Electronics For Imaging Inc. Annual Report 2014

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FY2014 Annual Report · Electronics For Imaging Inc.

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ELECTRONICS FOR IMAGING, INC.
2015 PROXY STATEMENT AND
2014 ANNUAL REPORT

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

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held on May 13, 2015

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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 13, 2015 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, 2015.

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 6, 2015 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/ ALEX GRAB

Alex Grab
Secretary

Fremont, California
April 10, 2015

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 13, 2015

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 13, 2015 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 10, 2015 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, 2015; 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 6, 2015 (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 46,946,280 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
23,473,141 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 Directors Guidelines (the “Board of Directors Guidelines”). The Board of
Directors 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, 2015 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, 2015; 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 2016, pursuant to Securities and
Exchange Commission (the “SEC”) Rule 14a-8, is currently expected to be December 13, 2015. 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 2016 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, 2016 and not later than the
close of business on February 12, 2016 (the “Discretionary Vote Deadline”). These deadlines are subject to
change if the date of the 2016 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 2016 annual meeting.

Additional Copies

The Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014 (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 13, 2015: The
Company’s Proxy Statement dated APRIL [10], 2015 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 2014 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 Directors 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 6, 2015 are
set forth below.

Name of Nominee and Principal Occupation

Age Director Since

Eric Brown(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

2011

Chief Financial Officer & Chief Operating Officer, Tanium, Inc.

Gill Cogan(1)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

1992

Founding Partner, Opus Capital Ventures LLC

Guy Gecht . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

2000

Chief Executive Officer and President of the Company

Thomas Georgens(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

2008

Chairman of the Board of Directors & Chief Executive Officer, NetApp, Inc.

Richard A. Kashnow(2)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

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 Chief Financial
Officer and Chief Operating Officer of Tanium Inc, an enterprise software company. 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
fifteen (15) 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 and Chairman of the Board of Directors of NetApp, Inc., a provider of data management

solutions. Previously, from August 2009 until April 2014, Mr. Georgens served as Chief Executive Officer,
President and Director of NetApp. 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 served on the board of directors of Infinera Corporation, a digital optical communications
company and currently serves on the boards of directors of privately held companies. 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 Directors 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 eight (8) meetings in 2014. 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 2014.

Audit Committee

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

Audit Committee held nine (9) meetings in 2014. 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 seven (7) meetings in 2014. 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.

Nominating and Governance Committee

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

and Maydan. The Nominating and Governance Committee held one (1) meeting in 2014. 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
Directors Guidelines.

Pursuant to our Board of Directors Guidelines and the charter of the Nominating and Governance

Committee, the Nominating and Governance Committee oversees an annual evaluation of the performance of the
Board and each of its committees. The evaluation process is designed to facilitate ongoing, systematic
examination of the Board’s effectiveness and accountability, and to identify opportunities to improve its
operations and procedures. In 2014, the Board completed an evaluation process focusing on the effectiveness of
the performance of the Board as a whole. Each standing committee conducted a separate evaluation of its own
performance and of the adequacy of its charter and reported to the Board on the results of its evaluation.

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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 who 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 Alex Grab
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.

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• 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.

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 2014 DIRECTOR COMPENSATION

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

2014 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 . . . . . . . . . . .

$63,500
58,000
53,500
62,500
53,000

$293,150
$ —
322,663(5) —
—
293,150
—
293,150
—
293,150

$ —
—
—
—
—

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

$ —
—
—
—
—

All other
compensation
(g)

Total
(h)

$ —
—
—
—
—

$356,650
380,658
346,650
355,650
346,150

(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 2014 on page 43 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 2014. See Note 12 of the consolidated financial statements in our Annual Report on Form 10-K for
the year ended December 31, 2014 regarding assumptions underlying the valuation of equity awards.
(3) At December 31, 2014, 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
(#)

9,500
11,774
11,000
11,000
11,000

(4) At December 31, 2014, 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

55,625
87,500
127,500
87,500
37,500

9,375
12,500
12,500
12,500
12,500

65,000
100,000
140,000
100,000
50,000

(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 2014. 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 2014. 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 2014.

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.

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 6, 2015, 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. Five 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 on the
compensation of our named executive officers as disclosed pursuant to the SEC’s executive compensation
disclosure rules and as set forth in this proxy statement (including the compensation tables and narratives
accompanying those tables as well as in the Compensation Discussion and Analysis).

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.

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The Compensation Discussion and Analysis, beginning on page 26 of this Proxy Statement, describes the
Company’s executive compensation program and the decisions made by the Compensation Committee in 2014 in
more detail. Highlights of the program include the following:

• Our executive compensation program is designed to pay for performance. For 2014, the vast majority
of the target total direct compensation for our named executive officers was in the form of incentive
compensation with approximately 91% of the target total direct compensation for Mr. Gecht and
approximately 88% for Mr. Olin 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 Mr. Reeder, 95% 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, target annual incentive award (excluding
the “accelerator” bonus opportunity described below) 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. Mr. Gecht
recommended, and the Compensation Committee approved, that his base salary would not be increased
for 2014. The base salaries of Messrs. Olin and Reeder were established under their employment
agreements entered into in January 2014.

• 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 objective, financial performance criteria. The awards payable under our annual
bonus program are subject to a maximum payout.

• Awards under the fiscal year 2014 bonus program consisted of restricted stock unit awards and an

“accelerator” 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. Each executive could also earn an additional “accelerator” bonus under the
program if the Company’s performance exceeded certain targets established in the Company’s 2014
operating plan approved by the Board of Directors. The “accelerator” bonus was a cash opportunity;
however, the executives requested, and the Compensation Committee approved, that the accelerator
bonus awarded for 2014 would be paid out in Company stock to further align the executives’ interests

with those of our stockholders. 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 2014 exceeded the target levels for vesting of the restricted stock unit awards
granted under the 2014 bonus program and therefore the restricted stock units vested in full.
Performance was less than the level that would trigger maximum payout of the accelerator bonus
opportunities so consistent with our pay-for-performance philosophy, only a portion of the accelerator
bonus component vested and was paid out in Company stock.

• Annual equity awards to our named executive officers under our long-term equity incentive program in

2014 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.
The performance awards granted under our long-term equity program generally vest based on the
achievement of Company-wide revenue and non-GAAP operating income targets for three four-quarter
periods prior to December 31, 2017, in addition to continued employment requirements. For a portion
of Mr. Gecht’s performance grant, vesting of the award is tied to achievement of specified revenue and
non-GAAP earnings per share targets over a period of four consecutive quarters 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 Compensation Committee also approved grants of performance-based and time-based restricted

stock units to Messrs. Olin and Reeder in January 2014 in connection with their appointments as Chief
Operating Officer and Chief Financial Officer, respectively, and a grant of performance-based
restricted stock units to Messrs. Gecht and Olin in May 2014. Each of these performance grants is tied
to achievement of pre-established financial or stock price targets within a specified time period to
provide further performance incentives for our executives.

• 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.

•

In August 2014, the Board adopted a new clawback policy, which provides that the Company may
recover performance-based compensation paid to executive officers in connection with a restatement of
the Company’s financial results, and new stock ownership guidelines, which provide that the
Company’s chief executive officer should own Company shares with a value of at least five times his
base salary.

• As of April 6, 2015, Mr. Gecht owned approximately 1.1% of the Company’s outstanding common
stock, which the Company believes significantly aligns his interests with the stockholders’ interests.

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

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

Vote Required

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

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Recommendation of the Board of Directors

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

PROPOSAL THREE

RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee of the Board of Directors has appointed Deloitte & Touche LLP (“Deloitte”) as the

Company’s independent registered public accounting firm for the fiscal year ending December 31, 2015.
Stockholder ratification of the appointment of Deloitte as the Company’s independent registered public
accounting firm for the fiscal year ending December 31, 2015 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 fiscal years ended December 31, 2014 and 2013, Deloitte provided various audit, audit related,

and non-audit services as follows (in thousands):

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

$1,386
287
1,637
88

$ —
—
1,494
—

Total

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

$3,398

$1,494

2014

2013

(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 acquisition-related due diligence services, audit
procedures related to our acquisitions, attest services that are not required by statute or regulation, and
consultations concerning financial accounting and reporting standards.

These services include tax assistance regarding mergers and acquisitions.

(d) All other fees consist of consulting services not related to audit, financial reporting, or tax matters provided

prior to being engaged as the Company’s independent registered public accounting firm.

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

The Audit Committee has considered whether provision of the services described in sections (b), (c), and

(d) above is compatible with maintaining the independent registered public accounting firm’s independence and
has determined that such services have not adversely affected Deloitte’s independence. All of the services of
each of (b), (c), and (d) were pre-approved by the Audit Committee.

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Representatives of Deloitte are expected to be present at the Annual Meeting. The representatives will have

an opportunity to make a statement and will be available to respond to appropriate questions.

Changes to the Independent Registered Public Accounting Firm

After considering proposals from several firms including PricewaterhouseCoopers, LLP

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

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 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.

During the fiscal year ended December 31, 2013, 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

$1,685
392
—

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

$2,081

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

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.

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, 2015.
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 6, 2015 by: (1) each of the Company’s current directors; (2) each of the
named executive officers listed in the Summary Compensation Table for 2014 on page 43 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 6, 2015, there were 46,946,280 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 6, 2015 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) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4,198,476

8.94%

40 East 52nd Street
New York NY 10022

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

2,677,680

5.70

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Building One
6300 Bee Cave Road
Austin TX 78746

The Vanguard Group, Inc.(4)

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

3,177,075

6.77

100 Vanguard Blvd.
Malvern PA 19355

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

4,762,394

10.14

245 Summer Street
Boston MA 02110

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

497,549
98,830
20,560
159,750
104,750
68,250
56,933
15,128

1.06
*
*
*
*
*
*
*

All executive officers and directors as a group (7 persons)(14) . . . . . . . . . . . . . . . . . . . .

