
instruments with a notional amount of $24.7 million at December 31, 2013 consisting of Euro-denominated
intercompany loans. We had not entered into hedges against any other currency exposures as of December 31,
2013, but we may consider hedging against movements in other currencies in the future. See Financial Risk
Management below for a discussion of European market risk.

The impact of hypothetical changes in foreign exchanges rates on revenue and income from operations are
presented below. The modeling technique measures the change in revenue and income from operations resulting
from changes in selected foreign exchange rates with respect to the Euro and British pound sterling of plus or
minus one percent during the nine months ended December 31, 2013 as follows (in thousands):

Impact of a foreign
exchange rate decrease
of one percent

No change in foreign
exchange rates

Impact of a foreign
exchange rate increase
of one percent

Revenue . . . . . . . . . . . . . . . . . . .

$729,214

Income from operations . . . . . . .

$175,095

$727,693

$174,648

$726,172

$174,201

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.,
Latin America, China, Australia, and New Zealand and are primarily related to operating expenses in Europe,
India, Japan, the U.K., China, Brazil, and Australia. We hedge our operating expense exposure in Indian rupees.
We also hedge certain balance sheet remeasurement exposures using forward contracts not designated as hedging
instruments. We had not entered into hedges against any other currency exposures as of December 31, 2013, 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. We typically utilize money
market, U.S. Treasury and government-sponsored entity, foreign government, corporate debt, municipal, asset-
backed, and mortgage-backed residential securities. 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 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 and money market investments
consist of non-sovereign corporate debt included within money market funds and corporate debt securities of
$24.6 million, which represents 14% of our money market funds and corporate debt securities at December 31,
2013. Our European debt investments are with corporations domiciled in the northern and central European
countries of Sweden, Germany, Netherlands, Switzerland, Luxembourg, Norway, France, Belgium, and the U.K.
We do not have any investments in the higher risk “southern European” countries (i.e., Greece, Spain, Portugal,
and Italy) or in Ireland. We believe that we do not have significant exposure with respect to our money market
and corporate debt investments in Europe. Nevertheless, we do have some exposure due to the interdependencies
among the European Union countries.

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 28% of our
receivables are with European customers as of December 31, 2013. Of this amount, 25% of our European
receivables (7% of consolidated net receivables) are in the higher risk southern European countries (mostly
Spain, Portugal, and Italy), which are adequately reserved. The ongoing relocation of the ceramic tile industry
from southern Europe to the emerging markets of China, India, Brazil, and Indonesia will reduce our exposure to
credit risk in southern Europe.

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, 2013 and 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations for the Years Ended December 31, 2013, 2012, and 2011 . . . . . . . .
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2013, 2012, and

2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2013, 2012, and

2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows for the Years Ended December 31, 2013, 2012, and 2011 . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unaudited Quarterly Consolidated Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

92
93
94

96
97
98
163

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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, 2013 and December 31, 2012, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 2013 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 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, 2013,
based on criteria established in Internal Control—Integrated Framework (1992) 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, management has excluded
J.J.F Enterprises, Inc., doing business as PrintLeader Software (“PrintLeader”), GamSys Software SPRL
(“GamSys”), Metrix Software (“Metrix”), and Lector Computersysteme GmbH (“Lector”) from its assessment of
internal control over financial reporting as of December 31, 2013 because they were acquired by the Company in
purchase business combinations during 2013. We have also excluded PrintLeader, GamSys, Metrix, and Lector
from our audit of internal control over financial reporting. PrintLeader, GamSys, Metrix, and Lector are wholly-
owned by the Company with total assets and total revenue representing 2.3% and 0.4%, respectively, of the
related consolidated financial statement amounts as of and for the year ended December 31, 2013.

/S/ PRICEWATERHOUSECOOPERS LLP
San Jose, California
February 19, 2014

Electronics For Imaging, Inc.
Consolidated Balance Sheets

December 31,

2013

2012

(in thousands)

Assets
Current assets:

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term investments, available for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, net of allowances of $16.4 and $12.9 million, respectively . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes receivable and deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 177,084
177,957
130,717
68,345
20,945
25,516

$ 283,996
80,966
135,110
58,343
54,034
20,843

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

600,564
84,829
233,203
68,722
34,300
4,766

633,292
86,582
219,456
80,244
52,587
2,810

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,026,384

$1,074,971

Liabilities and Stockholders’ Equity
Current liabilities:

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred proceeds from property transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes payable and deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Imputed financing obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncurrent contingent and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncurrent deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncurrent income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

75,132
—
78,515
42,569
4,654

200,870
11,500
6,815
6,738
33,011

258,934

63,446
180,216
79,018
40,229
7,562

370,471
—
17,742
6,210
29,755

424,178

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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; 47,370 and 79,193

shares issued, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital
Treasury stock, at cost, 396 and 33,045 shares, respectively . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income (loss)
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

474
474,330
(12,897)
(1,388)
306,931

792
764,870
(569,576)
269
454,438

Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

767,450

650,793

Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,026,384

$1,074,971

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,

2013

2012

2011

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of revenue(1)

$ 727,693
332,527

$652,137
297,316

$591,556
260,573

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

395,166

354,821

330,983

Operating expenses (gains):

Research and development(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales and marketing(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative(1)
Amortization of identified intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring and other (Note 14)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of building and land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

128,124
137,583
47,755
19,438
4,834
(117,216)

120,298
125,513
50,727
18,594
5,803
—

115,901
119,487
53,756
11,248
3,258
—

Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

220,518

320,935

303,650

Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest and other income (expense), net: . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefit from (provision for) income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .

174,648
(1,510)

173,138
(64,031)

33,886
1,137

35,023
48,246

27,333
3,087

30,420
(2,955)

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 109,107

$ 83,269

$ 27,465

Net income per basic common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net income per diluted common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.34

2.26

1.79

1.74

0.59

0.58

Shares used in basic per-share calculation . . . . . . . . . . . . . . . . . . . . . . . . . . . .

46,643

46,453

46,234

Shares used in diluted per-share calculation . . . . . . . . . . . . . . . . . . . . . . . . . . .

48,359

47,734

47,579

(1)

Includes stock-based compensation expense as follows:

Cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,817
7,568
4,500
11,885

1,193
5,719
3,320
9,489

1,664
5,724
4,133
11,848

2013

2012

2011

See accompanying notes to consolidated financial statements.

Electronics For Imaging, Inc.
Consolidated Statements of Comprehensive Income

(in thousands)

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized investment gains (losses):

Unrealized holding gains, net of tax provisions of less than $0.1, $0.1, and
less than $0.1 million for the years ended December 31, 2013, 2012, and
2011, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Reclassification adjustments included in net income, net of tax benefits of
less than $0.1, $0.1, and $0.1 million for the years ended December 31,
2013, 2012, and 2011, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net unrealized investment gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Currency translation adjustments, net of tax benefits (provisions) of $(0.1), $0.6,
and less than $(0.1) million for the years ended December 31, 2013, 2012,
and 2011, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

For the years ended December 31,

2013

2012

2011

$109,107

$83,269

$27,465

198

(23)

(100)

(187)

(148)

(1,733)
33

(1,304)
28

(1,292)
(68)

Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$107,450

$82,091

$25,957

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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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to net cash provided by operating

activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax benefit from employee stock plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefit from stock-based compensation . . . . . . . . . . . . . . . . . . . . . .
Provision for bad debts and sales-related allowances . . . . . . . . . . . . . . . . . . . .
Provision for inventory obsolescence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contingent consideration payments related to business acquired . . . . . . . . . . .
Non-cash acquisition-related compensation costs . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of minority investment in a privately-held company . . . . . . . . . .
Gain on sale of building and land, net of relocation costs paid . . . . . . . . . . . . .
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 and receivable, net

For the years ended December 31,

2013

2012

2011

$ 109,107

$ 83,269

$ 27,465

28,830
53,846
6,867
(7,024)
9,595
4,508
25,770
(1,563)
940
(75)
(118,492)
(4,949)

(4,409)
(13,683)
(7,117)
11,819
(4,631)

27,032
(52,821)
417
(1,360)
3,250
3,231
19,721
—
907
—
—
1,870

(29,325)
(6,853)
(4,840)
9,464
(608)

18,765
(2,691)
1,426
(2,038)
2,010
6,991
23,369
—
—
(2,866)
—
1,426

(3,386)
(6,550)
(1,047)
2,529
6,793

Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

89,339

53,354

72,196

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, and post-acquisition non-

competition agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of minority investment in a privately-held company . . . . .
Proceeds from notes receivable of acquired businesses . . . . . . . . . . . . . . . . . . .

(145,088)
47,375
(49,815)
91

(64,528)
80,992
(6,147)
179,173

(99,155)
101,716
(9,828)
—

(14,688)
75
188

(61,591)
—
5,216

(36,690)
2,866
713

Net cash provided by (used for) investing activities . . . . . . . . . . . . . . . . . . . . . . .

(161,862)

133,115

(40,378)

Cash flows from financing activities:

Proceeds from issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of treasury stock and net share settlements . . . . . . . . . . . . . . . . . . . .
Repayment of debt assumed through business acquisitions . . . . . . . . . . . . . . .
Contingent consideration payments related to businesses acquired . . . . . . . . .
Excess tax benefit from stock-based compensation . . . . . . . . . . . . . . . . . . . . . .

12,303
(35,734)
(1,860)
(15,123)
7,024

18,958
(35,176)
(6,914)
(969)
1,360

8,123
(45,841)
(210)
(1,746)
2,038

Net cash used for financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(33,390)

(22,741)

(37,636)

Effect of foreign exchange rate changes on cash and cash equivalents . . . . . . .

(999)

210

(487)

Increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . .

(106,912)
283,996

163,938
120,058

(6,305)
126,363

Cash and cash equivalents at end of year

$ 177,084

$283,996

$120,058

See accompanying notes to consolidated financial statements.

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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-centric digital printing innovation focused on the transformation of the
printing, packaging, and ceramic tile decoration industries from the use of traditional analog based presses to
digital on-demand printing.

Our products include industrial super-wide, wide format, and label and packaging digital inkjet printers that
utilize our digital ink, ceramic tile decoration digital inkjet printers, digital inkjet printer parts, and professional
services; print production workflow, web-to-print, cross-media marketing, and business process automation
solutions; and color DFEs creating an on-demand digital printing ecosystem. Our award-winning business
process automation solutions are integrated from creation to print and are vertically integrated with our digital
industrial inkjet printers. Our inks include digital UV and LED ink, of which we are the largest world-wide
manufacturer, textile dye sublimation, and thermoforming ink. Our product portfolio includes industrial inkjet
products (“Industrial Inkjet”), including VUTEk super-wide and EFI wide format industrial digital inkjet printers
and related ink, Jetrion label and packaging digital inkjet printing systems and related ink, and Cretaprint digital
inkjet printers for ceramic tile decoration; print production workflow, web-to-print, cross-media marketing, and
business process automation software (“Productivity Software”), which provides corporate printing, label and
packaging, publishing, and mailing and fulfillment solutions for the printing industry; and Fiery DFEs (“Fiery”).
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.

In accordance with ASC 805, we revised previously issued post-acquisition financial information to reflect
adjustments to the preliminary accounting for business acquisitions as if the adjustments occurred on the
acquisition date. Accordingly, we have increased goodwill and accrued and other liabilities by $1.2 million in the
aggregate at December 31, 2012 to reflect opening balance sheet adjustments related to our acquisitions of
Cretaprint, OPS, and Technique.

During 2012, we adjusted our accounting for acquisition-related contingent consideration in the Consolidated
Statement of Cash Flows, which affected the year ended December 31, 2011. We concluded the impact was
immaterial to the prior periods. We have revised the accompanying Consolidated Statement of Cash Flows for
the year ended December 31, 2011, which resulted in a decrease of $1.7 million in cash used for investing
activities and a corresponding increase in cash used for financing activities. The correction had no impact on the
Consolidated Balance Sheets and the Consolidated Statements of Operations for the periods presented.

Use of Estimates

The preparation of consolidated financial statements requires estimates and judgments that affect the reported
amounts of assets, liabilities, revenue, expenses, comprehensive income, cash flows, 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, build-to-suit lease accounting, and contingencies on an ongoing basis.
Estimates are based on historical and current experience, the impact of the current economic environment, and

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

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 on deposit with major banks in money market, U.S. Treasury and government-
sponsored entity, corporate debt, municipal, asset-backed, and mortgage-backed residential 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 Sheets.

We consider all highly liquid investments with an original 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 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. Realized gains and losses on sales of financial instruments are recognized
upon sale of the investments using the specific identification method.

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.

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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, we 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.

Based on this analysis, there were no other-than-temporary impairments, including credit-related impairments,
during the years ended December 31, 2013, 2012, and 2011. We have determined that gross unrealized losses on
short-term investments at December 31, 2013 and 2012 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.

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Restricted Cash

Fair Value of Financial Instruments

The carrying amounts of our financial instruments, including cash, cash equivalents, accounts receivable,
accounts payable, and accrued and other liabilities, approximate their respective fair 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.

Revenue Recognition

We derive our revenue primarily from product revenue, which includes hardware (DFEs, 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 and printer maintenance agreements, customer support, training, and consulting.

We recognize revenue on the sale of DFEs, 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.

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.

•

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;

if the sales arrangement is classified as a sales-type lease, revenue is recognized upon shipment;

100

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

We assess whether the fee is fixed or determinable based on the terms of the contract or purchase order. We
assess collectibility 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 or letters of credit are
generally required from Industrial Inkjet and Productivity Software 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
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 stand-alone 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

We adopted ASU 2009-13 and ASU 2009-14 as of the beginning of fiscal 2011 for new and materially modified
transactions originating after January 1, 2011.

101

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Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

relative sales price in accordance with ASC 605-25. Thereafter, the relative sales 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 sales price that was allocated to any undelivered element.

Subscription Arrangements

102

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Leasing Arrangements

A lease is classified as a sales-type lease with revenue recognized upon shipment if the lease is determined to be
collectible and has no significant uncertainties and if any of the following criteria are satisfied:

•

present value of all minimum lease payments is greater than or equal to 90% of the fair value of the
equipment at lease inception,

noncancellable lease term is greater than or equal to 75% of the economic life of the equipment,

bargain purchase option that allows the lessee to purchase the equipment below fair value, or

transfer of ownership to the lessee upon termination of the lease.

Long-term Contracts Involving Substantial Customization

We have established our ability to produce estimates sufficiently dependable to require that we follow the
percentage of completion method with respect to fixed price contracts where we provide information technology
system development and implementation services.

Revenue on such fixed price contracts 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.

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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. Such revisions are reflected in net income in the period in which the facts that
give rise to that revision become known.

Deferred Revenue and Related Deferred Costs

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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 $6.6 and $2.2 million as of December 31, 2013
and 2012, respectively, and is included in other current assets in our Consolidated Balance Sheets.

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. 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.

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 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.

Financing Receivables

ASC 310, Receivables, requires disclosures regarding the credit quality of our financing receivables and
allowance for credit losses. ASC 310 further requires disclosure of credit quality indicators, past due information,
and modifications of our financing receivables. Our financing receivables were $5.2 and $2.3 million consisting
of $4.3 and $0.9 million of sales-type lease receivables, included within other current assets and other assets, and
$0.9 and $1.4 million of trade receivables having a contractual maturity in excess of one year at December 31,
2013 and 2012, respectively. The credit quality of financing receivables are evaluated on the same basis as trade
receivables. We have not experienced material amounts of past due financing receivables.

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.

Our Fiery products, which constitute approximately 35% 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 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 their
significance is expected to decline in future periods as our revenue increases from Industrial Inkjet and
Productivity Software products. We generally have experienced longer accounts receivable collection cycles in

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Notes to Consolidated Financial Statements—(Continued)

our Industrial Inkjet and Productivity Software 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 Industrial Inkjet and Productivity Software customers as a means to ensure payment.