1,006,622

2.12%

* Less than one percent.

(1) This table is based upon information supplied by officers, directors, and principal stockholders on

Schedules 13G and Forms 4 filed with the SEC as of April 6, 2015. 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 46,946,280 shares outstanding on April 6, 2015, 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 22, 2015, by BlackRock, Inc. BlackRock, Inc. has sole voting power as to
4,095,095 shares of common stock and sole dispositive power over 4,198,476 shares of common stock.
(3) Beneficial ownership information is based on information contained in Schedule 13G, as amended, filed

with the SEC on February 5, 2015, by Dimensional Fund Advisors LP (“DFA”). DFA has sole voting power
as to 2,607,596 shares of common stock and sole dispositive power as to 2,677,680 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 11, 2015, by The Vanguard Group, Inc. (“VGI”), Vanguard Fiduciary Trust
Company (“VFTC”), and Vanguard Investments Australia, Ltd. (“VIA”). VFTC is the beneficial owner as
to 58,583 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 62,283 shares of common
stock and sole dispositive power as to 3,118,492 shares of common stock. VGI and VFTC have shared
dispositive power as to 58,583 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 3,177,075 shares of common stock.

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

with the SEC on February 13, 2015, 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 873,376 shares of common stock and sole dispositive power over
4,762,394 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 6
2015.
Includes 72,477 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 6,
2015.
Includes 2,500 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 6,
2015.
Includes 133,750 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 6, 2015.

(6)

(7)

(8)

(9)

(10) Includes 93,750 shares of common stock issuable upon the exercise of options granted to Mr. Kashnow

under the 2009 equity incentive plans, which are currently exercisable and/or exercisable within 60 days of
April 6, 2015.

(11) Includes 38,750 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 6, 2015.
(12) 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 is also currently serving
as our Interim Chief Financial Officer subsequent to Mr. Reeder’s resignation on January 9, 2015. Mr. Olin
does not hold any options, which are currently exercisable and/or exercisable within 60 days of April 6,
2015.

(13) Mr. Reeder resigned as our Chief Financial Officer effective January 9, 2015. Mr. Reeder does not hold any

options, which are currently exercisable and/or exercisable within 60 days of April 6, 2015.

(14) Includes an aggregate of 503,365 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 6, 2015.

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.

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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.

Each non-employee director had a late filing of a Form 4 that did not timely report the granting of
6,500 restricted stock units. Mr. Cogan had one late filing of a Form 4 that did not timely report an exercise of
stock options and the sale of the shares. Mr. Maydan had one late filing of a Form 4 that did not timely report an
exercise of a stock option and sale of the shares.

EXECUTIVE OFFICERS

The following table lists certain information regarding the Company’s executive officers as of April 6,

2015:

Name

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

Age

49
50

Position

Chief Executive Officer
Chief Operating Officer & Interim 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
January 9, 2015 to the present time, Mr. Olin has served as our Interim Chief Financial Officer, and from
September 2013 until January 15, 2014, Mr. Olin also 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.

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 2014, included Guy
Gecht, Chief Executive Officer and President; Marc Olin, Interim Chief Financial Officer and Chief Operating
Officer; and David Reeder, former Chief Financial Officer. Mr. Reeder resigned from employment with the
Company effective January 9, 2015.

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 2014 in more detail. Highlights of the program include:

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compensation with approximately 91% of the target total direct compensation for Mr. Gecht and
approximately 88% for Mr. Olin 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 Mr. Reeder, 95% 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, target annual incentive award (excluding
the “accelerator” bonus opportunity described below) 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

• Awards under the fiscal year 2014 bonus program consisted of restricted stock unit awards and an

• Annual equity awards to our named executive officers under our long-term equity incentive program in

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 Compensation Committee also approved grants of performance-based and time-based restricted

stock units to Messrs. Olin and Reeder in January 2014 in connection with their appointments as Chief
Operating Officer and Chief Financial Officer, respectively, and agrant of performance-based restricted
stock units to Messrs. Gecht and Olin in May 2014. Each of these performance grants is tied to
achievement of pre-established financial or stock price targets within a specified time period to provide
further performance incentives for our executives.

•

The Company believes the compensation program for the named executive officers is instrumental in
helping the Company achieve its financial performance. In 2014, the Company achieved record revenue, growing
to approximately $790 million, which represented an increase of approximately $62 million or 9% growth over
the prior year. As described below, revenue is one of the metrics used to measure the Company’s performance
for purposes of the executives’ annual bonus program and performance-based long-term incentive awards. In
addition, the Company’s stock price increased from $38.73 at the end of 2013 to $42.83 at the end of 2014.

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 2014, 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.

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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 throughout 2014 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 stockholders
held in May 2014, approximately 99% 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 2014 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”) as its independent compensation

consultant to provide information, analyses, and advice regarding executive and director compensation, as
described below. In 2014, Mercer advised the Compensation Committee on a variety of compensation-related
issues, including:

•

compensation strategy;

peer group;

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

•

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

emerging compensation trends.

For 2014, 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 50 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 $89,500 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 2014. 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 2014,
other Mercer business segments received fees from the Company of approximately $18,085, which was primarily
related to health and benefits consulting services. In addition, during 2014, MMC affiliates other than Mercer
received approximately $132,750 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. 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 2014;

• The aggregate amount of fees paid or payable by the Company to MMC for 2014 represented (or are

reasonably certain to represent) less than 1% of MMC’s total revenue for 2014;

• 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 used a peer group of

companies each year to provide a basis of comparison for the Company’s executive compensation programs. The
peer group is determined based generally on the following criteria:

• U.S. publicly traded companies;

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

Company’s revenue;

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

Peripherals, Computer Hardware, Electronic Equipment and Instruments, and Systems Software; and

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

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

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The companies in the 2014 peer group consisted of the following:

3D Systems Corporation
Aruba Networks Inc.
Cirrus Logic In.
Commvault Systems, Inc.
Emulex Corporation
F5 Networks, Inc.
Finisar Corporation

Fortinet Inc.
Netgear, Inc.
QLogic Corporation
Quantum Corporation
Silicon Graphics International Corporation
Synaptics, Inc.
Zebra Technologies Corporation

In reviewing the peer group for 2014, Arris Group, Inc. and Progress Software Corporation were removed

because they no longer met the size criteria. Avid Technology, Inc. was also removed because it suspended filing
financial and proxy statements in 2014. Applying the criteria noted above, Aruba Networks, Cirrus Logic, Finisar
and Fortinet were added to the peer group for 2014 in order to maintain a reasonable number of companies from
which to draw data and insights. At the time the peer group was selected, the Company ranked above the median
in revenue and number of employees, and slightly below the median in market capitalization.

New Employment Agreements

In January 2014, Mr. Olin, who had been serving as our Interim Chief Financial Officer, was appointed as

our Chief Operating Officer, and Mr. Reeder joined the Company and was appointed as our Chief Financial
Officer. In connection with these appointments, the Company entered into new employment agreements with
each executive that set forth the terms of their new compensation arrangements, including new equity grants. The
compensation arrangement took into consideration the Company’s compensation philosophy, the competitive
market for talent, internal equity at the Company, and in Mr. Reeder’s case, long-term incentive awards that he
forfeited upon leaving his prior employer. These compensation arrangements were negotiated with each
executive and are described in detail below in the applicable sections of this Compensation Discussion and
Analysis.

Executive Compensation Elements

For the 2014 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 2014 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.

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 2013, the Compensation Committee reviewed the base salary level for Mr. Gecht. Mr. Gecht

recommended, and the Compensation Committee approved, that Mr. Gecht’s salary would remain at $620,000
for 2014, the same level as his salary for 2013. As noted above, Messrs. Olin and Reeder entered into new
employment agreements with the Company in January 2014. Under these agreements, Mr. Olin’s base salary was
set at $310,000, and Mr. Reeder’s base salary was set at $350,000. The Compensation Committee considered the
base salary levels for each of the named executive officers to be appropriate in light of each executive’s
experience and responsibilities with the Company.

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 annual incentive program allows
named executive officers to receive short-term incentive compensation if 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 his employment agreement, and are determined by the
Compensation Committee based on performance against the pre-established goals. The Compensation
Committee believes that the opportunity to receive annual bonuses 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 the 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.

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In January 2014, the Compensation Committee approved the 2014 performance-based equity and cash

bonus program (the “2014 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
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marc Olin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
David Reeder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

105%
70%
70%

For Mr. Gecht, the target short-term incentive opportunity for the 2014 fiscal year remained unchanged
from the prior fiscal year. The target short-term incentive opportunities established for Messrs. Olin and Reeder
in connection with their appointments as Chief Operating Officer and Chief Financial Officer, respectively, in
January 2014 were consistent with the opportunities provided to our executive officers other than Mr. Gecht in
prior years. The difference in short-term incentive percentages between Mr. Gecht and the other named executive
officers correlated with the Compensation Committee’s assessment of their roles and levels of responsibility
within the Company.

Under the 2014 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 as described below. In execution of the
program, the Compensation Committee approved grants of performance-based awards of restricted stock units in
January 2014 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 incentive by the Company’s closing stock price
on January 17, 2014. Fifty percent (50%) of each executive’s stock units were eligible to vest based on the
Company’s non-GAAP operating income for 2014 relative to the performance target established by the
Compensation Committee, and the remaining 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 2014).

The maximum number of restricted stock units that may vest under a 2014 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 2014 exceeded the performance
targets established by the Compensation Committee (which we refer to as the “Accelerator Bonus Program”). 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 Accelerator Bonus Program, with the target cash bonus for each
executive being the same as his target incentive amount set forth in the table above. As with the equity bonus
opportunity, the Accelerator Bonus Program was based 50% on the Company’s non-GAAP operating income for
2014 and 50% on the Company’s revenue for 2014 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 additional bonus opportunity to the executives as for any bonus to be payable under the Accelerator
Bonus Program, the Company would need to achieve levels for both performance metrics significantly above the
Company’s operating plan for 2014 approved by the Board of Directors.

In determining that the 2014 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 stockholder value. The Compensation Committee selected revenue and non-GAAP operating income as the
performance measures for the equity and cash components of the 2014 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 the amortization of acquisition-related intangibles, transaction costs, and contingent consideration;
stock-based compensation expense; litigation settlement charges; and restructuring-related and other 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 RSU performance targets selected by the Compensation Committee for the 2014 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 2014 Program was
established. The Accelerator performance targets represent performance at levels above the operating plan and
thus if achieved provide for a maximum of up to two times each executive’s target annual incentive award when
both the RSU and Accelerator awards are combined. The threshold and target performance levels for each of the
restricted stock unit and cash bonus components of the 2014 Program are set forth in the table below.

Goals

Weighting

RSU
Threshold

RSU
Target

Accelerator
Threshold

Accelerator
Target

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

50% $728.0
—
50% $ 98.0
—

$779.0

$833.0

100%

$108.0

$115.0

100%

With respect to the equity bonus component of the 2014 Program, the minimum threshold for non-GAAP
operating income for 2014 established by the Compensation Committee was $98 million. None of the restricted
stock units granted under the 2014 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 0% and 100% of the units, with 0% 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 0% and 100% of the units, with 0% 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 Accelerator
Bonus Program, no cash bonus would be paid unless the Company met or exceeded the “Accelerator Threshold”
levels for both revenue and non-GAAP operating income set forth above. If both of these threshold levels were
exceeded, 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 between the “Accelerator
Threshold” and “Accelerator Target” 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 the RSU award under the 2014
Program or to receive payment of a cash bonus greater than 100% of his target cash bonus amount.

In February 2015, the Compensation Committee reviewed the Company’s total 2014 fiscal year revenue and

non-GAAP operating income and determined that the RSU target levels identified above were achieved for both
performance measures. For purposes of the 2014 Program, the Company’s revenue was $783.3 million, and the
Company’s non-GAAP operating income was $113.2 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 approximately $790 million for 2014) and non-GAAP operating
income (which was $115.3 million as reflected in the Unaudited Non-GAAP Financial Information section of the
Company’s Form 10-K) for 2014 were each adjusted to remove the impact of revenue from entities acquired
during 2014 that were not contemplated when the targets were established.

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Prior to the Compensation Committee’s determination of the award amounts under the 2014 Program,

Messrs. Gecht and Olin requested, and the Compensation Committee approved, that any award the executive
received under the Accelerator Bonus Program would be paid in shares of our common stock rather than a cash
bonus, with the number of shares awarded to be determined by dividing the bonus amount awarded to the
executive under the Accelerator Bonus Program by the Company’s closing stock price on February 2, 2015. The
executives and the Compensation Committee believed it was appropriate for this award to be paid in shares
rather than cash to increase the executives’ ownership interest in the Company and further align their interests
with those of our stockholders.

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

Messrs. Gecht and Olin under the 2014 Program had vested and that each executive would be awarded
approximately 41% of his target bonus amount under the Accelerator Bonus Program (approximately 8% as to
the revenue component of the Accelerator Bonus Program and approximately 74% as to the operating income
component of the Accelerator Bonus Program), with the amount to be paid in shares as described above.
Mr. Reeder was not eligible for any vesting or payment of his awards under the 2014 Program as a result of his
resignation prior to the vesting date for the 2014 Program.

Long-Term Equity Incentive Program

The Company believes that equity ownership 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. Although the Compensation Committee has
discretion to grant stock options or other equity-based awards, the Company’s practice in recent years has been to
grant its executive officers a combination of performance-based restricted stock units and time-based restricted
stock units. For 2014, as in prior years, two-thirds of each named executive officer’s annual equity award vests
based upon the Company’s achievement of pre-established financial performance. We believe these
performance-based equity awards create additional incentives for executives to achieve goals considered
important to the Company’s long-term growth and success. In order to provide an incentive for continued
employment, the vesting of performance-based awards is subject to the executive’s continued employment
through the time the applicable performance goals are achieved, while service-based restricted stock units
granted to named executive officers under the long-term incentive program typically have a three-year annual
vesting schedule.

The Compensation Committee determines the value of each executive’s 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 Company’s 2009 Equity Incentive Award Plan (the “2009 Equity Plan”) and any
planned uses of such shares 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.

2014 Awards

January 2014 New-Hire/Promotion Grants.

In January 2014, the Compensation Committee approved time-
based and performance-based equity awards for Mr. Olin in connection with his appointment as Chief Operating
Officer and for Mr. Reeder in connection with his appointment as Chief Financial Officer. The grant to Mr. Olin
consisted of 20,654 performance-based vesting restricted stock units and 7,745 time-based vesting restricted
stock units. Of the performance units, approximately 62% of the units are eligible to vest only if, for any period
of four consecutive fiscal quarters ending no later than the fourth quarter of fiscal year 2016, the Company
achieves revenue of $1 billion and non-GAAP earnings per share of $2.50. For these purposes, non-GAAP
earnings per share is defined as non-GAAP net income divided by diluted weighted average shares outstanding.
Non-GAAP net income is defined as net income determined in accordance with GAAP adjusted to remove the
impact of the amortization of acquisition-related intangibles, transaction costs, and contingent consideration;

stock-based compensation expense; litigation settlement charges; restructuring-related and charges and gains;
non-cash interest expense related to our 0.75% convertible senior notes; and a constant non-GAAP tax rate of
19%. The remaining approximately 38% of the units are eligible to vest if the Company’s stock price achieves
specified targets, with one-third of these units vesting if the average of the per-share closing prices of the
Company’s common stock over a period of 90 consecutive trading days is at least $46, $53 and $60, respectively.
In each case, the vesting of the performance units is subject to Mr. Olin’s continued employment through the
vesting date. The time-based units will vest in three annual installments, in each case subject to Mr. Olin’s
continued employment through the vesting date. The grant to Mr. Reeder consisted of 51,638 performance-based
vesting restricted stock units and 77,459 time-based vesting restricted stock units. Of the performance units, one-
half were subject to the same revenue and non-GAAP earnings per share goals as described above for Mr. Olin,
and the remaining one-half were subject to the same stock price goals as Mr. Olin’s grant. The time-based units
were scheduled to vest in five installments over a period of three and one-half years following the date of grant.
In each case, vesting of the grant was subject to Mr. Reeder’s continued employment through the vesting date. As
noted above, Mr. Reeder’s employment with us ended in January 2015, and the unvested portion of each grant
terminated on that date.

May 2014 Performance Grants.

In May 2014, the Compensation Committee approved performance-based

awards to Messrs. Gecht and Olin that would vest only if, for any period of four consecutive fiscal quarters
ending no later than the second quarter of fiscal year 2015, the Company achieves revenue of $800 million and
non-GAAP operating income of $110 million. The Compensation Committee approved these grants after
determining that a portion of the awards granted to these executives in August 2011 would be forfeited, and the
number of shares subject to these awards corresponded to the number of forfeited shares under the August 2011
grants for each executive. The new revenue and operating income goals represent substantially higher objectives
than the goals associated with the forfeited awards. The new awards ensure continued executive focus on
achieving our financial growth objectives as well as enhance retention and alignment with shareholder interest
given that the awards are equity based and 100 percent contingent on performance.

August 2014 Annual Equity Grants.

In August 2014, the Compensation Committee approved the grant of

restricted stock unit awards to each of our named executive officers as set forth in the following table:

Type of Security

Type of Vesting

Vesting Schedule

Restricted Stock Unit

Performance-based (Annual
Grant)

Restricted Stock Unit

Performance-based

Restricted Stock Unit

Time-based

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This award will vest as follows:
• One-third of the award will vest if, for any
period of four consecutive fiscal quarters
ending no later than the fourth quarter of
fiscal year 2015, the Company achieves
revenue of $880 million and non-GAAP
operating income of $123 million (which
goals reflect increases of 11.4% and 6.7%
over the Company’s revenue and non-GAAP
operating income for the fiscal year ended
December 31, 2014, respectively).

• One-third of the award will vest if, over a
period of four consecutive fiscal quarters
ending no later than the fourth quarter of
fiscal year 2016, the Company achieves
revenue of $1 billion and non-GAAP
operating income of $145 million (which
goals reflect increases of 26.6% and 25.8%
over the Company’s revenue and non-GAAP
operating income for the fiscal year ended
December 31, 2014, respectively).

• One-third of the award will vest if, over a
period of four consecutive fiscal quarters
ending no later than the fourth quarter of
fiscal year 2017, the Company achieves
revenue of $1.1 billion and non-GAAP
operating income of $160 million (which
goals reflect increases of 39.2% and 38.8%
over the Company’s revenue and non-GAAP
operating income for the fiscal year ended
December 31, 2014, respectively).