We rely 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.

We subcontract the manufacture of our Fiery DFEs, certain Industrial 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.

Many of our current Fiery and Productivity Software 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.

Accounts Receivable Sales Arrangements

We have facilities in Spain that enable us to sell to third parties, on an ongoing basis, certain trade receivables
without recourse. Trade receivables sold without recourse are generally short-term receivables with payment due
dates of less than one year, which are secured by international letters of credit. Trade receivables sold under these
facilities were $8.3 and $4.3 million during the years ended December 31, 2013 and 2012, respectively, which
approximates the cash received.

We have facilities in the U.S. that enable us to sell to third parties, on an ongoing basis, certain trade receivables
with recourse. The trade receivables sold with recourse are generally short-term receivables with payment due
dates of less than 30 days from the date of sale, which are subject to a servicing obligation. Trade receivables
sold under these facilities were $12.9 and $2.1 million during the years ended December 31, 2013 and 2012,
respectively, which approximates the cash received.

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Electronics For Imaging, Inc.
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In accordance with ASC 860-20, Transfers and Servicing, trade receivables are derecognized from our
Consolidated Balance Sheet when sold to third parties upon determining that such receivables are presumptively
beyond the reach of creditors in a bankruptcy proceeding. The recourse obligation is measured using market data
from similar transactions and the servicing liability is determined based on the fair value that a third party would
charge to service these receivables. Both liabilities were determined to not be material at December 31, 2013 and
2012.

We report collections from the sale of trade receivables to third parties as operating cash flows in the
Consolidated Statements of Cash Flows, because such receivables are the result of an operating activity and the
associated interest rate risk is de minimis.

Inventories

Inventories are stated at standard cost, which approximates the lower of actual cost using the first-in, first-out
cost flow assumption, 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 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 as follows: desktop and laptop computers (two years); computer server
equipment (three years); software under perpetual licenses (three to five years); manufacturing, testing, and other
equipment (three years); tooling (lesser of three years or the product life); research and development equipment
with alternative future uses (three years); equipment leased to customers on operating leases (three years);
furniture (seven years); land improvements such as parking lots or sidewalks (seven years); leasehold
improvements (lesser of five years or the lease term); building improvements (five to ten years); building under a
build-to-suit lease (forty years); and purchased buildings (forty years).

When assets are disposed, the asset and accumulated depreciation are removed from our records and the related
gain or loss is recognized 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 interest and other income (expense), net.

Depreciation expense was $9.4, $8.4, and $7.4 million for the years ended December 31, 2013, 2012, and 2011,
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

In accordance with ASC 350-40, Intangibles—Goodwill and Other—Internal-Use Software, software
development costs, including costs incurred to purchase third party software, are capitalized during the
application development stage when we determine that certain factors are present including, among others, that

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Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

technology exists to achieve the performance requirements, management has committed to funding the project,
and conceptual formulation, design, and testing of possible software alternatives (preliminary project phase) have
all been completed. Costs incurred during preliminary project phase, post-implementation / operational phase,
process re-engineering, training, and maintenance must be expensed as incurred. The accumulation of software
costs to be capitalized ceases when the software is substantially developed and is ready for its intended use.
Capitalized internal use software is amortized over an estimated useful life of three years using the straight-line
method.

Goodwill

We perform our annual goodwill impairment analysis in the fourth quarter of each year. ASU 2011-08,
Intangibles—Goodwill and Other (Topic 350), Testing Goodwill for Impairment, provides that a simplified
analysis of goodwill impairment may be performed consisting of a qualitative assessment to determine whether
further impairment testing is necessary. Due to the significant additions to goodwill resulting from the business
combinations completed in recent years, we determined that the quantitative analysis should be performed.

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.

Please see Note 5—Goodwill and Long-Lived Intangible Assets 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 2013, 2012, or 2011.

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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 2013, 2012,
or 2011. Intangible amortization expense was $19.4, $18.6, and $11.2 million for the years ended December 31,
2013, 2012, or 2011, respectively.

We previously assessed each investee’s technology pipeline and market conditions in the industry and ability to
sustain an earnings capacity that would justify its carrying amount in accordance with ASC 323-10-35-32. We
determined it is no longer probable that they will generate sufficient positive future cash flows to recover the
carrying amount of each investment. Therefore, we previously fully reserved our equity and debt investments in
privately-held companies. We received sales proceeds from certain of these investments of $0.1 and $2.9 million
during the years ended December 31, 2013 and 2011, respectively.

Please see Note 5—Goodwill and Long-Lived Intangible Assets of the Notes to Consolidated Financial
Statements

Warranty Reserves

Our Industrial Inkjet printer and Fiery DFE 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, an accrual is
established when the warranty liability is estimable and probable based on historical experience. A provision for
estimated future warranty costs is recorded in cost of revenue when revenue is recognized. Warranty reserves
were $11.0 and $10.2 million as of December 31, 2013 and 2012, respectively.

Litigation Accruals

Restructuring Reserves

Restructuring liabilities are established when the costs have been incurred. Severance and other employee
separation costs are incurred when management commits to a plan of termination identifying the number of
employees impacted, their termination dates, and the terms of their severance arrangements. The liability is
accrued at the employee notification date unless service is required beyond the greater of 60 days or the legal
notification period, in which case the liability is recognized ratably over the service period. Facility downsizing
and closure costs are accrued at the earlier of the lessor notification date, if the lease agreement allows for early
termination, or the cease use date. Relocation costs are incurred when the related relocation services are
performed. Costs related to contracts without future benefit are incurred at the earlier of the cease use date or the
contract cancellation date.

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Research and Development

Research and development costs were $128.1, $120.3, and $115.9 million for the years ended December 31,
2013, 2012, and 2011, 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 employees performing research and development activities, 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, as defined by U.S. GAAP, and have been released for sale at substantially the same time. We have
capitalized research and development equipment that has been acquired or constructed for research and
development activities and has alternative future uses (in research and development projects or otherwise). Such
research and development equipment is depreciated on a straight-line basis with a three year useful life.

Shipping and Handling Costs

Amounts billed to customers for shipping and handling costs are included in revenue. 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 $4.1, $3.5, and $4.8
million for the years ended December 31, 2013, 2012, and 2011, respectively.

Income Taxes

We account for income taxes in accordance with 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, including permanent charges and benefits, 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 recent 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 established in 2013 related to realization
of existing California deferred tax assets and valuation allowances established in prior years related to deferred
tax assets from foreign tax credits resulting from the 2003 acquisition of Best GmbH and compensation
deductions potentially limited by IRC Section 162(m), we have determined that is more likely than not that we
will realize the benefit related to all other deferred tax assets. In 2013, we determined that it is more likely than
not that our existing deferred tax assets in California would not be realized based on the size of the net operating
loss and research and development credits being generated exceeding the utilization of these tax attributes. As a
result, we recorded a full valuation allowance against our California deferred tax assets. To the extent we
increase a valuation allowance, we include an expense in the Consolidated Statement of Operations in the period
in which such determination is made.

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Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

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. Tax benefits that are deemed
to be less than fifty percent likely of being realized are recorded in noncurrent income taxes payable until the
uncertainty has been resolved through either examination by the relevant taxing authority or expiration of the
pertinent statutes of limitations.

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.

These acquisitions were accounted for as purchase business combinations using the acquisition method of
accounting in accordance with ASC 805. Key provisions of the acquisition method of accounting include the
following:

•

one hundred percent of assets and liabilities of the acquired business, including goodwill, are recorded
at fair value, regardless of the percentage of the business 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, we revise any previously issued post-
acquisition financial information in future financial statements to reflect any adjustments as if they
occurred on the acquisition date.

At various dates in 2013, we acquired PrintLeader, GamSys, Metrix, and Lector, which have been integrated into
our Productivity Software operating segment and provide business process automation software to small
commercial and in-plant printing operations in North America; business process automation software to the
printing and packaging industries in the French-speaking regions of Europe and Africa; imposition solutions for
estimating, planning, and integrating into prepress and postpress solutions; and business process automation
software to the sheetfed and packaging industries in Germany, respectively.

On January 10, 2012, we acquired Cretaprint, which is a leading developer and supplier of inkjet printers for the
ceramic tile decoration industry and has been integrated into our Industrial Inkjet operating segment. On April 5,
2012, we acquired the FX Colors business, which develops and provides technology and software for industrial
printing and has been integrated into our Fiery operating segment. At various dates in 2012, we acquired Metrics,
OPS, and Technique, which have been integrated into our Productivity Software operating segment and provide
business process automation solutions to medium-sized printing and packaging companies in Latin America;

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Notes to Consolidated Financial Statements—(Continued)

business process automation solutions for web-to-print, publishing, and cross-media marketing; and business
process automation solutions for publication, commercial, and direct marketing print industries, respectively.

In 2011, we acquired the Entrac business, which provides self-service and payment solutions for business
services including mobile printing and has been integrated into our Fiery operating segment, and we acquired
Alphagraph, Prism, and Streamline, which have been integrated into our Productivity Software operating
segment and provide business process automation solutions for the graphics arts industry; business process
automation solutions for the printing and packaging industry, including automated shop floor management and
work in progress tracking; and business process automation solutions for mailing and fulfillment services in the
printing industry, respectively.

Liability for Self-Insurance

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 thousand per enrollee unless specific exposures are separately insured. We have accrued a contingent
liability of $2.6 and $1.4 million as of December 31, 2013 and 2012, respectively, 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, 2013 and 2012 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.

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.

ASC 718 requires forfeitures to be estimated at the grant date 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

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Notes to Consolidated Financial Statements—(Continued)

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.

Foreign Currency Translation

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, net of tax, at December 31, 2013 and 2012 was an unrealized gain
(loss) of $(1.6) and $0.1 million, 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 Brazilian subsidiary,
Metrics, for which we consider the Brazilian real to be the subsidiary’s functional currency; our German
subsidiaries, EFI GmbH, Alphagraph, and Lector, 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; our Spanish subsidiary, Cretaprint, for which we
consider the Euro to be the subsidiary’s functional currency; our New Zealand subsidiary contains the Prism
operations in New Zealand for which we consider the New Zealand dollar to the functional currency; our
Australian subsidiary contains the Prism, OPS, and Metrix operations in Australia for which we consider the
Australian dollar to the functional currency; our U.K. subsidiaries, Electronics For Imaging United Kingdom
Limited and Technique, for which we consider the British pound sterling to be the subsidiaries’ functional
currency; and our subsidiary in the People’s Republic of China, which contains the operations of our Cretaprint
sales and support center for which we consider the renminbi to be the functional currency.

Computation of Net Income per Common Share

Net income 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 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, Earnings Per Share, are excluded from the effect of dilutive securities.

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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 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 monetary assets and liabilities,
including intercompany transactions, 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, be recorded as assets or liabilities in our Consolidated Balance
Sheet. As permitted, foreign exchange contracts with notional amounts of $2.5 and $2.7 million and net asset/
liability fair values that are immaterial have been designated for cash flow hedge accounting treatment at
December 31, 2013 and 2012, 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 revenue in Europe, Japan, the U.K., Latin America,
China, Australia, and New Zealand and are primarily related to non-U.S. dollar-denominated operating expenses
in Europe, India, Japan, the U.K., Brazil, and Australia. We hedge our operating expense cash flow exposure in
Indian rupees. We hedge remeasurement exposure associated with Euro-denominated intercompany loans and
Indian rupee net monetary assets. As of December 31, 2013, we had not entered into hedges against any other
currency exposures, but we may consider hedging against movements in other currencies in the future.

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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) or the settlement of the Euro-denominated intercompany loans. We do not believe
there is a significant risk of loss from non-performance by the counterparty associated with these instruments
because, 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.

Variable Interest Entities

In accordance with the Variable Interest Entities (“VIE”) sub-section of ASC 810, Consolidation, we perform a
formal assessment at each reporting period regarding whether any consolidated entity is considered 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 rights 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 May 2011, the Financial Accounting Standards Board (“FASB”) issued ASU

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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.

Accordingly, the appropriate disclosures have been included in the accompanying consolidated financial
statements.

Other Comprehensive Income. In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive
Income. Effective in the first quarter of 2012, we have opted to present total comprehensive income, the
components of net income, and the components of other comprehensive income in two separate, but consecutive,
statements. Under ASU 2011-05, we also have the option to present this information in a single continuous
statement of comprehensive income. We previously presented the components of accumulated other
comprehensive income (loss) (“OCI”) 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.

In February 2013, the FASB issued ASU 2013-02, Reporting of Amounts Reclassified Out of Accumulated
Other Comprehensive Income, which requires additional disclosures about amounts reclassified out of OCI by
component. Effective in the first quarter of 2013, we are required to present, either on the face of the
Consolidated Statement of Operations or in the notes to our consolidated financial statements, significant
amounts reclassified out of OCI by the respective line items of net income, but only if the amount reclassified is
required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other
amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, we are required
to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those
amounts. We have provided the required disclosure in Note 4, Balance Sheet Components, of the Notes to
Consolidated Financial Statements.

Goodwill and Other Indefinite-Lived Intangible Asset Impairment Assessment. In September 2011 and July
2012, the FASB issued new accounting guidance that simplifies the analysis of goodwill and other indefinite-
lived intangible asset impairment. The new guidance allows a qualitative assessment to be performed to
determine whether further impairment testing is necessary. These accounting standards were effective for the
year ended December 31, 2012 with respect to the assessment of goodwill and were effective for the year ending
December 31, 2013 with respect to the assessment of other indefinite-lived intangible assets. These standards
provide an alternative method for determining whether our goodwill and other indefinite-lived intangible assets
have been impaired, which would not differ materially from the result of the detailed impairment testing
methodology required by ASC 350-20-35, Goodwill – Subsequent Measurement.

Joint and Several Liability. In February 2013, the FASB issued ASU 2013-04, Obligations Resulting from Joint
and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting
Date, which requires accrual of obligations resulting from joint and several liability arrangements when the total
amount of the obligation is fixed at the reporting date, as the sum of the following:

114

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

•

the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and

any additional amount the reporting entity expects to pay on behalf of its co-obligors.

If the amount of the obligation is not fixed at the reporting date, then the related liability should be accrued in
accordance with ASC 450-20, Loss Contingencies. Examples of obligations subject to ASU 2013-04 include debt
arrangements, legal settlements, and contractual obligations.

ASU 2013-04 will be effective in the first quarter of 2014. We are currently evaluating its impact on our financial
condition and results of operations.

Balance Sheet Presentation of Unrecognized Tax Benefits. In July 2013, the FASB issued ASU 2013-11,
Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a
Tax Credit Carryforward Exists. We currently present our liability for estimated unrecognized tax benefits as
noncurrent income taxes payable in our Consolidated Balance Sheets of $33.0 and $29.8 million as of
December 31, 2013 and 2012, respectively.

We are required to reclassify unrecognized tax benefits as an offset to deferred tax assets to the extent of any net
operating loss carryforwards, similar tax loss carryforwards, or tax credit carryforwards that are available at the
reporting date under the tax law of the applicable tax jurisdiction to settle any additional income taxes that would
result from the disallowance of a tax position. An exception would apply if the tax law of the tax jurisdiction
does not require us to use, and we do not intend to use, the deferred tax asset for such purpose.

ASU 2013-11 will be effective in the first quarter of 2014 with early adoption allowed. We are currently
determining the amount of the required reclassification between noncurrent income taxes payable and deferred
tax assets.

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Supplemental Disclosure of Cash Flow Information

(in thousands)

For the years ended December 31,

2013

2012

2011

Net cash paid (refunded) for income taxes . . . . . . . . . . . . . . . . . . . .