This award will vest in full if the Company
achieves revenue of $1 billion and non-GAAP
earnings per share of $2.50 over any four
consecutive fiscal quarters ending no later than
the fourth fiscal quarter of fiscal year 2016.

This award will vest in annual installments over a
three-year period after the date of grant (“EPS
Grant”).

As indicated in the Grants of Plan-Based Awards Table on page 44 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 annual equity award for 2014 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 annual equity award to restricted
stock units that vest based on the executive’s continued service with the Company. In Mr. Gecht’s case, the
performance-based portion of his 2014 award was allocated approximately two-thirds to the “Annual Grant”
performance award described above, and approximately one-third to the “CEO Grant” performance award

described above. In the case of Messrs. Olin and Reeder, the entire performance-based portion of each
executive’s 2014 award was allocated to the “Annual Grant” performance award described above.

The Compensation Committee selected revenue and non-GAAP operating income as the performance
measures for the “Annual Grant” performance-based award for the same reasons these measures were used to
measure performance under the executive annual bonus program as described above. Mr. Gecht’s “EPS Grant”
performance-based award represents a portion of his overall long-term incentive award and was granted at the
same time as his “Annual Grant.” The Compensation Committee determined that it would be appropriate to use
non-GAAP earnings per share as a metric for this award so that it aligned with metrics used on performance
based grants made to other members of the senior leadership team earlier in the year. While the Committee
usually uses operating income as its primary measure of profitability, at the time the performance awards were
made to the other members of the senior leadership team, the Compensation Committee wanted to clearly link
the awards to future earnings per share targets established at that time.

The Compensation Committee believes that each of the equity grants made to the named executive officers

in 2014 help to 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.

Vesting of 2013 Performance Awards

As described in the Company’s 2014 proxy statement, the Company granted performance-based restricted
stock unit awards to Messrs. Gecht and Olin in August 2013. As with the performance-based awards granted in
August 2014 described above (other than the EPS Grant), the vesting of each of these awards is contingent on the
Company’s achievement of specified levels of revenue and non-GAAP operating income (calculated as described
above under “Short-Term Incentive Compensation”). Specifically, 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). 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).

In August 2014, the Compensation Committee determined that, for the period from the third quarter of fiscal

2013 through the second quarter of fiscal 2014, the Company’s revenue was $758 million and the Company’s
non-GAAP operating income was $104 million, in each case calculated as described under “Short-Term
Incentive Compensation” above. Accordingly, one-third of the units subject to each of these awards vested upon
the Compensation Committee’s determination.

Vesting of 2012 Performance Awards

As described in the Company’s 2013 proxy statement, the Company granted a performance-based restricted
stock unit award to Mr. Gecht in May 2012. At the time, Mr. Olin received a similar performance-based award as
a non-executive member of our senior management team. As with the performance-based awards granted in
August 2014 described above (other than the CEO Grant), the vesting of each of these awards is contingent on

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the Company’s achievement of specified levels of revenue and non-GAAP operating income (calculated as
described 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).

The first tranche of one-third of the restricted stock units subject to each of the awards granted to Messrs.
Gecht and Olin vested in 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 calculated as
described under “Short-Term Incentive Compensation” above. Accordingly, one-third of the units subject to each
of these awards vested upon the Compensation Committee’s determination. In November 2014, the
Compensation Committee determined that, for the period from the fourth quarter of fiscal 2013 through the third
quarter of fiscal 2014, the Company’s revenue was $777 million and the Company’s non-GAAP operating
income was $112 million. Accordingly, the final one-third of the units subject to each of these awards vested
upon the Compensation Committee’s determination.

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 48 through 50 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 February 2015, the Compensation Committee approved the 2015 annual incentive program (the “2015
Program”) for Messrs. Gecht and Olin. Under the 2015 Program, each executive is eligible to receive a bonus
payable in the form of RSUs up to an amount equal 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 addition, each executive has an opportunity to receive an “accelerator” bonus also payable in the
form of RSUs up to an amount equal to the executive’s target bonus amount if the Company achieves financial
results above the Company’s 2015 operating plan approved by the Board of Directors. Each executive’s target
equity bonus amount and target accelerator equity bonus amount is the same as under the 2014 Program—105%
of base salary for Mr. Gecht and 70% of base salary for Mr. Olin. In execution of the program, the Compensation
Committee approved grants of performance-based restricted stock units in February 2015 to each executive, with
the total number of stock units subject to each executive’s equity bonus award and accelerator equity bonus
award determined by dividing the executive’s target bonus amount for each award by the closing price of the
Company’s common stock on January 30, 2015. In 2014, the bonus award was denominated in stock and the
accelerator component was denominated in cash, with the accelerator value ultimately paid in shares. In 2015,
both the bonus award and accelerator component are denominated in stock. We believe this increases the
alignment of the executives with shareholder interests since the ultimate value earned on both components is a
function of the operating financial performance as well as the stock price performance over the course of the
year.

As under the 2014 Program, the performance metrics under the 2015 Program will be the Company’s
revenue and non-GAAP operating income, with each metric being weighted 50% for the named executive
officers and the Compensation Committee establishing threshold and target levels for each metric for vesting of
the equity bonus and accelerator equity bonus components of the program. Under the 2015 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 2015 Program, the accelerator equity
bonus component is intended to reward performance above the target level, so the accelerator equity bonus
threshold for each metric is equal to the equity bonus target for that metric. Vesting of the accelerator equity
bonus begins after both revenue and non-GAAP operating thresholds are met. If both accelerator equity bonus
thresholds are met, the accelerator equity bonus will be determined as a percentage of the executive’s target
bonus amount, with 0% of the accelerator equity 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.

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Stock Ownership Policy

In August 2014, the Board of Directors adopted an Executive Stock Ownership Policy, which was amended
in March 2015. Under the policy, the Company’s Chief Executive Officer should own Company shares having an
aggregate value of at least five times his or her then-effective annual base salary. The Chief Executive Officer
should achieve this minimum share ownership position within three years of becoming Chief Executive Officer
(or, if later, three years after the adoption of the policy). For these purposes, shares owned outright by the Chief
Executive Officer, as well as shares owned in trust for his or her benefit or by his or her family members, as well
as shares subject to outstanding restricted stock and restricted stock unit awards subject to time-based vesting
requirements, are considered to be owned by the Chief Executive Officer. Unvested restricted stock units subject
to performance-based vesting requirements shall not be taken into account in determining the CEO’s beneficial
ownership.

In February 2011, the Board of Directors adopted a Stock Ownership Policy for the Company’s directors.
The Stock Ownership Policy does not apply to Mr. Gecht in his role as director of the Company as he is subject
to the Executive Stock Ownership Policy described above. 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 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.

Clawback Policy

In August 2014, the Board of Directors adopted a clawback policy that provides for the Company, in the
discretion of the Board of Directors or as required by law or NASDAQ listing standards, to cancel or recover
performance-based compensation from its executive officers in the event the Company’s publicly-reported
financial results are restated due to material noncompliance with any financial reporting requirement under
applicable securities laws.

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 2014

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

December 31, 2014, 2013, and 2012 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)

Chief Executive
Officer . . . . . . . . . . 2014 $620,000 $ — $5,999,416 $ —
620,000 — 4,738,484 —
620,000 — 2,912,060 —

2013
2012

David Reeder,

Chief Financial
Officer(6) . . . . . . . 2014 $335,417 $ — $6,358,283 $ —

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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$266,114
583,619
—

$ —
$ —
—

$ 5,200
5,100
5,380

$6,890,730
$5,947,203
3,537,440

$ —

$ 3,500

$6,697,200

Marc Olin, Chief

Operating Officer
and Interim
Chief Financial
Officer(7) . . . . . . .

2014 $311,553 $ — $2,263,741 $ —
901,786 —
2013

293,332 —

$ 88,705
55,433

$ —
—

$ 2,350
29,358

$2,666,349
1,279,909

(1) All cash compensation earned by each named executive officer in 2014, 2013, and 2012 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 2014, 2013, or 2012.

(2) The amounts reported in the “Stock awards” column 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, 2014 regarding assumptions
underlying the valuation of equity awards.

(3) The amounts reported in the “Stock awards” column 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” columns would vest.
(4) The named executive officer bonuses that have been awarded under our executive bonus program each year include a

target bonus opportunity that is payable in shares of stock and an “accelerator” component that is payable in cash if the
target performance levels are exceeded. As described in the Compensation Discussion and Analysis above, the
executives were awarded the stock component of the bonus for 2014 and a portion of the “accelerator” (which the
executives requested and the Compensation Committee approved, was paid in stock in 2015 upon certification by the
Compensation Committee). For 2013, the executives were awarded the stock component of the bonus and a portion of
the accelerator was paid in cash. For 2012, the executives were awarded a portion of the stock component of the bonus
and did not receive any portion of the cash component. These awards are reflected in the “Stock awards” and the “Non-
equity incentive plan compensation” columns of the table above.

(5) For fiscal year 2014, “All other compensation” includes 401(k) employer matching contributions as follows:

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

$5,200

Guy
Gecht

David
Reeder

$3,500

Marc
Olin

$2,350

(6) Mr. Reeder resigned as our Chief Financial Officer in December 2014 effective as of January 9, 2015.
(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. Mr. Olin is also currently serving as our Interim
Chief Financial Officer subsequent to Mr. Reeder’s resignation on January 9, 2015.

2014 Grants of Plan-Based Awards

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

December 31, 2014 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
(#)

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)

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

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

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

— 8,322
$ — $ — $ —
— 8,322
—
—
—
651,000
—
— 23,833
— 15,127 45,382
— 22,691
—
—
—
—

—
651,000
—
—
—
—

—
—
—
—
—
—

8,322
8,322
—
23,833
45,382
22,691

—
—
—
—
—
—
—
—
—
—
—
—
— 34,036 —

—
—
—
—
—
—
—
—
—

—
—
—
—
—
—
—
—

—
—
—
—
—
217,000
—
—
—

—
—
—
—
—
245,000
—
—

—
—
—
—
—
217,000
—
—
—

—
—
—
—
—
245,000
—
—

2,582

7,745
— 12,909
—
—
— 3,256
— 3,390
—
—
— 2,963
3,883 11,648
—

—

7,745
12,909
—
3,256
3,390
—
2,963
11,648
—

—
—

—
—
7,745 —
—
—
—
—
—
5,823 —

—
—
—
—
—

8,606 25,819
— 25,819
—
—
— 3,132
— 3,132
—
—
5,043 15,128
—

—

25,819
25,819

—
—
—
—
— 77,459 —
—
—
—
—
—
—
—
—
7,562 —

3,132
3,132
—
15,128
—

— $ 334,212
— $ 334,212
—
— $
— $ 913,757
— $1,963,225
— $ 981,613
— $1,472,397

— $ 307,477
— $ 512,487
— $ 307,477
— $ 130,761
— $ 136,142
— $
—
— $ 113,601
— $ 503,893
— $ 251,903

— $1,025,015
— $1,025,015
— $3,075,122
— $ 125,781
— $ 125,781
— $
—
— $ 654,437
— $ 327,132

Name and
Grant Date

Guy Gecht

1/24/2014(1)(3)
1/24/2014(1)(4)
1/24/2014(1)(5)
5/15/2014(6)
8/15/2014(7)
8/15/2014(8)
8/15/2014(9)

Marc Olin

1/16/2014(10)
1/16/2014(11)
1/16/2014(9)
1/24/2014(1)(3)
1/24/2014(1)(4)
1/24/2014(1)(5)
5/15/2014(6)
8/15/2014(7)
8/15/2014(9)

David Reeder

1/16/2014(10)(13)
1/16/2014(11)(13)
1/16/2014(12)(13)
1/24/2014(1)(3)(13)
1/24/2014(1)(4)(13)
1/24/2014(1)(5)(13)
8/15/2014(7)(13)
8/15/2014(9)(13)

(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 January 2014 represent amounts payable under our 2014 annual target
bonus program. Threshold achievement results in no bonus payout, while Target and Maximum achievement results in 100% bonus payout, with pro rata
payouts for achievement between these 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,
2014 regarding assumptions underlying the valuation of equity awards.

(3) These RSUs vest based on achievement of 2014 revenue targets with pro rata vesting between the threshold of $728 million (0% vesting) and the target of
$779 million (100% vesting). The Compensation Committee certified on February 4, 2015 that 100% of these RSUs would vest on that date based on
actual 2014 revenue for purposes of the bonus program of $783.3 million.

(4) These RSUs vest based on achievement of 2014 non-GAAP operating income targets with pro rata vesting between the threshold of $98.0 million (0%
vesting) and the target of $108.0 million (100% vesting). The Compensation Committee certified on February 4, 2015 that 100% of these RSUs would
vest on that date based on actual 2014 non-GAAP operating income for purposes of the bonus program of $113.2 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 2014 revenue targets with pro rata vesting between the threshold of
$779 million (0% vesting) and the target of $833 million (100% vesting) and 50% toward achievement of 2014 non-GAAP operating income targets with
pro rata vesting between the threshold of $108.0 million (0% vesting) and the target of $115.0 million (100% vesting). The Compensation Committee
certified on February 4, 2015 that approximately 41% of the cash accelerator vested on that date based on actual 2014 revenue and non-GAAP operating
income for purposes of the bonus program of $783.3 and $113.2 million, respectively. As noted above the accelerator bonus was paid in Company stock.

(6) These RSUs will vest upon achievement of $800 million in revenue and $110 million in non-GAAP operating income during any four consecutive

quarters between the third quarter of 2013 and the second quarter of 2015.

(7) These RSUs will vest by one-third of the target number of RSUs subject to the award upon achievement of $880 million in revenue and $123 million in
non-GAAP operating income during any four consecutive quarters between the first quarter of 2014 and the fourth quarter of 2015. An additional one-
third of the target RSUs will vest upon achievement of $1.0 billion in revenue and $145 million in non-GAAP operating income during any four
consecutive quarters between the first quarter of 2014 and the fourth quarter of 2016. An additional one-third of the target RSUs will vest upon
achievement of $1.1 billion in revenue and $160 million in non-GAAP operating income during any four consecutive quarters between the first quarter of
2014 and the fourth quarter of 2017.

(8) These RSUs will vest upon achievement of $1.0 billion in revenue and $2.50 of non-GAAP earnings per share during any four consecutive

quarters between the third quarter of 2014 and the fourth quarter of 2016.

(9) Each RSU award vests with respect to one-third of the units on the first, second, and third anniversaries of the date of grant.
(10) These RSUs vest by one-third of the target number of RSUs subject to the award when the average closing stock price over a period of 90 consecutive

trading days equals or exceeds $46.00, $53.00, and $60.00, respectively.

(11) These RSUs will vest upon achievement of $1.0 billion in revenue and $2.50 of non-GAAP earnings per share during any four consecutive

quarters between the first quarter of 2014 and the fourth quarter of 2016.

(12) Each RSU award vests with respect to one-fourth of the units six (6) months after the date of grant, one-sixth of the units eighteen (18) months
after the date of grant, one-sixth of the units on the second anniversary of the date of grant, one-sixth of the units on the third anniversary of the
date of grant, and one-fourth of the units 42 months after the date of grant.

(13) Mr. Reeder resigned as our Chief Financial Officer in December 2014 effective as of January 9, 2015. Accordingly, he was not eligible for

vesting or payment under these awards, except to the extent vested prior to his resignation.

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 2014 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 2014 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’ 2014
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 January 2014 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 2014 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 2014 Fiscal Year-End

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

executive officers as of December 31, 2014 is as follows:

Option Awards

Stock Awards

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

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

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

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)

Option
exercise
price
per
share
($)
(e)

Option
expiration
date
(f)

Name
(a)

Grant
Date

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

$10.77 8/28/2016
$10.77 8/28/2016
$11.40 8/20/2017

Guy Gecht . . . . . . 8/28/2009(2)
8/28/2009(3)
8/20/2010(3)
5/18/2012(1)
8/15/2013(4)
8/15/2013(1)
1/24/2014(5)
1/24/2014(6)
5/15/2014(7)
8/15/2014(1)
8/15/2014(8)
8/15/2014(9)
Marc Olin . . . . . . . 5/18/2012(1)
8/15/2013(4)
8/15/2013(1)
1/16/2014(1)
1/16/2014(9)
1/16/2014(10)
1/24/2014(5)
1/24/2014(6)
5/15/2014(7)
8/15/2014(1)
8/15/2014(8)
David Reeder . . . . 1/16/2014(11)
1/16/2014(9)
1/16/2014(10)
1/24/2014(5)
1/24/2014(6)
8/15/2014(1)
8/15/2014(8)

—
32,138
130,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—

—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—

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

—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—

—

—
—

—
—
—

—
—
—
—
—
—
—
— 21,750 $ 931,553
— 29,600
—
—
— 29,600 $1,267,768
—
— 8,332 $ 356,860
—
— 8,332 $ 356,860
— 23,833
—
—
— 34,036 $1,457,762
— 15,127
—
— 22,691
—
—
— 5,526 $ 236,679
5,250
—
—
—
— 5,043 $ 215,992
—
— 7,745 $ 331,718
— 12,909
—
2,582
—
—
—
— 3,256 $ 139,454
—
— 3,390 $ 145,194
2,963
—
—
—
— 5,823 $ 249,399
3,883
—
—
— 58,094 $2,488,166
—
— 25,819
—
8,606
—
—
—
— 3,132 $ 134,144
—
— 3,132 $ 134,144
—
— 7,562 $ 323,880
5,043
—
—

—
—

—

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

—
—
—
—
$1,267,768
—
—
—
$1,020,767
—
$ 647,889
$ 971,856
—
$ 224,858
—
—
$ 552,892
$ 110,587
—
—
$ 126,905
—
$ 166,309
—
$1,105,828
$ 368,595
—
—
—
$ 215,992

(1) One-third of the RSUs of each award vests on the first, second, and third anniversary of the date of grant.
(2) 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.

(3) 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.

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(4) These RSUs will vest upon the 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 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.

(5) These RSUs vest based on achievement of 2014 revenue targets with pro rata vesting between the threshold of $728 million (0% vesting)
and the target of $779 million (100% vesting). The Compensation Committee certified on February 4, 2015 that 100% of these RSUs
would vest on that date based on actual 2014 revenue for purposes of the bonus program of $783.3 million. Vesting of the RSUs was
contingent upon the executive’s continued employment through the later of the date of the Compensation Committee’s determination or
the first anniversary of the grant date.

(6) These RSUs vest based on achievement of 2014 non-GAAP operating income targets with pro rata vesting between the threshold of

$98.0 million (0% vesting) and the target of $108.0 million (100% vesting). The Compensation Committee certified on February 4, 2015
that 100% of these RSUs would vest on that date based on actual 2014 non-GAAP operating income for purposes of the bonus program
of $113.2 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 through the later of the date of the Compensation Committee’s determination or
the first anniversary of the grant date.