$ 7,883

$ 4,384

$ (2,998)

Cash paid for interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

210

Acquisition related activities:
Cash paid for acquisitions, excluding contingent consideration . . . .
Cash acquired in acquisitions, excluding restricted cash . . . . . . . . . .

$15,541
(853)

$66,050
(5,059)

$35,299
(1,554)

Net cash paid for acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$14,688

$60,991

$33,745

Non-cash investing and financing activities:
Non-cash acquisition of property under a build-to-suit lease . . . . . .
Property and equipment received, but accrued in accounts

$11,230

$ — $ —

payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7,210

1,042

$18,440

$ 1,042

240

115

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Note 2: Earnings Per Share

Net income 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 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, non-vested restricted stock having a
dilutive effect, shares to be purchased under our ESPP having a dilutive effect, and 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.

ASC 260-10-45-48 requires that performance-based and market-based restricted stock and stock options 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 per diluted common share as of
the later of the beginning of the period or the grant date. Accordingly, performance-based RSUs, which vested on
various dates during the years ended December 31, 2013, 2012, and 2011 based on achievement of specified
performance criteria related to 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 and stock options, which vested on various dates during December 31, 2013, 2012, and 2011
based on achievement of specified stock prices for defined periods; and performance-based RSUs, which vested
on January 24, 2014 based on achievement of specified performance criteria related to 2013 revenue and non-
GAAP operating income targets upon certification by the Compensation Committee of the Board of Directors are
included in the determination of net income 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 RSUs or stock options as of
December 31, 2013.

Basic and diluted earnings per share for the years ended December 31, 2013, 2012, and 2011 are reconciled as
follows (in thousands, except for per share amounts):

For the years ended December 31,

2013

2012

2011

Basic net income per share:
Net income available to common shareholders . . . . . . . . . . . . . . . .

$109,107

$83,269

$27,465

Weighted average common shares outstanding . . . . . . . . . . . . . . . .
Basic net income per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

46,643
2.34

46,453
1.79

46,234
0.59

Dilutive net income per share:
Net income available to common shareholders . . . . . . . . . . . . . . . .

$109,107

$83,269

$27,465

Weighted average common shares outstanding . . . . . . . . . . . . . . . .
Dilutive stock options and non-vested restricted stock . . . . . .

46,643
1,716

46,453
1,281

46,234
1,345

Weighted average common shares outstanding for purposes of

computing diluted net income per share . . . . . . . . . . . . . . . . . . .

48,359

47,734

47,579

Dilutive net income per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.26

1.74

0.58

Potential shares of common stock that are not included in the determination of diluted net income 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 RSUs and stock options for which the performance criteria were not met, of less than 0.1,
0.4, and 2.2 million shares for the years ended December 31, 2013, 2012, and 2011, respectively.

116

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

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 on December 31, 2013, 2012 and 2011.

Note 3: Acquisitions

We acquired three business process automation businesses and an imposition solution business during 2013,
which have been integrated into our Productivity Software operating segment. During 2012, we acquired
Cretaprint, which has been integrated into our Industrial Inkjet operating segment, three business process
automation businesses, which have been integrated into our Productivity Software operating segment, and the FX
Colors business, which have been integrated into our Fiery operating segment. During 2011, we acquired three
business process automation businesses, which have been integrated into our Productivity Software operating
segment and Entrac, which have been integrated into our Fiery operating segment.

These acquisitions were accounted for as purchase business combinations. In accordance with ASC 805, the
purchase 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 enter the ceramic tile decoration market through the Cretaprint acquisition, the opportunity to
utilize FX Colors technology in the development of our products, the opportunity to cross-sell products of the
acquired businesses to existing customers, the opportunity to sell PrintSmith, Pace, Monarch, and Radius
products to customers of the acquired businesses, and the positive reputation of each of these companies in the
market.

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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 for the 2013 purchase business combinations are preliminary and 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 in 2013, during the
respective measurement periods, which end at various dates in 2014. 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
respective acquisition period could be affected.

2013 Acquisitions

Productivity Software Operating Segment

At various dates in 2013, we acquired privately-held PrintLeader, GamSys, Metrix, and Lector, which have been
integrated into our Productivity Software operating segment, for cash consideration of an aggregate of $12.9
million, net of cash acquired, $0.6 million payment, which was dependent on account receivable collections, plus
additional future cash earnouts contingent on achieving certain performance targets. An additional $1.0 million
of accounts receivable payments are dependent on collections.

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Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

The fair value of the PrintLeader, GamSys, and Metrix earnouts were valued at $4.2 million on their respective
acquisition dates by applying the income approach in accordance with ASC 805-30-25-5. Key assumptions
include discount rates between 4.5% and 6.0% and probability-adjusted levels of 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. These contingent liabilities are reflected in the Consolidated Balance Sheet as of December 31, 2013, as
current and noncurrent liabilities of $2.0 and $2.2 million, respectively. In accordance with ASC 805-30-35-1,
changes in the fair value of contingent consideration subsequent to the acquisition date will be recognized in
general and administrative expenses.

PrintLeader, headquartered in Palm City, Florida, provides business process automation software to small
commercial and in-plant printing operations in North America. Support and operations of PrintLeader were
integrated into the Productivity Software operating segment, which will also provide PrintSmith products to the
PrintLeader customer base, while continuing to support existing PrintLeader customers.

GamSys, headquartered in LaReid, Belgium, provides business process automation software to the printing and
packaging industries in the French-speaking regions of Europe and Africa. Support and operations of GamSys
were integrated into the Productivity Software operating segment, which provides PrintSmith, Pace, Monarch,
and Radius products to the GamSys customer base, while continuing to support existing GamSys customers.

Metrix, headquartered in Edmonds, Washington, is a leading innovator in imposition solutions for estimating,
planning, and integrating into prepress and postpress solutions and a pending release that will support wide
format imposition. This technology acquisition enhances our existing functionality and allows us to extend our
portfolio offerings to bridge the gap between our business process automation software and prepress. Metrix has
been integrated into the Productivity Software operating segment.

Lector, headquartered in Mönchengladbach, Germany, provides German-language business process automation
solutions to the sheetfed and packaging industries. Support and operations of Lector were integrated into the
Productivity Software operating segment, which provides PrintSmith, Pace, Monarch, and Radius products to the
Lector customer base, while continuing to support existing Lector customers.

2012 Acquisitions

Industrial Inkjet Operating Segment

On January 10, 2012, we purchased privately-held Cretaprint, headquartered in Castellon, Spain, for cash
consideration of approximately $28.8 million, net of cash acquired, plus an additional future cash earnout
contingent on achieving certain performance targets. We subsequently merged Cretaprint into Electronics for
Imaging España S.L.U., which changed its name post-merger to EFI Cretaprint S.L. Cretaprint is a leading
developer and supplier of inkjet printers for ceramic tiles. This acquisition allows us to provide ceramic tile
decoration as a product offering within our Industrial Inkjet operating segment.

The fair value of the earnout is currently estimated to be $6.2 million by applying the income approach in
accordance with ASC 805-30-25-5. Acquisition-related executive deferred compensation cost of $1.8 million
was expensed during the two years ended December 31, 2013, coinciding with the continuing employment of a
former shareholder of an acquired company, thereby increasing the liability for contingent consideration
accordingly. Key assumptions include a discount rate of 5.0% and a probability-adjusted level of Cretaprint
revenue and gross profit. Probability-adjusted revenue and gross profit are significant inputs that are not
observable in the market, which ASC 820-10-35 refers to as Level 3 inputs. This contingent liability is reflected
as a current liability in our Consolidated Balance Sheet as of December 31, 2013. We paid contingent

118

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

consideration related to Cretaprint of $8.9 million in 2013. In accordance with ASC 805-30-35-1, changes in the
fair value of contingent consideration subsequent to the acquisition date will be recognized in general and
administrative expenses.

Productivity Software Operating Segment

At various dates in 2012, we acquired privately-held Metrics, OPS, and Technique, which have been integrated
into our Productivity Software operating segment, for cash consideration of an aggregate of $31.1 million, net of
cash acquired, plus additional future cash earnouts contingent on achieving certain performance targets.

The fair value of the earnouts are currently estimated to be $10.6 million by applying the income approach in
accordance with ASC 805-30-25-5. Key assumptions include discount rates between 4.2% and 6.4% and
probability-adjusted levels of 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. These contingent liabilities are reflected in the
Consolidated Balance Sheet as of December 31, 2013, as current and noncurrent liabilities of $6.5 and $4.1
million, respectively. We paid contingent consideration related to these acquisitions of $4.5 million in 2013. In
accordance with ASC 805-30-35-1, changes in the fair value of contingent consideration subsequent to the
acquisition date will be recognized in general and administrative expenses.

Metrics, headquartered in Sao Paolo, Brazil, provides business process automation software to medium-sized
printing and packaging companies in Latin America. Support and operations of Metrics were integrated into the
Productivity Software operating segment, which provides PrintSmith, Pace, Monarch, and Radius products,
localized for the Latin American market, while continuing to support existing Metrics customers.

OPS, headquartered in Mosman, Australia, provides web-to-print, publishing, and cross-media marketing
solutions. Support and operations of OPS were integrated into the Productivity Software operating segment,
while continuing to support the existing OPS customers. Key OPS features and technologies will be integrated
into our Digital StoreFront software and our Fiery DFEs.

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Technique, headquartered in Leeds, U.K., provides business process automation solutions to the publication,
commercial, and direct marketing print industries. Support and operations of Technique were integrated into the
Productivity Software operating segment, which provides Pace, Monarch, and Radius products to the Technique
customer base, while continuing to support existing Technique customers.

Fiery Operating Segment

On April 5, 2012, we acquired the FX Colors business, a societe par actions simplifiee headquartered in
Charnay-Les-Macon, France, which has been integrated into our Fiery operating segment, for cash consideration
of approximately $0.4 million. A portion of the consideration is contingent upon the achievement of certain
milestones. We paid contingent consideration related to FX Colors of $0.1 million in 2012. FX Colors develops
and provides technology and software for industrial printing. We accounted for the acquisition of FX Colors for
financial reporting purposes as a purchase business combination in accordance with ASC 805. The FX Colors
purchase price has been allocated to existing technology, with a useful life of three years.

2011 Acquisitions

Productivity Software Operating Segment

At various dates in 2011, we acquired privately-held Streamline, Prism, and Alphagraph, which have been
integrated into our Productivity Software operating segment, for cash consideration of an aggregate of $27.8
million, net of cash acquired. The Streamline and Alphagraph purchase prices include additional future cash
earnouts contingent on achieving certain performance targets.

119

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

The Streamline and Alphagraph earnouts have been settled as of December 31, 2013. We paid contingent
consideration related to these acquisitions of $1.3 and $0.6 million in 2013 and 2012, respectively.

Streamline, headquartered in San Rafael, California, provides PrintStream business process automation software,
which we acquired to establish our Productivity Software operating segment presence in mailing and fulfillment
services for the printing industry.

Prism, headquartered in New Zealand, provides business process automation solutions for the printing and
packaging industry including automated shop floor management and work in progress tracking. Support and
operations of Prism were integrated into the Productivity Software operating segment, which provides
PrintSmith, Pace, Monarch, and Radius products, while continuing to support existing Prism customers.

Alphagraph, headquartered in Essen, Germany, provides business process automation solutions for the graphic
arts industry. Support and operations of Alphagraph were integrated into the Productivity Software operating
segment, which will provides PrintSmith, Pace, Monarch, and Radius products, while continuing to support
existing Alphagraph customers.

Fiery Operating Segment

On July 25, 2011, we purchased the Entrac business, 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 Entrac earnout expired without being earned.

Valuation Methodologies

Intangible assets acquired consist of customer relationships, existing technology, trade names, backlog, and
IPR&D. Each intangible asset valuation methodology assumes a discount rate between 13% and 24%.

Customer Relationships and Backlog. With the exception of Entrac, customer relationships and backlog 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 costs associated with
developing the relationships. Customer relationships were valued by estimating the revenue attributable to
existing customer relationships and probability-weighted in each forecast year to reflect the uncertainty of
maintaining existing relationships based on historical attrition rates.

The Cretaprint backlog represents unfulfilled customer purchase orders at the acquisition date that will provide a
relatively secure revenue stream, subject only to potential customer cancellation. The backlog has been
fulfilled.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.

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.

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Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Existing Technology and IPR&D. With the exception of Entrac, 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 products of the acquired businesses 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 and the cost of
sustaining research and development required to maintain 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,

GamSys

Technique

Prism

Entrac

Streamline

17%
50-53%

17%
73%

23%
20%
22%
50% 48-79% 78-89%

2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

90%

100%

IPR&D is subject to amortization after product completion over the product life or otherwise subject to
impairment in accordance with acquisition accounting guidance.

The 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:

Operating Segment

Acquired Business

2013 Acquisitions

2012 Acquisitions

2011 Acquisitions

Productivity Software

Industrial Inkjet

Productivity Software Productivity Software

Fiery

PrintLeader, GamSys,
Metrix, Lector

Cretaprint

Metrics, OPS,
Technique

Streamline, Prism,
Alphagraph

Entrac

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

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Customer relationships . . . . . . . . . . . . . 5-6 years $ 5,540
2,060
Existing technology . . . . . . . . . . . . . . . 3-4 years
670
Trade names . . . . . . . . . . . . . . . . . . . . . 3-4 years
150
3 years
IPR&D . . . . . . . . . . . . . . . . . . . . . . . . .
—
Backlog . . . . . . . . . . . . . . . . . . . . . . . . .
— 1 year
— 13,365
Goodwill . . . . . . . . . . . . . . . . . . . . . . . .

5 years $ 8,000 5-6 years $14,880 5-6 years $10,150
3 years
6 years
—

7,070 3-4 years
4,970 3-4 years
— 5 years

3,060 2-5 years
4,580 3-4 years
1,100
1,080 4-5 years
110
5 years
—
—
— 20,020

90
—

5 years $2,340
1,290
—
—
410
5 years
—
—
— 4,611

1,290
— 22,794

—
— 31,100

Net tangible assets (liabilities) . . . . . . .

Total purchase price . . . . . . . . . . . . . . .

21,785
(3,441)

$18,344

44,124
3,078

$47,202

51,730
(4,942)

$46,788

34,440
(1,295)

$33,145

8,651
579

$9,230

In accordance with ASC 805, we revised previously issued post-acquisition financial information to reflect
adjustments to the preliminary accounting for these business acquisitions as if the adjustments occurred on the
acquisition date. We have increased goodwill and accrued and other liabilities by $1.2 million in the aggregate at
December 31, 2012 to reflect opening balance sheet adjustments related to our acquisitions of Cretaprint, OPS,
and Technique.

The initial preliminary allocation of the GamSys purchase price was adjusted during the third quarter of 2013 to
reflect a $0.1 million decrease to goodwill, offset by a corresponding increase in other current assets. The initial
preliminary allocation of the Cretaprint purchase price was adjusted during the third quarter of 2012 to reflect a
$0.2 million increase in goodwill, offset by a corresponding decrease in deferred tax assets, income taxes
receivable, and other current assets. The initial preliminary allocation of the Metrics purchase price was adjusted

121

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

during the fourth quarter of 2012 to reflect a $0.6 million decrease to goodwill, offset by a corresponding
decrease in deferred tax liabilities, resulting from a decision to remain on the deemed profit method of reporting
income tax liabilities in Brazil through 2013. 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. These adjustments were recorded as an adjustment to the
opening balance sheet of each of these acquired businesses as of the effective date of each acquisition.

In conjunction with the Metrics acquisition, we entered into five-year non-competition agreements with certain
selling shareholders. The non-competition agreements were valued at $0.6 million based on the “with and
without” method, which is an income approach, by adjusting revenue for the probability of the impact of this
potential competition. In assessing the competitive impact without the non-competition agreements in place, it
was assumed the selling shareholders could develop a competitive product in approximately three years. In
assessing the competitive impact with the non-competition agreements in place, it was assumed that the selling
shareholders would compete immediately following the end of the five-year non-compete period. The impact of
this competition on our revenue for valuation purposes was assessed based on the cumulative probability of the
selling shareholders’ ability, feasibility, and desire to compete and a discount rate of 15%. The value of the non-
competition agreements are being amortized over a five-year period as a component of operating expenses.

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.

Significant assumptions used to determine the 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 percentages, and operating expense percentages. Gross profit and operating expenses as a

GamSys and Lector generate revenue and incur operating expenses in Euros. Accordingly, we have adopted the
Euro as the functional currencies for GamSys and Lector.

Cretaprint, Metrics, and Technique generate revenue and incur operating expenses in Euros, Brazilian reais, and
British pounds sterling, respectively. Accordingly, we have adopted the Euro, Brazilian real, and British pound
sterling as the functional currencies for Cretaprint, Metrics, and Technique, respectively. OPS generates revenue
and incurs operating expenses in Australian and New Zealand dollars in Australia and New Zealand,
respectively. Accordingly, we have adopted those currencies as the functional currencies for OPS in those
locations. OPS operation in Ireland generates revenue primarily in U.S. dollars. Upon consideration of the salient
economic indicators discussed in ASC 830-10-55-5, we consider the U.S. dollar to be the functional currency for
OPS operations in Ireland.

Alphagraph and Prism generate revenue and incur operating expenses in Euros and British pounds sterling,
respectively. Accordingly, we have adopted the Euro and British pound sterling as the functional currencies for
Alphagraph and Prism, respectively.

122

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:
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Property and equipment, net:
Land, buildings, and improvements (including build-to-suit)
. . . . .
Equipment and purchased software . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture and leasehold improvements . . . . . . . . . . . . . . . . . . . . . . .

Less accumulated depreciation and amortization . . . . . . . . . . . . . . .

December 31,

2013

2012

$ 35,470
3,434
29,441

$ 30,519
5,847
21,977

$ 68,345

$ 58,343

$ 72,601
50,280
12,808

$ 72,671
55,932
18,387

135,689
(50,860)

146,990
(60,408)

$ 84,829

$ 86,582

We entered into a 15-year lease agreement pursuant to which we leased approximately 59,000 square feet in
Fremont, California. The lease commenced on September 1, 2013. The leased facility was a cold shell requiring
additional build-out and tenant improvements. As explained in Note 8—Commitments and Contingencies, we are
deemed to be the accounting owner of the facility. On December 31, 2013, we capitalized $11.1 million in
property and equipment based on the estimated replacement cost of the unfinished space, including capitalized
interest, reduced by accumulated depreciation.

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On December 31, 2012, Land, buildings, and improvements included $61.6 million of assets that were sold to
Gilead on November 1, 2013. Until we vacated the building on October 31, 2013, these assets remained on our
balance sheet as depreciable assets. See Note 13—Gain on Sale of Building and Land of the Notes to
Consolidated Financial Statements.

Accrued and other liabilities:
Accrued compensation and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warranty provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued royalty payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contingent liabilities—current
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

December 31,

2013

2012

$32,375
11,047
3,915
14,803
16,375
$78,515

$23,387
10,158
4,318
21,286
19,869
$79,018

123

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

In accordance with ASC 805, we revised previously issued post-acquisition financial information to reflect
adjustments to the preliminary accounting for these business acquisitions as if the adjustments occurred on the
acquisition date. Accordingly, we have increased goodwill and accrued and other liabilities by $1.2 million in the
aggregate at December 31, 2012 to reflect opening balance sheet adjustments related to our acquisitions of
Cretaprint, OPS, and Technique.

Accumulated other comprehensive income (loss):
Net unrealized investment gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Currency translation gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

December 31,

2013

2012

227
(1,601)
(14)

$184
132
(47)

$(1,388)

$269

Amounts reclassified out of OCI were less than $0.1 million, $0.1, and $0.2 million, net of tax, for the years
ended December 31, 2013, 2012, and 2011, and consisted of unrealized gains (losses) from investments in debt
securities and are reported within interest and other income (expense), net, in our consolidated statements of
operations.

Note 5: Goodwill and Long-Lived Intangible Assets

Purchased Intangible Assets

Our purchased identified intangible assets resulting from acquisitions that closed during the years ended
December 31, 2013 and 2012 are as follows (in thousands, except for weighted average useful life):

December 31, 2013

December 31, 2012

Weighted
average
useful life
(years)

Gross
carrying
amount

Accumulated
amortization

Weighted
remaining
average
useful life
(years)

Goodwill

. . . . . . . . . . . . . . . . . . . . . . . . . — $233,203 $

—

5.6
Customer relationships and other
. . . . . .
4.3
Existing technology . . . . . . . . . . . . . . . . .
Trademarks and trade names . . . . . . . . . .
13.2
IPR&D . . . . . . . . . . . . . . . . . . . . . . . . . . . —

$109,906 $ (77,922)
(122,857)
132,192
(31,614)
58,867
—
150

Amortizable intangible assets . . . . . . . . .

6.6

$301,115 $(232,393)

—

3.5
1.5
8.3
—

5.1

Net carrying
amount

Gross carrying
amount

Accumulated
amortization

Net carrying
amount

$233,203

$219,456

— $219,456

$ 31,984
9,335
27,253
150

$103,891
129,320
59,235
200

$ (69,800)
(115,411)
(27,191)
—

$ 34,091
13,909
32,044
200

$ 68,722

$292,646

$(212,402)

$ 80,244

Acquired customer relationships and other; existing technology; trademarks and trade names; and IPR&D are
amortized over their estimated useful lives of 2 to 18 years using the straight-line method, which approximates
the pattern in which the economic benefits of the identified intangible assets are realized. Aggregate amortization
expense was $19.4, $18.6, and $11.2 million for the years ended December 31, 2013, 2012, and 2011,
respectively.

124

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

As of December 31, 2013, future estimated amortization expense for each of the next five years and thereafter
related to the amortization of identified intangible assets is as follows (in thousands):

For the years ended December 31,

2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Future
amortization
expense

$19,105
15,112
11,252
7,708
4,127
11,418

$68,722

Goodwill Rollforward

The goodwill rollforward for the years ended December 31, 2013 and 2012 as required by ASC 805 is as follows
(in thousands):

Industrial
Inkjet

Productivity
Software

Fiery

Total

Ending Balance, December 31, 2011 . . . . . . . . . . . . . . . . . . . . .

$ 36,508

$ 63,403

$64,412

$ 164,323

Additions (Cretaprint, Metrics, OPS, and Technique) . . . . . . . . .
Cretaprint opening balance sheet adjustment . . . . . . . . . . . . . . . .
Metrics opening balance sheet adjustment . . . . . . . . . . . . . . . . . .
Opening balance sheet adjustments recognized in 2013 . . . . . . .
Foreign currency adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 22,794
215
—
801
427

$ 31,100
—
(588)
386
(116)

$ — $ 53,894
215
(588)
1,187
425

—
—
—
114

Ending Balance, December 31, 2012 . . . . . . . . . . . . . . . . . . . . .

$ 60,745

$ 94,185

$64,526

$ 219,456

Additions (PrintLeader, GamSys, Metrix, and Lector

acquisitions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
GamSys opening balance sheet adjustment . . . . . . . . . . . . . . . . .
Foreign currency adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . .

— $ 13,365
(52)
—
(801)
959

$ — $ 13,365
(52)
434

—
276

Ending Balance, December 31, 2013 . . . . . . . . . . . . . . . . . . . . .

$ 61,704

$106,697

$64,802

$ 233,203

Accumulated Impairment, December 31, 2013 . . . . . . . . . . . .

$(103,991) $ — $ —

(103,991)

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In accordance with ASC 805, we revised previously issued post-acquisition financial information to reflect
adjustments to the preliminary accounting for these business acquisitions as if the adjustments occurred on the
acquisition date. Accordingly, we have increased goodwill and accrued and other liabilities by $1.2 million in the
aggregate at December 31, 2012 to reflect opening balance sheet adjustments related to our acquisitions of
Cretaprint, OPS, and Technique.

125

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

decrease in deferred tax liabilities, resulting from a decision to remain on the deemed profit method of reporting
income tax liabilities in Brazil through 2013. These adjustments were recorded as an adjustment to the opening
balance sheet of each of these acquired businesses as of the effective date of each acquisition.

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 Industrial 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—Industrial Inkjet, Productivity
Software, and Fiery—which are consistent with our operating segments identified in Note 15—Segment
Information, Geographic Regions, and Major Customers of the Notes to Consolidated Financial Statements.

Goodwill Assessment

ASU 2011-08, Intangibles—Goodwill and Other (ASC 350): Testing Goodwill for Impairment, provides that a
simplified analysis of goodwill impairment may be performed consisting of a qualitative assessment to determine
whether further impairment testing is necessary. Due to the significant additions to goodwill resulting from the
business combinations completed during 2013 and 2012 and because our reporting units are susceptible to fair
value fluctuations, we determined that the quantitative analysis should be performed.

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. Four, six, and four
suitable guideline companies were identified for the Industrial Inkjet, Productivity Software, and Fiery reporting
units, respectively.

126

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Solely for purposes of establishing inputs for the income approach to assess the fair value of the Industrial Inkjet,
Productivity Software, and Fiery reporting units, we made the following assumptions:

•

Industrial Inkjet revenue growth of 11% in 2013 was comparable to historical normalized growth rates.

Productivity Software revenue growth of 14% in 2013 exceeded historical normalized growth rates due
to ten acquisitions completed during the years ended December 31, 2013, 2012, and 2011.

Fiery revenue growth of 11% in 2013 significantly exceeded historical normalized growth rates in the
Fiery operating segment. This significant increase followed a decrease of 15% in 2012, due to the
delayed launch of products that utilize our Fiery DFEs by the leading printer manufacturers, which
indicates that the growth rate should be normalized in the forecast horizon.

Despite the ongoing economic uncertainty, our reporting units’ revenue is assumed to grow at historical
normalized rates between 2014 and 2018 for the following primary reasons:

•

Our Industrial 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 Cretaprint industrial inkjet ceramic tile decoration business is in a sector of the market that is
growing at a faster rate than the remainder of the industrial inkjet market due to a rapid adoption
of digital technology and the ceramic tile industry’s demand for equipment to support its partial
geographic relocation to China, India, Brazil, and Indonesia.

Our acquisition strategy in the Productivity Software 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 Productivity Software 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 2019.

Gross profit percentages will approximate historical average levels in the Productivity Software
and Fiery reporting units. Industrial Inkjet gross profit will remain at the 40 percent level, which is
the approximate level achieved in 2013 and 2012, as we have resolved significant warranty issues
and exposures.

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Our discounted cash flow projections are 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 6% to 10%, which equates to a consolidated compound
annual growth rate of 7%. 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 10%. Terminal values were
calculated using the Gordon growth methodology with a consolidated long-term growth rate of 4.0%, except for
Fiery at 2.5%. The sum of the fair values of the Industrial Inkjet, Productivity Software, and Fiery reporting units
was reconciled to our current market capitalization (based on our stock price) plus an estimated control premium.
Percentage of revenue over the five-year forecast horizon were compared to approximate percentages realized by

127

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

the guideline companies. To assess the reasonableness of the estimated control premium of 6.5%, 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.

Long-Lived Assets

128

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

carrying amount of each investment. Therefore, we previously fully reserved our equity and debt investments in
privately-held companies. We received proceeds from the sale of certain of these investments of $0.1 and $2.9
million during the years ended December 31, 2013 and 2011, respectively.

Note 6: Investments and Fair Value Measurements

We invest our excess cash on deposit with major banks in money market, U.S. Treasury and government-
sponsored entity, foreign government, corporate debt, municipal, asset-backed, and mortgage-backed residential
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 sheets.

We consider all highly liquid investments with an original 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 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. Realized gains and losses on sales of financial instruments are recognized
upon sale of the investments using the specific identification method.

Our available-for-sale short-term investments as of December 31, 2013 and 2012 are as follows (in thousands):

Amortized cost

Gross unrealized
gains

Gross
unrealized losses

Fair value

December 31, 2013
U.S. Government and sponsored entities . . . . . . . . .
Corporate debt securities . . . . . . . . . . . . . . . . . . . . .
Municipal securities . . . . . . . . . . . . . . . . . . . . . . . . .
Asset-backed securities . . . . . . . . . . . . . . . . . . . . . . .
Mortgage-backed securities — residential . . . . . . . .

$ 28,880
114,333
15,319
14,148
4,906

Total short-term investments . . . . . . . . . . . . . . . . . .

$177,586

December 31, 2012
U.S. Government and sponsored entities . . . . . . . . .
Corporate debt securities . . . . . . . . . . . . . . . . . . . . .
Municipal securities . . . . . . . . . . . . . . . . . . . . . . . . .
Asset-backed securities . . . . . . . . . . . . . . . . . . . . . . .
Mortgage-backed securities — residential . . . . . . . .

$ 17,371
40,218
1,710
12,128
9,237

Total short-term investments . . . . . . . . . . . . . . . . . .

$ 80,664

$ 36
273
7
97
28

$441

7
194
3
66
63

$333

$ (7)
(42)
(2)
(9)
(10)

$ (70)

$—

(17)
—

(2)
(12)

$ (31)

$ 28,909
114,564
15,324
14,236
4,924

$177,957

$ 17,378
40,395
1,713
12,192
9,288

$ 80,966

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129

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

The fair value and duration that investments, including cash equivalents, have been in a gross unrealized loss
position as of December 31, 2013 and 2012 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, 2013
U.S. Government and sponsored entities . . . . . .
Corporate debt securities . . . . . . . . . . . . . . . . . .
Municipal securities . . . . . . . . . . . . . . . . . . . . . .
Asset-backed securities . . . . . . . . . . . . . . . . . . .
Mortgage-backed securities — residential . . . . .

$16,294
29,125
6,243
6,705
1,659

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

$60,026

December 31, 2012
U.S. Government and sponsored entities . . . . . .
Corporate debt securities . . . . . . . . . . . . . . . . . .
Asset-backed securities . . . . . . . . . . . . . . . . . . .
Mortgage-backed securities — residential . . . . .

$15,791
11,288
1,959
1,263

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

$30,301

$ (7)
(42)
(2)
(9)
(8)

$(68)

$ (1)
(17)
(2)
(7)

$(27)

$ —
—
—
—
188

$ 188

$ —
—
—
(300)

$(300)

$—
—
—
—

(2)

$16,294
29,125
6,243
6,705
1,847

$ (2)

$60,214

$—
—
—

(4)

$15,791
11,288
1,959
963

$ (4)

$30,001

$ (7)
(42)
(2)
(9)
(10)

$(70)

$ (1)
(17)
(2)
(11)

$(31)

For fixed income securities that have unrealized losses as of December 31, 2013, 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. 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, 2013 were temporary in nature.

Amortized cost and estimated fair value of investments at December 31, 2013 is summarized by maturity date as
follows (in thousands):

Mature in less than one year . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mature in one to three years . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 97,286
80,300

$ 97,391
80,566

Total short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$177,586

$177,957

Amortized cost

Fair value

For the year ended December 31, 2013, $0.1 million was recognized in net realized losses, which was comprised
of $0.1 million in realized gains from sale of investments, partially offset by $0.2 million in realized losses. For
the year ended December 31, 2012, $0.1 million was recognized in net realized losses, which was comprised of
$0.2 million in realized gains from sale of investments, partially offset by $0.3 million in realized losses. 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. As of December 31, 2013 and 2012, net unrealized gains of $0.4 and $0.3 million,
respectively, were included in OCI in the accompanying Consolidated Balance Sheets.

130

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

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;

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 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 the 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 is 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. 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 obtain the fair value of our Level 2 financial instruments from several third party asset managers, custodian
banks, 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.