(7) These RSUs will vest upon achievement of $800 million in revenue and $110 million in non-GAAP operating income during any four

consecutive quarters between the third quarter of 2013 and the second quarter of 2015.

(8) These RSUs will vest upon achievement of $880 million in revenue and $123 million in non-GAAP operating income during any four
consecutive quarters between the first quarter of 2014 and the fourth quarter of 2015. An additional number of RSUs equal to this
number of RSUs will vest upon achievement of $1.0 billion in revenue and $145 million in non-GAAP operating income during any four
consecutive quarters between the first quarter of 2014 and the fourth quarter of 2016. An additional number of RSUs equal to this
number of RSUs will vest upon achievement of $1.1 billion in revenue and $160 million in non-GAAP operating income during any four
consecutive quarters between the first quarter of 2014 and the fourth quarter of 2017.

(9) These RSUs will vest upon achievement of $1.0 billion in revenue and $2.50 of non-GAAP earnings per share during any four

consecutive quarters between the third quarter of 2014 and the fourth quarter of 2016.

(10) These RSUs will vest when the average closing stock price over a period of 90 consecutive trading days equals or exceeds $46.00. An

additional number of RSUs equal to this number of RSUs will vest when the average closing stock price over a period of 90 consecutive
trading days equals or exceeds $53.00. An additional number of RSUs equal to this number of RSUs will vest when the average closing
stock price over a period of 90 consecutive trading days equals or exceeds $60.00.

(11) Each RSU award vests with respect to one-fourth of the units six (6) months after the date of grant, one-sixth of the units eighteen

(18) months after the date of grant, one-sixth of the units on the second anniversary of the date of grant, one-sixth of the units on the third
anniversary of the date of grant, and one-fourth of the units 42 months after the date of grant.

Option Exercises and Stock Vested in 2014

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

December 31, 2014 were as follows:

Option Awards

Stock Awards

Name
(a)

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

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

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

350,000
—
—

$9,534,000
—
—

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

166,984
34,224
19,365

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

$7,056,769
1,443,186
863,292

(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, 2014 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 2014, with benefits being valued using the closing sales price of the
Company’s common stock on such date ($42.83) and determined based on each executive’s employment
agreement in effect on December 31, 2014. Receipt of these benefits is subject to the execution of a separation
agreement and full release of all claims by the named executive officer. The executive’s actual benefits upon a
termination or 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. As noted above, Mr. Reeder resigned from the
Company in January 2015, and he was not entitled to any severance payments or benefits in connection with his
resignation. As to Mr. Reeder, the amounts in the tables below are for informational purposes only and do not
represent any severance payments made to Mr. Reeder.

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:

Name

Lump sum
severance
payment
($)(1)

Outplacement
benefits
($)(2)

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

$2,218,977
718,437
683,353

$35,000
35,000
35,000

Continued
health
care
coverage
benefits
($)(3)

$34,236
22,122
692

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

$931,553

—
347,266

Total ($)

$3,219,766
775,559
1,066,311

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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 12 months of base salary for Mr. Olin and Mr. Reeder, 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 2014
based upon the level of performance targets applicable to the bonus that were actually attained for 2014. 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, Olin, and Reeder would each be entitled to outplacement services up to a maximum of

$35,000.

(3) Messrs. Gecht, Olin, and Reeder 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 and Mr. Reeder for up to 12
months.

(4) Other than RSU awards related to the 2014 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, 2014 of $42.83
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, 2014, were as follows:

Name

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

Stock
Options
(#)

—
—
—

Restricted
Stock
Units
(#)

21,750
—
8,108

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:

Name

Lump sum
severance
payment
($)(1)

Outplacement
benefits
($)(2)

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

$3,223,863
893,437
992,847

$35,000
35,000
35,000

Continued
health
care
coverage
benefits
($)(3)

$34,236
33,182
1,038

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

Total
($)

$10,627,165
5,671,634
2,993,903

$13,920,264
6,633,254
4,022,788

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

Mr. Gecht and 18 months of base salary for Mr. Olin and Mr. Reeder, 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 2014
assuming that 100% of any performance targets applicable to the bonus were attained.

(2) Messrs. Gecht, Olin, and Reeder would each be entitled to outplacement services up to a maximum of

$35,000.

(3) Messrs. Gecht, Olin, and Reeder would each be entitled to premium reimbursement for health insurance

coverage under COBRA for up to 18 months.

(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,
2014 of $42.83 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, 2014 (assuming such
termination was within 24 months after a change of control) are as follows:

Name

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

Stock
Options
(#)

15,540
—
—

Restricted
Stock
Units
(#)

253,136
138,686
76,548

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 2014, 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 2014 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

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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 2014 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 2014

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 6, 2015, Mr. Gecht owns approximately 1.1% of the Company’s outstanding common

stock, which significantly aligns his interests with the stockholders’ interests.

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, 2014, 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,

Deloitte & Touche LLP (“Deloitte”), the matters required to be discussed by statement on Auditing
Standards No.16, Communications With Audit Committees, 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 Deloitte required by

applicable requirements of the PCAOB regarding the independent accountant’s communications with the Audit
Committee concerning independence and has discussed with Deloitte the independence of Deloitte 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, 2014 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/ ALEX GRAB
Alex Grab

Secretary

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Dated: April 10, 2015

[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, 2014
‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 000-18805

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)

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

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

None

K
-
0
1
m
r
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F

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

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, 2014 was $2,095,724.080.*

The number of shares outstanding of the registrant’s common stock, $.01 par value per share, as of January 28, 2015 was 46,894,719.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement to be delivered to stockholders in connection with the 2015 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, 2014, the last business day of the
registrant’s second quarter of the 2014 fiscal year. Excludes 391,230 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2
18
33
33
34
35

36
39
40
76
79
146
146
148

149
149

149
150
150

ITEM 15
Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

151
156

PART IV

Exhibit index
EXHIBIT 12.1
EXHIBIT 21
EXHIBIT 23.1
EXHIBIT 23.2
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 101

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,” “goal,” “intend,” “may,” “plan,” “potential,” “project,” “seek,” “should,”
“target,” “will,” variations of such words, 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, label and packaging, and
ceramic tile decoration digital inkjet printers that utilize our digital ink, 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 inks include digital ultra-violet (“UV”), light emitting diode (“LED”), ceramic, textile dye sublimation, and
thermoforming ink. Our award-winning business process automation solutions are integrated from creation to
print and are vertically integrated with our industrial digital inkjet printers and products produced by the leading
printer manufacturers that are driven by our Fiery DFEs.

Our product portfolio includes industrial inkjet products (“Industrial Inkjet”) including VUTEk super-wide and
EFI wide format industrial digital inkjet printers, Jetrion label and packaging digital inkjet printing systems, 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 consists of our
VUTEk super-wide format, EFI wide format, Jetrion label and packaging, and Cretaprint ceramic tile decoration
industrial digital inkjet printers; UV, LED, ceramic, textile dye sublimation, and thermoforming ink; digital
inkjet printer parts; and professional services. Printing surfaces include paper, vinyl, corrugated, textile, glass,
plastic, aluminum composite, ceramic tile, and many other flexible and rigid substrates.

Customer Base. 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 entry-level and 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 and ceramic digital ink to the ceramic
tile manufacturing and construction industries.

Our focus in 2014 has been to add LED capability to our printer models driven by strong market demand for our
“cool cure” LED printing technology. LED technology is a green technology that saves our customers money by
reducing their consumables waste and energy consumption. LED technology uses less heat than the traditional
curing process resulting in increased uptime and greater reliability. Energy assessments conducted by the Fogra
Graphic Technology Research Association have shown that our super-wide format printers with LED curing can
reduce energy consumption by up to 82% when compared with devices that use conventional mercury arc lamps.

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 2014, 2013, and 2012. We launched
the HS100 Pro UV inkjet press in 2013, which is an alternative to analog presses. The HS100 is a super-wide
format industrial digital UV inkjet press incorporating pin & cure technology and utilizing an upgraded operating
system platform. Pin & cure technology delivers precise ink lay down for better image quality and high
production speeds, gloss control, an increased color gamut, and wider output capability.

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 2014, 2013, and 2012. The LX
models incorporate LED technology. We added ultra-drop capability to our GS3250LX and GS2000LX hybrid
printers in 2014. Ultra-drop technology offers smaller drop sizes and more precise control. Our newly developed
Material Edge Guide (“MEG”) addresses challenges created by corrugated, fluted paper, and other plastic
materials. The MEG eliminates the need to tape materials and allows customers to use less than perfect material.
The five meter roll-to-roll GS5500LXr Pro LED inkjet printer was launched in 2014. The 3.2 meter GS3250LXr
Pro was launched in 2013 and was the first dedicated roll-to-roll printer to use LED technology. The GS2000
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. In 2013, we launched the TX3250r, our textile dye sublimation printer, which enables textile and
soft signage makers to print onto textile surfaces.

The H/QS family of super-wide format industrial digital inkjet printers offers high quality and productivity for
the mid-range market in a super-wide format. In 2014, we launched the two meter H2000 Pro printer, which
provides a more affordable entry point into high-end production printing for signage and graphics companies

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with the option to add features as their business grows. H2000 Pro users can run rigid, sheet and flexible media
up to two inches thick. 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.

Wide Format. 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.
In 2014, we launched our wide format H1625 hybrid roll / flatbed printer. The H1625 includes LED technology
enabling printing on a broad range of substrates, including media that cannot withstand the high-heat drying or
curing methods used in other inkjet platforms. 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.