As part of this process, we engaged a 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.

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Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Our investments and liabilities measured at fair value have been presented in accordance with the fair value
hierarchy specified in ASC 820 as of December 31, 2013 and 2012 in order of liquidity as follows (in thousands):

December 31, 2013

Assets:

Money market funds . . . . . . . . . . . . . . . . . .
U.S. Government and sponsored entities . .
Corporate debt securities . . . . . . . . . . . . . . .
Municipal securities . . . . . . . . . . . . . . . . . .
Asset-backed securities . . . . . . . . . . . . . . . .
. .
Mortgage-backed securities—residential

Liabilities:

Contingent consideration, current and

noncurrent . . . . . . . . . . . . . . . . . . . . . . . .
Self-insurance . . . . . . . . . . . . . . . . . . . . . . .

December 31, 2012

Assets:

Liabilities:

Contingent consideration, current and

noncurrent . . . . . . . . . . . . . . . . . . . . . . . .
Self-insurance . . . . . . . . . . . . . . . . . . . . . . .

Fair Value Measurements at Reporting Date using

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

Significant
other
Observable
Inputs
(Level 2)

Unobservable
Inputs
(Level 3)

Total

$ 52,595
28,909
117,195
17,377
14,236
4,923

$235,235

$ 52,595
12,712
—
—
—
—

$ 65,307

$ —

16,197
117,195
17,377
14,135
4,923

$169,827

$ 21,052
2,554

$ 23,606

$ —
—

$ —

$ —
—

$ —

$112,714
20,177
42,069
1,713
12,192
9,288

$198,153

$112,714
15,214
—
—
—
—

$127,928

$ —

4,963
42,069
1,713
12,139
9,288

$ 70,172

$ 38,050
1,375

$ 39,425

$ —
—

$ —

$ —
—

$ —

$ —
—
—
—
101
—

101

$21,052
2,554

$23,606

$ —
—
—
—
53
—

$38,050
1,375

$39,425

Money market funds consist of $52.6 and $112.7 million, which have been classified as cash equivalents as of
December 31, 2013 and 2012, respectively. Municipal securities include $2.1 million, which have been classified
as cash equivalents at December 31, 2013. Corporate debt securities include $2.6 and $1.7 million, which have
been classified as cash equivalents at December 31, 2013and 2012, respectively. U.S. government and sponsored
entities securities include $2.8 million, which have been classified as cash equivalents at December 31, 2012.

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 transparency.
Investments in U.S. Treasury obligations and overnight money market mutual funds have been classified as

132

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

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, 2013 and 2012.

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.
We hold asset-backed securities with income payments derived from and collateralized by a specified pool of
underlying assets. Predominately, asset-backed securities in the portfolio are collateralized by credit cards and
auto loans. We also hold two asset-backed securities collateralized by mortgage loans.

At December 31, 2013 and 2012, one corporate debt instrument has been classified as Level 3 due to its
significantly low level of trading activity. The rollforward of Level 3 investments is not provided due to
immateriality. Changes in unobservable inputs to the fair value measurement of Level 3 investments on a
recurring basis will not result in a significantly higher or lower fair value measurement.

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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, we 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.

Based on this analysis, there were no other-than-temporary impairments, including credit-related impairments,
during the years ended December 31, 2013, 2012, and 2011. Accumulated other-than-temporary credit-related
impairments charged to retained earnings and interest and other income (expense), net, consists of the following
(in thousands):

Impairments
Charged to
Retained
Earnings

Impairments
Recognized in
Other Income
(Expense), Net TOTAL

Accumulated impairments, net, attributable to assets still held at December
31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 58

$824

$882

Minority Investment in Privately-Held Company

133

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

investments had been fully impaired in prior years. We received proceeds from the sale of certain of these
investments of $0.1 and $2.9 million during the years ended December 31, 2013 and 2011, respectively.

Liabilities for Contingent Consideration

Acquisition-related current and noncurrent liabilities for contingent consideration (i.e., earnouts) are related to
the acquisitions of Metrix, GamSys, and PrintLeader in 2013; Technique, OPS, Metrics, FX Colors, and
Cretaprint in 2012; Alphagraph, Entrac, and Streamline in 2011; and Radius in 2010. The fair value of these
earnouts is estimated to be $21.1 and $38.1 million as of December 31, 2013 and 2012, respectively, by applying
the income approach in accordance with ASC 805-30-25-5. Key assumptions include discount rates between
4.2% and 6.4%, achievement of acquisition-related executive deferred compensation cost, and probability-
adjusted revenue and gross profit levels. Probability-adjusted revenue and gross profit are significant inputs that
are not observable in the market, which ASC 820-10-35 refers to as Level 3 inputs. Acquisition-related executive
deferred compensation cost of $1.8 million was expensed during the two years ended December 31, 2013,
coinciding with the continuing employment of a former shareholder of an acquired company, thereby increasing
the liability for contingent consideration accordingly. These contingent liabilities have been reflected in the
Consolidated Balance Sheet as of December 31, 2013, as current and noncurrent liabilities of $14.8 and $6.3
million, respectively.

The Cretaprint, Streamline, OPS, and Alphagraph earnout performance probability percentages have been
reduced or partially achieved in 2013, partially offset by increased performance probability percentages with
respect to the 2013 Metrics and Technique earnout performance targets. The 2013 and 2012 Entrac earnout
performance targets were not achieved, primarily due to the delayed launch of the M500 product, which is
Entrac’s next generation device. The 2012 Alphagraph earnout performance target was partially achieved.
Consequently, the net decrease in the fair value of contingent consideration was $7.1 and $2.1 million as of
December 31, 2013 and 2012, respectively, partially offset by $1.4 and $1.7 million of earnout interest accretion
related to all acquisitions, 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.

Earnout payments during the year ended December 31, 2013 of $8.9, $4.5, $1.9, $0.7, and $0.6 million related to
previously accrued Cretaprint, Metrics, Radius, Alphagraph, and Streamline contingent consideration liabilities,
respectively. Earnout payments during the year ended December 31, 2012 of $0.6, $0.3, and $0.1 million related
to previously accrued Streamline, Radius, and FX Colors contingent consideration liabilities, respectively.

134

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Changes in the contingent liability for contingent consideration are summarized as follows:

Fair value of contingent consideration at January 1, 2012 . . . . . . . . . . . . . . . . . . .
Fair value of Cretaprint contingent consideration at January 10, 2012 . . . . . . . . .
Fair value of FX Colors contingent consideration at April 5, 2012 . . . . . . . . . . . .
Fair value of Metrics contingent consideration at April 10, 2012 . . . . . . . . . . . . .
Fair value of OPS contingent consideration at October 1, 2012 . . . . . . . . . . . . . .
Fair value of Technique contingent consideration at November 16, 2012 . . . . . . .
Deferred compensation expense dependent on future employment . . . . . . . . . . . .
Changes in valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency adjustment

Fair value of contingent consideration at December 31, 2012 . . . . . . . . . . . . . . . .
Fair value of PrintLeader contingent consideration at May 8, 2013 . . . . . . . . . . .
Fair value of GamSys contingent consideration at May 31, 2013 . . . . . . . . . . . . .
Fair value of Metrix contingent consideration at October 16, 2013 . . . . . . . . . . . .
Deferred compensation expense dependent on future employment . . . . . . . . . . . .
Changes in valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency adjustment

$ 8,704
16,445
190
5,582
2,600
4,410
907
(432)
(968)
612

$ 38,050
389
2,640
1,123
940
(5,779)
(16,683)
372

Fair value of contingent consideration at December 31, 2013 . . . . . . . . . . . . . . . .

$ 21,052

ASU 2011-04 requires a narrative description of the sensitivity of recurring fair value measurements to changes
in unobservable inputs if a change in those inputs might result in a significantly higher or lower fair value
measurement. Since the primary inputs to the fair value measurement of the contingent consideration liability are
the discount rate and probability-adjusted revenue, we reviewed the sensitivity of the fair value measurement to
changes in these inputs. Probability-adjusted gross profit was not considered in the sensitivity analysis as its
impact on the fair value measurement is conditional on achievement of the revenue performance targets and has
significantly less impact on the overall potential earnout payment.

We assessed the probability of achieving the revenue performance targets for the contingent consideration
associated with each acquisition at percentage levels between 70% and 100% as of each respective acquisition
date based on an assessment of the historical performance of each acquired entity, our expectations of future
performance, and other relevant factors. A change in probability-adjusted revenue of 5% from the level assumed
in the respective valuations would result in an increase in the earnout liability of $0.6 million or a decrease of
$0.7 million resulting in a corresponding adjustment to general and administrative expense. Likewise, a change
in the discount rate of one percentage point results in either an increase or decrease of $0.1 million in the fair
value of contingent consideration.

Liability for Self-Insurance

135

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Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

and 2012, include total enrollment (including employee contributions), population demographics, and historical
claims costs incurred, which are significant inputs that are not observable in the market, which ASC 820-10-35
refers to as Level 3 inputs.

Changes in the contingent liability for self-insurance are summarized as follows:

Fair value of self-insurance liability at January 1, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions to reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: insurance claims and administrative fees paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fair value of self-insurance liability at December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions to reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: insurance claims and administrative fees paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,640
12,440
2,340
(15,045)

$ 1,375
11,590
2,333
(12,744)

Fair value of self-insurance liability at December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 2,554

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. ASU 2011-04 requires a narrative description of
the sensitivity of recurring fair value measurements to changes in unobservable inputs if a change in those inputs
might result in a significantly higher or lower fair value measurement. Since the primary inputs to the fair value
measurement of the self-insurance liability are the historical claims costs incurred, we reviewed the sensitivity of
the fair value measurement to changes in medical cost assumptions and the severity of claims experienced by
employees. A change in the severity of claims experienced and medical cost inflation of 10% results in either an
increase or decrease in the fair value of the self-insurance liability of $0.2 million.

Fair Value of Derivative Instruments

We utilize the income approach to measure the fair value of our derivative assets and liabilities under ASC 820.
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 notional amount of
our derivative assets and liabilities was $27.2 and $3.2 million as of December 31, 2013 and 2012, respectively.
The fair value of our derivative assets and liabilities that were designated for cash flow hedge accounting
treatment having notional amounts of $2.5 and $2.7 million as of December 31, 2013 and 2012, respectively, was
not material.

Note 7: Indebtedness

Short-term borrowings of $6.9 million, which were assumed in the acquisition of Cretaprint on January 10, 2012,
have been repaid. Cretaprint indebtedness consisted primarily of notes payable to banks and lines of credit with
weighted average interest rates of 5.0% and 4.5%, respectively.

Short-term liabilities to a related party of GamSys of $1.2 million, which were assumed in the acquisition of
GamSys on May 31, 2013, have been repaid.

136

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Long-term indebtedness at December 31, 2012, excluding the noncurrent portion of contingent consideration,
consisted of the remaining balance of $0.3 million, net of current portion, on a 6.75% building loan assumed
upon the acquisition of Technique and $0.1 million of Alphagraph capital lease liabilities. The Technique
building mortgage, which was a ten-year loan, was fully paid during the year ended December 31, 2013. Long-
term indebtedness at December 31, 2013 consists of approximately $$0.2 million of Cretaprint pre-acquisition
financing obligations.

Note 8: Commitments and Contingencies

Contingent Consideration

We are required 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 $21.1 and $38.1 million at December 31,
2013 and 2012, respectively, by applying the income approach in accordance with ASC 805-30-25-5. These
contingent liabilities have been reflected in the consolidated balance sheet as of December 31, 2013, as current
and noncurrent liabilities of $14.8 and $6.3 million, respectively. The potential undiscounted amount of future
contingent consideration cash payments that we could be required to make related to our business acquisitions,
beyond amounts currently accrued, is $2.4 million as of December 31, 2013.

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Liability for Self-Insurance

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 thousand per enrollee unless specific exposures are separately insured. We have accrued a contingent
liability of $2.6 and $1.4 million as of December 31, 2013 and 2012, respectively, which are not discounted,
based upon examination of historical trends, our claims experience, industry claims experience, actuarial
analysis, and estimates. The primary estimates used in the development of our accrual as of December 31, 2013
and 2012, include total enrollment (including employee contributions), population demographics, and historical
claims costs incurred.

137

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Off-Balance Sheet Financing—Synthetic Lease Arrangement

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 they purchased 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.

On April 26, 2013, we purchased an approximately 119,000 square feet cold shell building located at 6750
Dumbarton Circle, Fremont, California, the related land, and certain other property improvements from the
Trusts, for a total purchase price of $21.5 million. We have incurred build-out and construction costs, including
furniture and equipment, of $20.8 million as of December 31, 2013.

138

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Lease Commitments

As of December 31, 2013, we have leased certain of our current facilities under noncancellable operating lease
agreements. 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, including the build-to-suit lease, and
future minimum sublease receipts, for each of the next five years and thereafter as of December 31, 2013 are as
follows (in thousands):

Fiscal Year

2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter

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

Future Minimum
Lease Payments

Future Minimum
Sublease Income

$ 5,110
3,568
2,857
3,569
2,917
17,543

$35,564

$108
108
108
27
—
—

$351

Rent expense was approximately $6.1, $7.1, and $6.6 million for the years ended December 31, 2013, 2012, and
2011, respectively. Sublease rental income was approximately $3.1, $1.7, and $0.8 million for the years ended
December 31, 2013, 2012, and 2011, respectively.

Sublease income results primarily from the imputed sublease of the portion of the building sold to Gilead that
they occupied before we vacated the building and the sublease of our facility in the U.K.

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We entered into a 15-year lease agreement with the Trusts, pursuant to which we leased approximately 59,000
square feet of a building located at 6700 Dumbarton Circle, Fremont, California, which is adjacent to the
building that we purchased from the Trusts. The lease commenced on September 1, 2013. Minimum lease
payments are $18.4 million, net of a full abatement of rent for the first three years of the lease term. During the
initial lease term, we also have certain rights of first refusal to (i) lease the remaining portion of the leased
facility and/or (ii) purchase the facility. This location now serves as our worldwide corporate headquarters, as
well as engineering, marketing, and administrative operations for our Fiery operating segment. We relocated our
former corporate headquarters to this location during the fourth quarter of 2013.

The leased facility was a cold shell requiring additional build-out and tenant improvements. The Trusts paid the
costs of the build-out up to $4.5 million, including all structural improvements, and we will pay the costs of
tenant improvements beyond that amount. We have incurred $4.9 million, including furniture and equipment,
during the year ended December 31, 2013. The Trusts are responsible for any costs related to force majeure
events that result in any damage to the facility. We are responsible for cost over-runs, if any, related to force
majeure events including strikes, war, and material availability. Since we are responsible for cost overruns
related to certain force majeure events, we are in substance offering an indemnification to the Trusts for events
outside of our control. As such, we are deemed to be the accounting owner of the facility. As of December 31,
2013, we capitalized $11.1 million in property and equipment based on the estimated replacement cost of the
unfinished space, including capitalized interest, reduced by accumulated depreciation.

Monthly lease payments are allocated between the land element of the lease, which is accounted for as an
operating lease upon lease execution, and the imputed financing obligation. The imputed financing obligation is
being amortized upon lease commencement in accordance with the effective interest method using the interest

139

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

rate determined in accordance with the requirements of sale leaseback accounting. The imputed interest cost
incurred during the construction period was capitalized as a component of the construction cost upon lease
commencement. As of December 31, 2013, the imputed financing obligation in connection with the facility was
$11.5 million, including accrued interest, which was classified as a long-term imputed financing obligation in our
Consolidated Balance Sheet. If the requirements of sale leaseback accounting are satisfied, or at the end of the
initial lease term, we will reverse the net book value of the building and the corresponding imputed financing
obligation.

Guarantees and Product Warranties

Under ASC 460, Guarantees, we are required to disclose guarantees upon issuance and recognize a liability for
the fair value of obligations we assume under such guarantees. ASC 460 applies to both general guarantees and
product warranties.

Our Industrial Inkjet printer and Fiery DFE 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, an accrual is
established when the warranty liability is estimable and probable based on historical experience. A provision for
the estimated warranty costs relating to products that have been sold 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.

The changes in product warranty reserve for the years ended December 31, 2013 and 2012 were as follows (in
thousands):

For the years ended
December 31,

2013

2012

Balance at January 1, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued warranty assumed upon acquisition of Cretaprint . . . . . . . .
Provisions, net of releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 10,158
—
11,267
(10,378)

$ 8,877
1,386
10,122
(10,227)

Balance at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 11,047

$ 10,158

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 these
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

140

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

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, 2013, we are subject to the various claims, lawsuits, investigations, or proceedings discussed
below.

Componex vs. EFI

Digitech Patent Litigation

We do not believe that our products infringe any valid claim of Digitech’s patent and in July 2013, the District
Court granted summary judgment that the patent at issue is invalid. In August 2013, the District Court entered
judgment in favor of EFI and the other defendants and Digitech filed its notice of appeal to the United States
Court of Appeals for the Federal Circuit (“Court of Appeals”). The appeal is currently pending.

Durst v. EFI GmbH and EFI, et al.

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Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

In a separate action filed in the German Federal Patent Court, we challenged the validity of the Durst patent,
whichwe believe is invalid in light of prior art. The Federal Patent Court held a hearing on the validity of the
patent on October 23, 2013 and, following the hearing, declared the relevant claims in Durst’s patents to be
invalid. Durst has the right to appeal the ruling.

Perfectproof v. EFI GmbH

Kerajet vs. Cretaprint

142

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

A trial was held on October 4, 2012. On January 2, 2013, the court ruled in favor of Cretaprint concluding that
the Cretaprint products do not infringe the Claramonte patent. Mr. Claramonte appealed the ruling on January 30,
2013. On July 15, 2013, the Spanish Court of Appeal affirmed the trial court’s conclusion that the Cretaprint
products do not infringe the Claramonte patent. Mr. Claramonte did not appeal the ruling of the Spanish Court of
Appeal. Accordingly, EFI no longer has any potential liability in this matter.

SkipPrint Patent Litigation

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Other Matters

143

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Note 9: Common Stock Repurchase Programs

On August 31, 2012, the board of directors approved the repurchase of $100 million of outstanding common
stock. Under this publicly announced plan, we repurchased 0.7 and 1.3 million shares for an aggregate purchase
price of $19.3 and $22.9 million during the years ended December 31, 2013 and 2012, respectively.

Our employees have the option to surrender shares of common stock to satisfy their tax withholding obligations
that arise on the vesting of RSUs. In addition, certain employees can surrender shares to satisfy the exercise price
of certain stock options and any tax withholding obligations incurred in connection with such exercises.
Employees surrendered 0.5 and 0.4 million shares for an aggregate purchase price of $13.9 and $12.3 million for
the years ended December 31, 2013 and 2012, respectively.

These repurchased shares reduce shares outstanding and are recorded as treasury stock under the cost method
thereby reducing stockholders’ equity by the cost of the repurchased shares. Our buyback program is limited by
SEC regulations and is subject to compliance with our insider trading policy.

On November 6, 2013, the board of directors approved the retirement of 34.0 million shares of treasury stock.
These retired shares are now classified as authorized, but unissued, shares. The retired shares had a carrying
value, at cost, of $592.4 million. Under the cost method, the par value of formally retired treasury stock is
deducted from common stock, a pro rata share is deducted from additional paid-in capital, and any remaining
excess of cost over the par value and the pro rata share of additional paid-in capital is deducted from retained
earnings.

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 monetary assets and liabilities,
including intercompany transactions, 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. Foreign exchange
contracts with notional amounts of $2.5 and $2.7 million and net asset/liability fair values that are immaterial
have been designated for cash flow hedge accounting treatment at December 31, 2013 and 2012, 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 revenue in Europe, Japan, the U.K., Latin America,
China, Australia, and New Zealand and are primarily related to non-U.S. dollar-denominated operating expenses
in Europe, India, Japan, the U.K., China, Brazil, and Australia. We hedge our operating expense cash flow
exposure in Indian rupees. We hedge remeasurement exposure associated with Euro-denominated intercompany
loans and Indian rupee net monetary assets. As of December 31, 2013, we had not entered into hedges against
any other currency exposures, but we may consider hedging against movements in other currencies in the future.

144

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Foreign currency derivative contracts with notional amounts of $2.5 and $2.7 million and net asset/liability
amounts that are immaterial have been designated as cash flow hedges of our Indian rupee operating expense
exposure at December 31, 2013 and 2012, 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.

Forward contracts not designated as hedging instruments with notional amounts of $24.7 and $0.5 million are
used to hedge foreign currency balance sheet exposures at December 31, 2013 and 2012, respectively. They are
not designated for hedge accounting treatment since there is a natural offset for the remeasurement of the
underlying foreign currency denominated asset or liability. We recognize changes in the fair value of non-
designated derivative instruments in earnings in the period of change. Gains (losses) on foreign currency forward
contracts used to hedge balance sheet exposures are recognized in interest and other income (expense), net, in the
same period as the remeasurement gain (loss) of the related foreign currency denominated assets and liabilities.
Forward contracts not designated as hedging instruments at December 31, 2013, consist of hedges of Euro-
denominated intercompany loans with notional amounts of $24.7 million. Forward contracts not designated as
hedging instruments at December 31, 2012 consist of hedges of Indian rupee net monetary assets with a notional
amount of $0.5 million.

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Note 11: Income Taxes

The components of income before income taxes are as follows (in thousands):

U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$127,232
45,906

$ 5,615
29,408

$ 3,143
27,277

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

$173,138

$35,023

$30,420

For the years ended December 31,

2013

2012

2011

145

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

The provision for (benefit from) income taxes is summarized as follows (in thousands):

For the years ended December 31,

2013

2012

2011

Current:

U.S. Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 6,589
(3,250)
6,845

$ (4,788)
1,841
7,522

$ 1,685
1,202
2,759

Total current

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

10,184

4,575

5,646

Deferred:

20,875
33,532
(560)

(35,487)
(9,648)
(7,686)

(688)
(1,114)
(889)

Total deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

53,847

(52,821)

(2,691)

Provision for (benefit from) income taxes . . . . . . . . . . . . . . . . . . .

$64,031

$(48,246)

$ 2,955

Reconciliation of the income tax provision (benefit) computed at the federal statutory rate to the actual tax
provision (benefit) is as follows (in thousands):

Tax provision at federal statutory rate . . . . . . . . . . . . .
State income taxes, net of federal benefit . . . . . . . . . . .
Research and development credits . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
Foreign tax rate differential
Non-deductible acquisition & integration costs . . . . . .
Increase in value of intangible assets . . . . . . . . . . . . . .
Reduction in accrual for estimated potential tax

assessments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital loss due to liquidation of subsidiary . . . . . . . . .
Non-deductible stock-based compensation pursuant to
ASC 718-740 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Valuation allowance changes affecting provision for

income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefit related to reassessment of taxes from filing of
prior year tax returns . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

For the years ended December 31,

2013

2012

2011

$60,598
467
(6,793)
(7,417)
58

—

35.0% $ 12,257
(5,074)
0.3
(629)
(3.9)
(300)
(4.3)
720
(0.1)
(6,494)
—

35.0% $10,647
57
(14.5)
(2,274)
(1.8)
(4,626)
(0.9)
—
2.0
—
(18.5)

35.0%
0.2
(7.5)
(15.2)
—
—

(4,427)

(2.6)

— —

(11,431)
(38,859)

(32.6)
(111.1)

(2,295)
—

(7.6)
—

1,764

1.0

1,528

20,012

11.6

274

4.4

0.8

2,179

7.2

(706)

(2.3)

(72)
(159)

(0.1)
(0.1)

—
(610)

—
(1.7)

—
(395)

—
(1.3)

Provision for (benefit from) income taxes . . . . . . . . . .

$64,031

36.8% $(48,618)

(138.9)% $ 2,587

8.5%

In the fourth quarter of 2013, we determined that it is more likely than not that our California deferred tax assets
will not be realized based on the size of the net operating loss and research and development credits being
generated that exceed the utilization of these tax attributes. As a result, we established a valuation allowance of
$19.4 million for the estimate of state deferred tax assets that may not be realized as of December 31, 2013.

146

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Research and development credits include a benefit of $3.2 million resulting from the renewal on January 2,
2013, of the U.S. federal research and development tax credit retroactive to 2012 pursuant to the American
Taxpayer Relief Act of 2012. ASC 740-10-45-15 requires the effects of a change in tax law or rates be
recognized in the period that includes the enactment date.

The provision for reassessment of tax exposure related to the filing of prior year tax returns of $0.1 million for
the year ended December 31, 2013, in the table above consists of $1.8 million of tax expense required to
correctly state our prior year tax provision, which was partially offset by $1.9 million change in estimate for
items recognized in the prior year. The prior year adjustment is required to correctly state our tax provision
subsequent to the realignment of the ownership of our intellectual property that is described more fully below.
We have determined that the impact of the prior year adjustment is immaterial to our consolidated financial
statements for the years ended December 31, 2013, 2012, and 2011.

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, Spain, and the Cayman
Islands, which are jurisdictions with tax rates materially lower than the statutory U.S. tax rate of 35%. In 2012,
we realigned the ownership of our Productivity Software and Cretaprint intellectual property to parallel our
worldwide intellectual property ownership, which primarily drove the increased benefit related to the foreign rate
differential in 2013. In addition to achieving operational synergies, one of the effects of this reorganization was
the recognition of a tax benefit of $6.5 million in 2012 related to an increase in the value of intangible assets for
Spanish statutory and tax reporting purposes. 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 payments of taxes and/or
increased interest expense. As of December 31, 2013, we have permanently reinvested $70.5 million of
unremitted foreign earnings. Should these earnings be remitted to the U.S., the tax on these earnings would be
$9.1 million.

The tax effects of temporary differences that give rise to deferred tax assets (liabilities) are as follows (in
thousands):

December 31,

2013

2012

Reserves and accruals not currently deductible for tax purposes . . . . . . . . . . . . . . . . . . . . .
Net operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax credit carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred gain on sale of building and land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other

$ 14,157
11,264
57,000
8,856
—
2,463
2,494

8,021
11,690
47,347
7,066
47,866
2,708
(677)

Gross deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

96,234

124,021

Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of identified intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3,985)
(13,163)
(1,746)

(2,554)
(13,788)
(4,873)

Gross deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(18,894)

(21,215)

Deferred tax valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(28,845)

(2,624)

Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 48,495

$100,182

147

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Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

We have $23.8 million ($50.8 million for state tax purposes) and $30.9 million ($28.6 million for state tax
purposes) of loss and credit carryforwards at December 31, 2013 for U.S. federal and state tax purposes. These
federal and state losses and credits will expire between 2021 and 2031. A significant portion of these net
operating loss and credit carryforwards relate to recent acquisitions. Utilization of these loss and credit
carryforwards will be subject to an annual limitation under the IRC. In addition, the decrease in the deferred gain
on the sale of building and land is the result of recognizing the deferred gain associated with the sale of our
Foster City corporate headquarter building and related land in 2013. 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 valuation allowance related to California net operating loss and research and
development credits. The $26.2 million increase in the valuation allowance resulted primarily from the
establishment of a valuation allowance on California deferred tax assets. If these foreign tax credits,
compensation deductions, and California deferred tax assets are ultimately utilized, then the resulting benefit
would reduce income tax expense.

As of December 31, 2013, 2012, and 2011, gross unrecognized benefits that would affect the effective tax rate if
recognized were $33.0, $29.8, and $35.6 million, respectively, offset by deferred tax benefits of $1.1, $2.4, and
$2.5 million related to the federal tax effect of state income taxes for the same periods. Over the next twelve
months, our existing tax positions will continue to generate increased liabilities for unrecognized tax benefits.

A reconciliation of the change in the gross unrecognized tax benefits from January 1, 2011 to December 31, 2013
is as follows (in millions):

Federal, State,
and Foreign
Tax

Accrued
Interest and
Penalties

Gross
Unrecognized
Income Tax
Benefits

Balance at January 1, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . .
Additions for tax positions related to 2012 . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions due to lapse of applicable statute of limitations . . . . . . . . . .

Balance at December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . .
Additions for tax positions related to 2013 . . . . . . . . . . . . . . . . . . . . . . .
Reductions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions due to lapse of applicable statute of limitations . . . . . . . . . .

Balance at December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 31.7
—
5.6
(0.1)
(0.6)
(2.0)

$ 34.6
0.1
5.0
(0.4)
(10.3)

$ 29.0
2.7
7.3
(1.9)
(1.1)
(3.6)

$ 32.4

$ 0.8
0.4
—
—
(0.1)
(0.1)

$ 1.0
0.3
—
—
(0.5)

$ 0.8
0.3
—
—
(0.1)
(0.4)

$ 0.6

$ 32.5
0.4
5.6
(0.1)
(0.7)
(2.1)

$ 35.6
0.4
5.0
(0.4)
(10.8)

$ 29.8
3.0
7.3
(1.9)
(1.2)
(4.0)

$ 33.0

We recognize potential accrued interest and penalties related to unrecognized tax benefits in income tax expense.
At December 31, 2013, 2012, and 2011, we have accrued $1.0, $1.2, and $1.7 million, respectively, for potential
payments of interest and penalties.

148

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

We are subject to examination by the Internal Revenue Service for the 2010-2012 tax years, state tax
jurisdictions for the 2009-2012 tax years, the Netherlands tax authority for the 2011 and 2012 tax years, and the
Spanish tax authority for the 2009-2012 tax years. It is reasonably possible that our unrecognized tax benefits
will decrease up to $3.3 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 a lapse of the statute of limitations for federal and state tax
purposes.

Note 12: Employee Benefit Plans

Equity Incentive Plans

Subsequent to stockholders approved our 2009 Equity Incentive Award Plan, no awards may be granted under
any of our prior plans. As of December 31, 2013, we had outstanding equity awards under three equity incentive
plans, including the 2009 Plan (defined below) and two prior equity incentive plans.

Our primary equity incentive plans are summarized as follows:

2009 Stock Plan

In June 2009, our stockholders approved the 2009 Equity Incentive Award Plan and the reservation of an
aggregate of 5 million shares of our common stock for issuance pursuant to such plan. In May 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. On June 4 2013, our stockholders approved
amendments to the Amended and Restated 2009 Equity Incentive Award Plan (“2009 Plan”) to increase the
number of shares of common stock reserved under the plan for future issuance from 7.0 to 11.6 million shares
and authorize the granting of performance-based awards under the plan through the 2018 annual meeting of
stockholders.

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The 2009 Plan provides for grants of stock options (both incentive 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 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

149

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

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, 2013, approximately 2,800 employees and consultants and 5
non-employee directors were eligible to participate in the 2009 Plan.

There were 2.7, 3.2, and 3.4 million shares outstanding and 4.5, 0.8, and 2.0 million shares available for grant
under the 2009 Plan as of December 31, 2013, 2012, and 2011, 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 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 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 value on the date of
the grant.

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.

As of December 31, 2013, 2012, and 2011, there were 0.5, 0.6, and 0.9 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, T/R, 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 value on the
date of the grant. The vesting period for restricted stock must be at least (a) one 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 years in the case of an RSA absent such performance-based vesting. Under this plan, RSAs 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). Stock options, RSUs, and RSAs 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, 2013, 2012, and 2011, there were less than 0.1, 0.1, and 0.6 million shares, respectively,
outstanding under the 2004 Plan.