Label and Packaging. Our Jetrion label and packaging digital inkjet printers 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 and packaging industries. Our Jetrion 4950LX printer, which incorporates full LED curing
and an image quality greater than 1000 dpi, was launched in 2013 and now offers a white printing option that was
launched in 2014. We launched the 4900M and 4900M-330 UV digital inkjet printing systems in 2012, 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.

Ceramic Tile Decoration. Our Cretaprint ceramic tile decoration digital inkjet printers are utilized by the
ceramic tile manufacturing and construction industries. The ceramic tile decoration market is transitioning from
analog to digital inkjet printing technology. We introduced the Cretaprint C4, which is our next generation
ceramic tile decoration digital inkjet printer in 2014, which is scheduled to launch later in 2015. Electronics and
ink systems have been upgraded to maximize accuracy in a broad range of production conditions. The Cretaprint,
C4 printer allows the use of different print heads and digital applications on the same machine.

We launched the Cretaprint C3 ceramic tile decoration digital inkjet printer in 2012, which features a single
chassis that accommodates up to eight print bars accessed via a slide-bar design and is independently
configurable for printing and special decoration effects. This multipurpose printer offers over 1,000 customizable
settings controlling print width, speed, printer direction, and ink discharge.

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. The
Fiery proServer for Cretaprint 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.

Inks. VUTEk printers primarily use UV and LED curable ink, 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. We launched
our ceramic digital ink in 2014

We accelerated our ink development capability with the purchase of technology from Polymeric Imaging, Inc.
(“Polymeric”) in 2014. Polymeric has extensive experience developing inkjet inks that address important curing,
adhesion, density, and durability issues that are encountered when printing on challenging substrates. We will use
the technology to enhance capabilities for thermoforming and other high-elongation applications. 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

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.

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Ceramic tile industry
Construction industry

thermoplastic sheet materials, which can then be formed into deep draw, high elongation parts while retaining
hue and opacity. Our ink provides a recurring revenue stream generated from sales to our existing customer base
of installed printers.

Our industrial digital inkjet printers and their related features are as follows:

Models

Capabilities

Application Examples

Printer Type

VUTEk super-
wide format

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

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.

EFI wide format R family roll-to-roll

H family hybrid
printers EFI H1625
LED 3M™ ink

Jetrion label &
packaging

4950LX
4900M/4900M-330
4900ML
Jetrion inks

Cretaprint
ceramic tile
decoration

Cretaprinter C3
Cretaplotter
Cretavision
Cretaprint ink

Productivity Software

Speeds up to 87.2 square meters
per hour (roll-to-roll) and 42.3
square meters per hour (hybrid),
up to 1200 dpi, 4 colors plus
white and greyscale, up to 2 inch
thickness, flexible and rigid
substrates, UV curable, and LED
“cool cure.”

Print resolutions greater than 1000
dpi; 4 colors plus white, printing
width up to 14 inches, inches, UV
curable, and LED “cool cure.”
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.

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, cost
effective, 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 products, services,
and solutions.

The Productivity Software operating segment includes (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.

Customer Base. 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.

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

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

New Version Releases and Product Offerings. New versions have been released for each of our significant
software products and new product offerings have resulted from strategic business acquisitions. New product
offerings that have resulted from strategic business acquisitions are described under “Growth and Expansion
Strategies” below. New versions of our PrintSmith, PrintFlow, Monarch, Pace, Metrix, Radius, Digital
StoreFront, and Metrics IQuote software were released in 2014, 2013, and 2012.

New version releases in 2014 include the following:

•

PrintSmith version released for the quick print, franchise, and small commercial market segment.

PrintFlow scheduling software has been released for the printing and packaging industry, which creates
an optimized schedule for the printing operation based on constraints such as workload, job
characteristics, work center capabilities, and delivery priorities.

The Customer Relationship Management (“CRM”) and mailing modules of our Monarch software have
been upgraded.

Pace has been interfaced with our Metrix impositioning software.

Radius 5.1 offers new features and enhancements, including a mobile CRM module; improved
scheduling with PrintFlow plant optimization software; web-based SmartLinc multi-carrier shipping
features; and Radius customer web portal.

Digital StoreFront 7.0 combines the software’s SmartStore Builder interface with advanced HTML5
tools for optimized web-to-print storefront access across desktop, tablet and mobile devices.

New version of Metrics IQuote sales price estimating software offering new price list functionality and
tools for more-accurate costing on variable data including estimating offset and digital print jobs with
minimal user interaction.

Our primary software offerings include:

Product Name

Description

User

Business process automation
software: Monarch, PSI, Logic,
PrintSmith, PrintFlow, Radius,
SmartLinc, Graphisoft, PC Topp,
DiMS!, PrintStream, Prism, IQuote,
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,
shipping and logistics, 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, DirectSmile, 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.

Fiery

Our Fiery brand consists of DFEs that 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 DFE solutions such as Fiery Central, Command WorkStation, and
MicroPress, (iv) Fiery Self Serve (formerly 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.

Fiery DFEs. The Fiery FS150 Pro DFE was released in 2014, which simultaneously processes a print job on four
processor cores allowing print jobs to be processed up to 55% faster. In 2013, Fiery FS100 Pro became the first
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.

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Fiery XF is a DFE and color management workflow for super-wide and wide format printing and proofing. Fiery
XF 6.0 was released in 2014 featuring real WYSIWYG tiling preview, the new Fiery Dynamic Smoothing
function, and the Fogra Process Standard Digital support.

Fiery proServer is a DFE and color management workflow for the super-wide format and ceramic tile decoration
digital inkjet printer market. Fiery proServer 6.0 was released in 2014 featuring Fiery Accelerated System
Technology, which processes Adobe PDF files up to seven times faster than previous versions of proServer.
Although designed for our super-wide, wide format, and ceramic printers, Fiery proServer is compatible with 540
super-wide and wide format printers from numerous major manufacturers.

Software Solutions. Fiery Command WorkStation 5.6 job management interface software was released in 2014
featuring automated job presets, faster job searching capabilities, a new user interface, advanced tools for
printing multi-bank and bleed-edge tabbed documents, and an integrated analytics tool, Fiery Dashboard.

Fiery Workflow Suite was released in 2012, 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.

Fiery Self Serve is a leading provider of self-service and payment solutions that allows service providers to offer
access to business machines including printers, copiers, computers/internet access, fax machines, and photo
printing kiosks from mobile phones, iPad ®, USB drives, and cloud accounts such as Google DriveTM Dropbox.

In 2014, we announced integration with campus identification card systems and campus card solutions such as
CBORD, Odyssey, and Blackboard. We also announced the release of Self-Serve AdminCentral, which is a
cloud-based management system for the M500 product. 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.

PrintMe. PrintMe Connect enables direct printing from Apple®, iPad®, iPhone®, and iPod touch® iOS 4.2-
enabled and other mobile devices to 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.

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

Platform

Fiery external DFEs

Fiery embedded DFEs and design-
licensed solutions

Printer Manufacturers or Customers

User Environments

Canon, Fuji Xerox, Konica
Minolta, Kyocera Document
Solutions, Landa, Ricoh, Sharp,
Toshiba, Xerox

Print for pay, corporate
reprographic departments, graphic
arts, advertising agencies, and
transactional & commercial printers

Canon, Epson, Fuji Xerox, Intec,
Konica Minolta, Kyocera
Document Solutions, OKI Data,
Ricoh, Sharp, Toshiba, Xerox

Office, print for pay, and quick
turnaround printers

Fiery Central, MicroPress Fiery
Workflow Suite

Canon, Konica Minolta, Kyocera
Document Solutions, Ricoh, Sharp,
Xerox

Corporate reprographic
departments, commercial printers,
and production workflow solutions

Fiery Self Serve

Canon, FedEx Office, Staples

PrintMe PrintMe Mobile

Production Inkjet and Proofing
software: ColorProof XF, Pro, Fiery
XF, Fiery proServer

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

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

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 in 2012. Foshan is home to the largest concentration of ceramic 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 attendees at our 2014 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.

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 sale to a mix of distribution
channels 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, Konica Minolta, Ricoh, Xerox, and
Veritiv (formerly xpedx). 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 expand our market in 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.

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

Fiery Self Serve is our self-service and payment solution that is sold to FedEx Office, Staples, and Canon. Fiery
Self Serve is also marketed to college campuses and libraries.

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, and Heidelberg. 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 through internal
development efforts or business acquisition, (ii) increasing market coverage through internal efforts or business
acquisition, (iii) expanding the addressable market, and (iv) 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. We expect to expand and improve our offerings of new generations of Industrial Inkjet products,
including super-wide and wide format, label and packaging, 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, image personalization, workflow, and
print management.

We have established relationships with many leading distribution companies in the graphic arts and commercial
print industries such as Nazdar, Heidelberg, 3M, and Veritiv, as well as significant printer manufacturing
companies including Xerox, Ricoh, Canon, 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.

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Increasing Market Coverage. We are increasing our market coverage through 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 China, India, and Latin
America through the acquisitions of Creta Print S.L. (“Cretaprint”), Metrics in 2012, and Prism in 2011.

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

We establish coherence across our product lines by designing products and platforms that provide a consistent
“look and feel” to the end user. Cross-product coherence creates higher productivity levels as a result of
shortened learning curves. 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. Open architecture utilizing industry-
established standards to provide interoperability across a range of digital printing devices and software
applications 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 Pace 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 have received more than ten JDF
certifications from Printing Industries of America.