150

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Amended and Restated 2000 Employee Stock Purchase Plan

In June 2013 and 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 2 and
3 million shares, respectively. 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.

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.

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
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 provides 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, 2013, 2012, and 2011, 0.6, 0.6, and 0.6 million shares were issued under
the ESPP at an average purchase price of $12.39, $12.24, and $9.49, respectively. As of December 31, 2013,
there was $0.8 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, 2013, 2012, and 2011, there were 2.4, 1.0, and 1.5 million shares, respectively, of our common
stock reserved for issuance under the ESPP.

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. Subsequent to December 31, 2013, the maximum employee contribution was increased from 40% to
75%, limited by the maximum annual amount as set periodically by the IRS. 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 $2.0, $1.9, and $1.7 million during the years ended December 31, 2013, 2012, and 2011,
respectively. The employees’ contributions and our contributions are invested in mutual funds managed by a
fund manager, or in self-directed retirement plans.

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

151

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-
0
1
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r
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F

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

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.

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, 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 upon 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.

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 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.

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, 2013, 2012, and 2011 is summarized as follows (in
thousands):

2013

2012

2011

Employee stock options . . . . . . . . . . . . . . . . . . . . . . .
Non-vested RSUs and RSAs . . . . . . . . . . . . . . . . . . .
ESPP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

921
22,026
2,823

$ 1,039
15,750
2,932

$ 2,096
17,926
3,347

Total stock-based compensation . . . . . . . . . . . . . . . . . . . .
Tax effect of stock-based compensation . . . . . . . . . . . . . .

25,770
(7,535)

19,721
(5,682)

23,369
(7,598)

Net effect on net income . . . . . . . . . . . . . . . . . . . . . . . . . .

$18,235

$14,039

$15,771

Valuation Assumptions for Stock Options and ESPP Purchases

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.

152

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

No stock options were granted during the year ended December 31, 2013. The estimated per share weighted
average fair value of stock options granted and the assumptions used to estimate fair value for the years ended
December 31, 2012 and 2011 and the estimated per share weighted average fair value of ESPP shares issued and
the assumptions used to estimate fair value for the years ended December 31, 2013, 2012, and 2011 are as
follows:

Stock Options
Years ended
December 31,

2012

2011

ESPP
Years ended December 31,

2013

2012

2011

Weighted average fair value per share . . . . . . . . . . . .
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . .
Expected term (in years) . . . . . . . . . . . . . . . . . . . . . . .

Stock Option Activity

7.53

$5.77

$6.62
$
43.8% 48% 25% - 38% 32% - 49% 28% - 42%
0.5% 0.8% 0.1% - 0.4% 0.1% - 0.2% 0.2% - 0.6%
4.0

0.5 - 2.0

4.79

4.70

4.0

K
-
0
1
m
r
o
F

Stock options outstanding and exercisable as of December 31, 2013, 2012, and 2011 and activity for each of the
years then ended is as follows (in thousands, except weighted average exercise price and remaining contractual
term):

Weighted
average
exercise
price

Weighted
average
remaining
contractual
term
(years)

Aggregate
intrinsic
value

Options outstanding at January 1, 2011 . . . . . . . . . . . . . . . . . . . . . . .

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 granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options forfeited and expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Options forfeited and expired, net of granted . . . . . . . . . . . . . . . . . . . . .
Options exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

126
(258)

(132)
(785)

16.57
15.74

15.56

Options outstanding at December 31, 2012 . . . . . . . . . . . . . . . . . . . .

1,536

$14.19

Options granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Options forfeited and expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(42)

—
25.63

Options forfeited and expired, net of granted . . . . . . . . . . . . . . . . . . . . .
Options exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(42)
(434)

11.93

Options outstanding at December 31, 2013 . . . . . . . . . . . . . . . . . . . .

1,060

$14.66

Options vested and expected to vest at December 31, 2013 . . . . . . . .

1,046

$14.65

Options exercisable at December 31, 2013 . . . . . . . . . . . . . . . . . . . . .

887

$14.57

153

2.86

2.83

2.46

$25,526

$25,193

$21,422

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

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, 2013, 2012, and 2011. The total intrinsic value of options
exercised, determined as of the date of option exercise, was $5.5, $1.4, $0.6 million for the years ended
December 31, 2013, 2012, and 2011, respectively. There was $0.3 million of total unrecognized compensation
cost related to stock options expected to vest as of December 31, 2013. That cost is expected to be recognized
over a weighted average period of 0.9 years.

Stock options outstanding and exercisable as of December 31, 2013 are summarized as follows (shares in
thousands):

Range of exercise prices

$9.12 to $10.80 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$11.40 to $11.40 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$11.92 to $13.72 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$14.28 to $15.25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$15.88 to $15.88 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$16.32 to $16.32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$16.57 to $16.57 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$17.97 to $26.67 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$28.34 to $28.51 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Options outstanding

Options exercisable

Weighted
average
remaining
contractual
term (years)

Weighted
average
exercise price

2.62
3.64
3.48
4.84
1.16
1.62
5.68
3.85
0.41

2.86

$10.46
11.40
12.83
14.28
15.88
16.32
16.57
18.87
28.51

$14.66

56
124
143
44
350
101
33
34
2

887

Weighted
average
exercise
price

$10.36
11.40
12.75
14.29
15.88
16.32
16.57
19.15
28.51

$14.57

73
130
155
86
350
101
117
46
2

1,060

Non-vested RSUs and RSAs

Non-vested RSUs and RSAs were awarded to employees under our equity incentive plans. Non-vested RSUs do
not have the voting rights of common stock and the shares underlying non-vested RSUs are not considered issued
and outstanding.

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), although we do
not intend to declare dividends.

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, 2013, 2012, and 2011 were $29.11, $16.05, and $15.09,
respectively. No RSAs were granted during 2013, 2012, and 2011.

154

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Non-vested RSUs and RSAs as of December 31, 2013, 2012, and 2011, and activity for each of the years then
ended, is as follows (shares in thousands):

RSUs

RSAs

Weighted
average
grant
date fair
value

Non-vested at January 1, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,538

$11.67

Restricted stock granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,505

15.09

Restricted stock vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted stock forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1,317)
(224)

11.87
11.89

Non-vested at December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,502

$13.60

Restricted stock granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted stock vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted stock forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,281
(1,291)
(147)

16.05
13.05
13.40

Non-vested at December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,345

$15.26

1,222
(1,159)
(319)

29.11
14.41
17.78

Non-vested at December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,089

$23.44

Weighted
average
grant
date fair
value

$ 27.21

—

(27.21)
—

$ —

—
—
—

$ —

—
—
—

$ —

101

—

(101)
—

—

—
—
—

—

—
—
—

—

K
-
0
1
m
r
o
F

Vested RSUs

The fair value of RSUs that vested during the years ended December 31, 2013, 2012, and 2011, determined as of
the vesting date, were $14.41, $16.9, and $20.2 million, respectively. The aggregate intrinsic value of RSUs
vested and expected to vest at December 31, 2013 was $72.0 million, calculated as the closing price per share of
our common stock on the last trading day of the fiscal period multiplied by 1.9 million RSUs vested and expected
to vest at December 31, 2013. There was approximately $16.4 million of unrecognized compensation costs
related to RSUs expected to vest as of December 31, 2013. That cost is expected to be recognized over a
weighted average period of 1.1 years.

Vested 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.

Performance-based and Market-based RSUs and Stock Options

We use the BSM option pricing model to value performance-based awards. Required assumption to value
performance-based awards under the BSM model were previously discussed and summarized in the section titled
“Valuation Assumptions for Stock Options and ESPP Purchases.”

155

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Our performance-based RSUs generally vest when specified performance criteria are met based on revenue and
non-GAAP operating income targets during the service period; otherwise, they are forfeited. The performance
criteria for long-term incentive plans must be achieved during four consecutive quarters during the service
period. Non-GAAP operating income is defined as operating income determined in accordance with GAAP,
adjusted to remove the impact of certain expenses. The grant date fair value determined in accordance with the
BSM valuation model is being amortized over the service period of the awards. The probability of achieving the
awards was determined based on review of the actual results achieved thus far by each business unit compared
with the operating plan during the pertinent service period as well as the overall strength of the business unit
within EFI. Stock-based compensation expense was adjusted based on this probability assessment. As actual
results are achieved during the service period, the probability assessment is updated and stock-based
compensation expense adjusted accordingly.

We use a Monte Carlo option pricing model to value market-based awards. Market-based awards vest when our
average closing stock price exceeded defined multiples of the closing stock price on a specified date for 20
consecutive trading days. If these multiples were not achieved by another specified date, the awards are forfeited.
The grant date fair value is being amortized over the average derived service period of the awards. The average
derived service period and total fair value were determined using a Monte Carlo valuation model based on our
assumptions, which include a risk-free interest rate and implied volatility.

Performance-based and market-based RSUs and stock options that were outstanding at any point during the years
ended December 31, 2013, 2012, and 2011 are summarized by year as follows:

2013 Grant Dates
Shares Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Shares Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Shares Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Service Period (years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Grant date fair value (millions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Short-Term Incentive

Long-Term Incentive

Performance-Based RSUs Performance-Based RSUs

Dates

Amounts

Dates

Amounts

2/21/2013
3/27/2013
3/27/2013
5/10/2013

234,519
2,660
5,920
1,013
—
(15,570)

228,542

1.00

5.7

8/15/2013

280,305

—

280,305

4.00

8.6

Short-Term Incentive

Long-Term Incentive

Performance-Based RSUs Performance-Based RSUs

Dates

Amounts

Dates

Amounts

2012 Grant Dates
Shares Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Shares Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Shares Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Shares Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Service Period (years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2/9/2012
2/13/2012
2/13/2012
5/11/2012
2/22/2013
5/11/2013

Grant date fair value (millions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

156

5/18/2012

191,594

51,286
207,448
15,000
9,116

(157,140) 8/15/2013

(63,868)

(8,016)
(117,694)

—

1.00

4.9

(18,333)

109,393

3.00

3.0

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

2011 Grant Dates

Dates

Amounts

Dates

Amounts

Dates

Amounts

Dates

Amounts

Short-Term Incentive
Performance-Based RSUs

Long-Term Incentive
Performance-Based RSUs

Long-Term Incentive

Performance-Based RSUs Market-Based RSUs

2/9/2011
2/25/2011
2/25/2011
2/9/2012
2/13/2012
2/25/2012
2/25/2012

Shares Granted . . . . . .

Shares Vested . . . . . . .

Shares Forfeited . . . . .

Shares Outstanding . . .

Service Period

(years) . . . . . . . . . . .

Derived Service

Period (years) . . . . .

Grant date fair value

(millions) . . . . . . . . .

Risk-free interest

rate . . . . . . . . . . . . .

Volatility . . . . . . . . . . .

312,097 8/15/2011

195,156 8/15/2011

8,000

1/5/2011

90,000

1,503
10,000
(93,423) 5/23/2012
(185,251) 8/15/2013

(1,503)
(7,750)
(35,673)

—

1.00

(64,909)
(62,201)

(14,287)

53,759

3.00

5/10/2011
2/7/2013
4/1/2013

(28,000)
(31,000)
(31,000)

8,000

7.00

—

3.93

5.0

3.0

0.1

1.1

2.9%

40%

2010 Grant Dates

Short-Term Incentive

2009 Grant Dates

Performance-Based RSUs Market-Based RSUs

Market-Based Options

ROE-Driven
Perf-Based Options

Pre-2011 Grant Dates

Dates

Amounts

Dates

Amounts

Dates

Amounts

Dates

Amounts

K
-
0
1
m
r
o
F

Shares Granted . . . . . . 3/2/2010
8/1/2010
Shares Vested . . . . . . . 3/2/2011

384,875
12,000
(305,940)

Shares Forfeited . . . . .

Shares Outstanding . .

Service Period

(years)

. . . . . . . . . .

Derived Service

Period (years) . . . . .

Grant date fair value

(millions) . . . . . . . .

Risk-free interest

rate . . . . . . . . . . . . .

Volatility . . . . . . . . . .

6/18/2009
8/28/2009
1/1/2011
1/10/2011
12/17/2012
12/13/2013

83,000
15,000 8/28/2009
(5,000) 4/27/2011
(24,335) 1/14/2013
(24,335) 2/11/2013
(24,330) 3/25/2013
(20,000)

294,076 8/28/2009
(59,598) 2/9/2012
(43,706)
(43,706)
(43,706)
(103,360)

—

32,674
(5,298)

(11,836)

15,540

(90,935)

—

1.00

4.35

4.88

3.71

4.7

0.9

1.7

0.1

3.5%

50%

3.1%

50%

157

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Shares vested reflect the date that the performance criteria were achieved with the exception of the Compensation
Committee certification requirement, which typically occurs at a later date.

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.

Note 13: Gain on Sale of Building and Land

Direct transaction costs consist primarily of documentary transfer and title costs, legal and escrow 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, 2013 as follows (in millions):

Sales proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Imputed interest obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 179.7
3.5

Deferred proceeds from property transaction . . . . . . . . . . . . . .
Land, building , and improvements . . . . . . . . . . . . . . . . . . . . . .
Imputed sublease receivable . . . . . . . . . . . . . . . . . . . . . . . . . . .
Relocation costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred lease financing costs . . . . . . . . . . . . . . . . . . . . . . . . .
Direct transaction costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

183.2
(60.3)
(3.6)
(1.3)
(0.4)
(0.4)

Gain on sale of building and land . . . . . . . . . . . . . . . . . . . . . . .

$ 117.2

The gain on sale of building and land is recognized as a component of income from operations as required by
ASC 360-10-45-5. Relocation costs include costs incurred to relocate information technology equipment, lab
equipment, office furniture, and related overtime.

158

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Note 14: Restructuring and Other

During the years ended December 31, 2013, 2012, and 2011, 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 to reconcile our cost structure following our business acquisitions.
These charges primarily relate to cost reduction actions taken to lower our quarterly operating expense run rate in
the Fiery operating segment during the first quarter of 2013, targeted head count reductions in the Industrial
Inkjet operating segment, and the integration of Productivity Software head count with acquired entities.
Restructuring and other consists primarily of restructuring, severance, retention, facility downsizing and
relocation, and acquisition integration expenses. Our restructuring and other plans are accounted for in
accordance with ASC 420, ASC 712, and ASC 820.

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Retention expenses of $0.9 million were accrued during the years ended December 31, 2013 and 2012 associated
with the Cretaprint acquisition.

Restructuring and other reserve activities for the years ended December 31, 2013 and 2012 are summarized as
follows (in thousands):

Reserve balance at January 1 . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash acquisition-related compensation costs . . . . . . . . .
Cash payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2013

2012

$ 1,670
1,251
3,583
(940)
(4,691)

$ 1,870
2,525
3,278
(907)
(5,096)

Reserve balance at December 31 . . . . . . . . . . . . . . . . . . . . . .

873

$ 1,670

159

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Note 15: Segment Information, Geographic Regions, and Major Customers

Operating Segments

ASC 280, Segment Reporting, requires operating segment information to be presented based on the internal
reporting used by the chief operating decision making group to allocate resources and evaluate operating segment
performance. Our enterprise management processes use financial information that is closely aligned with our
three operating segments 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, operating segment profit (i.e., gross profit), assets, and liabilities in accordance with our
operating segments as follows:

Our chief operating decision making group evaluates the performance of our 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, corporate sales and
marketing, research and development, significant real estate transactions, income taxes, various non-recurring
charges, and other separately managed general and administrative expenses.

160

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Operating segment profit (i.e., gross profit), excluding stock-based compensation expense, for the years ended
December 31, 2013, 2012, and 2011 is summarized as follows (in thousands):

For the years ended December 31,

2013

2012

2011

Industrial Inkjet

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit percentages . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$354,614
140,095

$320,228
127,783

$240,318
92,738

39.5%

39.9%

38.6%

Productivity Software

$118,409
85,246

$103,466
74,426

$ 81,165
56,825

72.0%

71.9%

70.0%

Fiery

$254,670
171,642

$228,443
153,805

$270,073
183,084

67.4%

67.3%

67.8%

A reconciliation of operating segment gross profit to the consolidated statements of operations for the years
ended December 31, 2013, 2012, and 2011 is as follows (in thousands):

Segment gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . .

$396,983
(1,817)

$356,014
(1,193)

$332,647
(1,664)

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$395,166

$354,821

$330,983

For the years ended December 31,

2013

2012

2011

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Tangible and intangible assets, net of liabilities, are summarized by operating segment as follows (in thousands):

Industrial
Inkjet

Productivity
Software

Fiery

December 31, 2013
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . .
Identified intangible assets, net
Tangible assets, net of liabilities . . . . . . . . . . . . . . . . . . . . . . . . .

$ 61,704
33,436
95,350

$106,697
33,271
(14,388)

$64,801
2,015
25,736

Net tangible and intangible assets . . . . . . . . . . . . . . . . . . . . . . . .

$190,490

$125,580

$92,552

December 31, 2012
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Identified intangible assets, net
. . . . . . . . . . . . . . . . . . . . . . . . . .
Tangible assets, net of liabilities . . . . . . . . . . . . . . . . . . . . . . . . .

$ 60,745
41,103
80,569

$ 94,185
36,141
(14,312)

$64,526
3,000
26,304

Net tangible and intangible assets . . . . . . . . . . . . . . . . . . . . . . . .

$182,417

$116,014

$93,830

Operating segment assets exclude corporate assets, such as cash and cash equivalents, short-term investments,
corporate headquarters facility, deferred proceeds from property transaction and related assets, imputed financing
obligation, taxes receivable, and taxes payable. In accordance with ASC 805, we revised previously issued post-
acquisition financial information to reflect adjustments to the preliminary accounting for business acquisitions as
if the adjustments occurred on the acquisition date. Accordingly, we have increased goodwill by $0.8 and $0.4

161

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

million at December 31, 2012 to reflect opening balance sheet adjustments in the Industrial Inkjet and
Productivity Software operating segments, respectively, related to our acquisitions of Cretaprint, OPS, and
Technique.

Information about Geographic Areas

Our revenue originates in the U.S., China, the Netherlands, Germany, France, Japan, the U.K., Spain, Brazil,
Australia, and New Zealand. We report revenue by geographic area based on ship-to destination. 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, 2013, 2012, and 2011 was as follows
(in thousands):

For the years ended December 31,

2013

2012

2011

Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EMEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
APAC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
APAC, ex Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$412,127
207,665
107,901
21,977
85,924

$354,114
195,397
102,626
27,870
74,756

$345,303
178,471
67,782
35,655
32,127

Total Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$727,693

$652,137

$591,556

Our tangible long-lived assets consist primarily of property and equipment, net, of $84.8 million. Of this amount,
$80.1 million resides in the Americas, $3.5 million resides in EMEA, consisting primarily of the Technique
building and Cretaprint equipment and leasehold improvements, and $1.2 million resides in APAC, consisting
primarily of India leasehold improvements and equipment.

Major Customers

Xerox provided 12% of our revenue for the years ended December 31, 2013 and 2012. 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.

One customer, Xerox, had an accounts receivable balance greater than 10% of our net consolidated accounts
receivables at December 31, 2013 and 2012, accounting for 13% and 10%, respectively.

Note 16: Subsequent Event

On January 16, 2014, we acquired privately-held SmartLinc, Inc. (“SmartLinc), headquartered in Milwaukee,
Wisconsin, for approximately $4.4 million in cash, plus additional future cash earnouts contingent on achieving
certain performance targets. SmartLinc is a provider of business process automation software for shipping and
logistics and will be integrated into the Productivity Software operating segment.

162

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, 2013
and 2012. 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)

2013

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income per basic common share . . . . . . . . . . . . . . . . . . . . . . .
Net income per diluted common share . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of building and land . . . . . . . . . . . . . . . . . . . . . . . . . .

$171,359
93,860
9,454
8,362
$
0.18
0.17
$
(76) $

$180,298
97,983
11,821
9,424
$
0.20
0.20
$
(35) $

$197,213
$178,823
106,110
97,213
139,497
13,876
75,180
16,141
1.60
$
0.34
0.33
1.54
$
(236) $117,563

$
$
$

(in thousands except per share data)

2012

$160,056
87,667
7,681
6,234
0.14
0.13

$174,105
94,285
11,821
56,619
$
1.22
1.19
$
$ — $ — $ — $ 43,600

$163,901
89,792
10,379
7,005
0.15
0.15

$154,074
83,077
4,006
13,411
0.29
0.28

$
$

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Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income per basic common share . . . . . . . . . . . . . . . . . . . . . . .
Net income per diluted common share . . . . . . . . . . . . . . . . . . . . . .
Tax benefit from capital loss due to liquidation of subsidiary . . . .

163

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 this 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, 2013.

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, 2013. 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 (1992).

Based on our assessment using those criteria, we concluded that our internal control over financial reporting was
effective as of December 31, 2013.

We have excluded PrintLeader, GamSys, Metrix, and Lector from our assessment of internal control over
financial reporting as of December 31, 2013 because they were acquired by us during fiscal year 2013.
PrintLeader, GamSys, Metrix, and Lector are wholly-owned by us with total assets and total revenue representing
2.3% and 0.4% respectively, of the related consolidated financial statement amounts as of and for the year ended
December 31, 2013.

PricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited the effectiveness of
our internal control over financial reporting as of December 31, 2013, as stated in their report included in this
Annual Report on Form 10-K.

164

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended
December 31, 2013 that have materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.

Item 9B: Other Information

None.

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165

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 2014 Annual Meeting of Stockholders (the
“2014 Proxy Statement”). Information regarding our current executive officers is incorporated by reference from
information contained under the caption “Executive Officers” in our 2014 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 2014 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 2014 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 2014 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 2014 Proxy Statement.

We intend to disclose any amendment to our code of ethics, or waiver from, certain provisions of our code of
ethics as applicable for our directors and executive officers, including our principal executive officer, principal
financial and accounting officer, chief accounting officer, and controller, or persons performing similar
functions, by posting such information on our website at www.efi.com.

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 2014 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 2014 Proxy Statement.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table sets forth information as of December 31, 2013 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 . . . . . . . . . . . . . . . . . . . . . . . . . . .

3,150,361

$14.66(1)

7,150,294(2)

Equity compensation plans not approved by

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

—

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

3,150,361

—

$14.66

—

7,150,294

(1) Calculated without taking into account 2,089,814 shares of RSUs that will become issuable as those units vest,

(2)

without any cash consideration or other payment required for such shares.
Includes 4,529,225 shares available under the 2009 Plan, 199,454 treasury shares available due to net share
settlement, and 2,412,615 shares available under the ESPP.

166

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 2014 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 2014 Proxy Statement.

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167

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, 2013 and 2012 . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations for the Years Ended December 31, 2013, 2012, and

2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2013,

2012, and 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2013,

2012, and 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Cash Flows for the Years Ended December 31, 2013, 2012, and

2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

92
93

97
98

(2) Financial Statement Schedule

Schedule II—Valuation and Qualifying Accounts

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

172

(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

3.1

3.2

4.1

10.1*

Amended and Restated Certificate of Incorporation(1)

Amended and Restated By-Laws of Electronics For Imaging, Inc., (as amended August 12, 2009)(2)

Specimen Common Stock Certificate of the Company(3)

Agreement dated December 6, 2000, by and between Adobe Systems Incorporated and the
Company(4)

10.2*

Electronics For Imaging, Inc. 1999 Equity Incentive Plan as amended(5)

10.3*

Amended and Restated 2000 Employee Stock Purchase Plan(6)

10.4*

Electronics For Imaging, Inc. 2004 Equity Incentive Plan(7)

10.5*

Electronics For Imaging, Inc. 2007 Equity Incentive Award Plan(8)

10.6*

10.7*

Electronics For Imaging, Inc. 2007 Equity Incentive Award Plan Stock Option Grant Notice and
Stock Option Agreement(9)

Electronics For Imaging, Inc. 2007 Equity Incentive Award Plan Restricted Stock Award Grant
Notice and Restricted Stock Award Agreement(9)

168

Exhibit
No.

10.8*

10.9*

10.10*

10.11*

Description

Electronics For Imaging, Inc. 2007 Equity Incentive Award Plan Restricted Stock Unit Award Grant
Notice and Restricted Stock Unit Award Agreement(9)

Electronics For Imaging, Inc. 2009 Equity Incentive Award Plan Stock Option Grant Notice and
Stock Option Agreement(10)

Electronics For Imaging, Inc. 2009 Equity Incentive Award Plan Restricted Stock Unit Award Grant
Notice and Restricted Stock Unit Award Grant Agreement(10)

Electronics For Imaging, Inc. 2009 Equity Incentive Award Plan Restricted Stock Award Grant
Notice and Restricted Stock Award Grant Agreement(10)

10.12*

Electronics For Imaging, Inc. 2009 Equity Incentive Award Plan(6)

10.13*

Form of Indemnification Agreement(3)

10.14*

Form of Indemnity Agreement(11)

10.15+

10.16+

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(12)

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(13)

10.17*

Employment Agreement effective August 1, 2006, by and between Guy Gecht and the Company(14)

10.18+

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 (15)

10.19*

Offer Letter to Vincent Pilette, dated December 29, 2010(16)

10.20*

Executive Employment Agreement to Vincent Pilette, dated December 29, 2010(16)

10.21*

EFI 2013 Section 16 Officer—Executive Performance Bonus Program(17)

10.22

10.23

10.24

10.25

10.26

Purchase and Sale Agreement and Joint Escrow Instructions dated as of July 18, 2012 by and
between the Company and Gilead Sciences, Inc.(18)

Purchase and Sale Agreement and Joint Escrow Instructions Amendment no. 1 dated as of
October 30, 2012 by and between the Company and Gilead Sciences, Inc.(19)

Lease Agreement dated as of November 1, 2012 by and between the Company and Gilead Sciences,
Inc.(19)

Purchase and Sale Agreement between Electronics for Imaging, Inc. and John Arrillaga Survivor’s
Trust, represented by John Arrillaga, Trustee, and Richard T. Peery Separate Property Trust,
represented by Richard T. Peery, Trustee, dated April 19, 2013(20)

Lease Agreement between Electronics for Imaging, Inc. and John Arrillaga Survivor’s Trust,
represented by John Arrillaga, Trustee, and Richard T. Peery Separate Property Trust, represented
by Richard T. Peery, Trustee, dated April 19, 2013(20)

12.1

Computation of Ratios of Earnings to Fixed Charges

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169

Exhibit
No.

Description

23.1

24.1

31.1

31.2

32.1

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

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)

(5)

(6)

(7)

(8)

(9)

(10)

(11)

(12)

Management contracts or compensatory plan or arrangement
The Company has received confidential treatment with respect to portions of these documents
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.
Filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000
(File No. 18805) and incorporated herein by reference.
Filed as an exhibit to the Company’s Registration Statement on Form S-8 (File No. 333-106422) on
June 24, 2003 and incorporated herein by reference.
Filed as an exhibit to the Company’s Current Report on Form 8-K filed on June 6, 2013 (File No. 18805)
and incorporated herein by reference
Filed as an exhibit to the Company’s Registration Statement on Form S-8 (File No.333-116548) on
June 16, 2004 and incorporated herein by reference.
Filed as Appendix B to the Company’s Proxy Statement filed on November 14, 2007 (File No. 18805) and
incorporated herein by reference.
Filed as an exhibit to the Company’s Registration Statement on Form S-8 (File No. 333- 148197) on
December 20, 2007 and incorporated herein by reference.
Filed as an exhibit to the Company’s Current Report on Form 8-K filed on August 17, 2009
(File No. 18805) and incorporated herein by reference.
Filed as an exhibit to the Company’s Current Report on Form 8-K filed on February 15, 2008
(File No. 18805) and incorporated herein by reference.
Filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005
(File No. 18805) and incorporated herein by reference.

170

(13)

(14)

(15)

(16)

(17)

(18)

(19)

(20)

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.
Filed as an exhibit to the Company’s Current Report on Form 8-K filed on August 7, 2006
(File No. 18805) and incorporated herein by reference.
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.
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.
Filed as an exhibit to the Company’s Current Report on Form 8-K filed on February 27, 2013
(File No. 000-18805) and incorporated herein by reference.
Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30,
2012 (File No. 18805) and incorporated herein by reference.
Filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2012
(File No. 18805) and incorporated herein by reference.
Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013.
(File No. 18805) and incorporated herein by reference.

(b) List of Exhibits

See Item 15(a).

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171

ELECTRONICS FOR IMAGING, INC.
Schedule II
Valuation and Qualifying Accounts

(in thousands)

Year Ended December 31, 2013
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$12,850

$9,595

$ —

$(6,012)

$16,433

Year Ended December 31, 2012
Allowance for bad debts and sales-related

allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12,031

3,250

—

(2,431)

12,850

Year Ended December 31, 2011
Allowance for bad debts and sales-related

allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13,167

2,010

346(1)

(3,492)

12,031

(1) Adjustment due to acquired bad debt allowance: Streamline

172

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.

February 19, 2014

By:

/s/ GUY GECHT

ELECTRONICS FOR IMAGING, INC.

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 David Reeder 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

/S/ GUY GECHT
Guy Gecht

Title

Chief Executive Officer, Director
(Principal Executive Officer)

Date

February 19, 2014

/s/ DAVID REEDER
David Reeder

Chief Financial Officer (Principal
Financial and Accounting Officer)

February 19, 2014

/s/ MARC OLIN
Marc Olin

Chief Operating Officer

February 19, 2014

/s/

ERIC BROWN

Director

February 19, 2014

Eric Brown

/s/ GILL COGAN
Gill Cogan

Director

February 19, 2014

/s/

THOMAS GEORGENS

Director

February 19, 2014

Thomas Georgens

/s/ RICHARD A. KASHNOW
Richard A. Kashnow

/s/ DAN MAYDAN
Dan Maydan

Director

173

February 19, 2014

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[THIS PAGE INTENTIONALLY LEFT BLANK]

CORPORATE DIRECTORY

Stockholder Information
Independent Accounting Firm
PricewaterhouseCoopers LLP
San Jose, California
(through March 27, 2014)

Deloitte & Touche LLP
San Jose, California
(commencing April 2, 2014)

Listing
Electronics For Imaging, Inc. is listed
on the NASDAQ Stock Market LLC
The trading symbol is EFII

Corporate Officers

Guy Gecht
Chief Executive Officer and President

David Reeder
Chief Financial Officer

Marc Olin
Chief Operating Officer

Board of Directors

Transfer Agent & Registrar
American Stock Transfer & Trust Company, LLC
6201 15th Avenue
Brooklyn, New York 11219
Telephone: (800) 937-5449

Gill Cogan (1)(2)
Chairman of the Board of the Company
Founding Partner,
Opus Capital Ventures LLC

Annual Meeting
The annual meeting of Stockholders will
be held on May 14, 2014

Corporate & Investor Information
Please direct inquiries to:
Investor Relations
Electronics for Imaging, Inc.
6750 Dumbarton Circle
Fremont, California 94555
Telephone: (650) 357-3828
Facsimile: (650) 357-3907
Web site: www.efi.com

Guy Gecht
Chief Executive Officer and President of the
Company

Eric Brown (3)
Self-Employed

Thomas Georgens (3)
President and Chief Executive Officer,
NetApp, Inc.

Richard A. Kashnow (2)(3)
Consultant, Self-Employed

Dan Maydan (1)(2)
Retired

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