Recent Business Acquisitions. 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. We also acquire businesses to expand our market coverage and customer base. The
impact of our business acquisitions on product innovation, market coverage, and addressable market during 2014,
2013, and 2012 is summarized as follows:

Year

2014

Acquired Business

Acquired Product Line or Customer Base

SmartLinc, Inc. (“SmartLinc”)

Shipping and logistics automation software

Rhapso S.A. (“Rhapso”)

DirectSmile GmbH (“DirectSmile”)

DiMS! organizing print BV (“DIMS”)

2013

PrintLeader Software (“PrintLeader”)

French customer base and corrugated
packaging software

Image personalization, cross media marketing,
variable data printing

Multilingual, and multi-national print and
packaging companies with a large European
installed base

Small commercial and in-plant printing
operations

GamSys Software SPRL (“GamSys”)

French speaking regions of Europe and Africa

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

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

Lector Computersysteme GmbH (“Lector”)

German speaking regions of Europe

2012

Creta Print S.L. (“Cretaprint”)

Ceramic tile decoration digital inkjet printers

Fxcolors (“FX Colors”)

Software and technology for industrial printing

Metrics Sistemas de Informação, Serviços e
Comércio Ltda. and Metrics Sistemas de
Informação e Serviço Ltda. (collectively,
“Metrics”)

Latin American customer base (sales quotation
software)

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

Technique, Inc. and Technique Business
Systems Limited (collectively, “Technique”)

European customer base

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

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. 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 2014 were Canon, Epson, Fuji Xerox, Konica
Minolta, Kyocera Document Solutions, Landa, OKI Data, Ricoh, Sharp, Toshiba, and Xerox. Sales to Xerox
accounted for 11% of our 2014 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 with sales to new or existing customers.

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 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 develop their own products for sale to the 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 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 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. Our current agreement
with Adobe was renewed on April 1, 2013 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 provided by Adobe, which is a leader in
providing page description software. Adobe’s PostScript® software is widely used to manage the geometry,
shape, and typography of hard copy documents. 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

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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 require inkjet print heads that are manufactured by a limited number of suppliers. If
we experience difficulty obtaining print heads, our inkjet printer production would be limited. In addition, we
manufacture UV and ceramic digital 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 when 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, 2014, we employed 2,672 full time employees. Approximately 762 were in sales and
marketing (including 304 in customer service), 337 were in general and administrative, 506 were in
manufacturing, and 1,067 were in research and development. Of the total number of employees, 1,494 employees
were located in the Americas (primarily the U.S. and Brazil) and 1,178 were located outside of the Americas.

Research and Development

Research and development expense was $134.7, $128.1, and $120.3 million for the years ended December 31,
2014, 2013, and 2012, respectively. As of December 31, 2014, 1,067 of our 2,672 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 13 U.S.
locations, as well as in India, Europe, the United Kingdom (“U.K.”), Brazil, Canada, New Zealand, China,
Australia, and Japan. 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 industrial digital 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”), label and packaging digital
inkjet printer production to Roberts Tool Company (“Roberts”), and formulation of certain solvent ink with
Nazdar Company, Inc. (“Nazdar”).

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 Cretaprint ceramic tile
decoration digital inkjet printers are manufactured in a single location in our Castellon, Spain facility. Our
ceramic digital ink that is used in our ceramic tile decoration digital inkjet printers is formulated in a single
location in our Ypsilanti, Michigan facility. Most components used to manufacture 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 formulations. In our Industrial Inkjet facilities, we use hazardous
materials to formulate and store digital UV and ceramic digital 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
super-wide format industrial digital inkjet printers and formulate our ceramic digital ink primarily in single
locations. Any significant interruption in the manufacturing process at these 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; and We may be subject to environmental-related
liabilities due to our use of hazardous materials and solvents.

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Significant 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
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
Contract manufacturing (digital inkjet printers)
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 industrial digital inkjet printers compete with printers produced by Agfa,
Domino, Durst, Canon, Hewlett-Packard (“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.

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
System), 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.

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 market.

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Fiery

The principal competitive factors affecting the market for our Fiery solutions include 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.

Although we have direct relationships with each of the leading printer manufacturers and work closely 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 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.

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, 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.

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 competitors 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.
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 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.

Our solvent-based ceramic digital ink is sold to users of our ceramic tile decoration digital inkjet printers. Until
we began formulating our solvent-based ceramic digital ink in our facility in Ypsilanti, Michigan, our customers
were required to fulfill their ceramic digital ink requirements from third party suppliers. Although we are focused
on developing this recurring revenue stream, we cannot guarantee that we will become the primary supplier of
ceramic digital ink to the users of our printers.

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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 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. For example, Xerox
provided 11% of our revenue for the year ended December 31, 2014. 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.

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.

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 experienced serious financial difficulties in the past,
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.

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.

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 a 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.

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 $42.2 million, which represents 16% of our money market funds
and corporate debt securities at December 31, 2014. Our European debt investments are with corporations
domiciled in the northern and central European countries of Sweden, Germany, Netherlands, Switzerland,
Luxembourg, Norway, France, Belgium, Finland, 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.

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Since Europe is composed of varied countries and regional economies, our European risk profile is somewhat
more diversified due to the varying economic conditions among the countries. Approximately 26% of our
receivables are with European customers as of December 31, 2014. Of this amount, 22% of our European
receivables (6% 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.

Our business, results of operations and financial condition may be negatively impacted by conditions
abroad, including local economies, political environments, fluctuating foreign currencies and shifting
regulatory schemes.

A significant amount of our revenue is generated from operations outside the U.S. Approximately $352.0 (45%),
$315.6 (43%), and $298.0 (46%) million of revenue for the years ended December 31, 2014, 2013, and 2012,
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. We maintain significant operations and acquire or manufacture many of our products and/or their
components outside the U.S. Our future revenues, costs, and results of operations could be significantly affected
by changes in each country’s economic conditions, foreign currency exchange rates relative to the U.S. dollar,
political conditions, trade protection measures, licensing requirements, local tax issues, capitalization, and other

related legal matters. If our future revenues, costs, and results of operations are significantly affected by
economic conditions abroad, our results of operations and financial condition could be negatively impacted.
Specifically, the slowdown in the Chinese construction market has negatively impacted, and may continue to
negatively impact, our results of operations, specifically within our ceramic tile decoration digital inkjet printer
business. Our revenue in the APAC region, excluding Japan, decreased by 7% during the year ended
December 31, 2014, compared with the year ended December 31, 2013 primarily as a result of this impact.

We face risks from currency fluctuations.

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 $2.9 million at
December 31, 2014.

Forward contracts not designated as hedging instruments consist of hedges of Brazilian real, British pound
sterling, and Euro-denominated intercompany loans with notional amounts of $63.8 million, British pound
sterling and Euro-denominated trade receivables with notional amounts of $20.8 million, and Indian rupee net
monetary assets with notional amounts of $1.9 million at December 31, 2014.These forward contracts 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, 2014, 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,

•

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 of 1977, as amended. 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 outsourced 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.

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.

We are required to obtain separate licenses from Adobe for the right to use Adobe PostScript® software in each
copier or printer model that uses 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 super-wide format industrial digital inkjet printers and formulate our ceramic
digital ink primarily in single locations. Any significant interruption in the manufacturing process at these
facilities 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. Our Cretaprint ceramic tile decoration digital inkjet printers are
manufactured in a single location in our Castellon, Spain facility. Our ceramic digital ink that is used in our
ceramic tile decoration digital inkjet printers is formulated in a single location in our Ypsilanti, Michigan 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 and wide format, label and packaging, and ceramic tile decoration industrial
digital inkjet 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 and ceramic 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, 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 delayed delivery of our products and potentially the cancellation of orders for our products.

We have outsourced our Fiery production with Avnet, label and packaging digital inkjet printer production with
Roberts, and formulation of certain solvent ink with Nazdar. Certain Industrial Inkjet sub-assemblies are
manufactured by subcontractors. Should our subcontractors experience any inability, or unwillingness, to
manufacture or deliver our products, then our business, financial condition, and operations could be harmed.
Since we generally do not maintain long-term agreements with our subcontractors, any of our subcontractors
could enter into agreements with our competitors that might restrict or prohibit them from manufacturing our
products or could otherwise lead to an inability to fill our orders in a timely manner. In such event, we may not
be able to find suitable replacement subcontractors, in which case our financial condition and operations would
likely be harmed.

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 and ceramic tile decoration
industrial digital inkjet printers and formulate digital UV and ceramic digital ink based on our sales forecasts. If
we do not accurately forecast demand for our products, we may produce or purchase excess inventory, which
may result in our inventory becoming obsolete. We might not produce the correct mix of products to match
actual demand if our sales forecast is not accurate, resulting in lost sales. If we have excess printers, ink, or other
products, we may need to lower prices to stimulate demand.

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

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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 13 U.S. locations. We have research and
development facilities 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 adequately 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.

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:

•

difficulties integrating operations, employees, technologies, or products, and the required focus 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 personnel 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;

possible overruns of direct acquisition and integration costs; and

if we issue equity securities in connection with any future acquisition, it 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.

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 any economic downturn, or the period or
strength of any subsequent recovery, made for purposes of our goodwill impairment testing at December 31,
2014 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 2015 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, 2014.

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 be sure 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.

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.

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.

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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 formulation
process are flammable.

We use flammable materials in the digital UV and ceramic digital ink formulation 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 and ceramic 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.

A significant natural disaster, such as an earthquake, flood, tsunami, hurricane, typhoon, or other business
interruptions due, for example, to power shortages and other interruptions could harm our business, financial
condition, and operating results.

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

Our business operations involve the use of certain hazardous materials at three locations. At these facilities, we
formulate and store UV, ceramic, solvent, thermoforming, and dye sublimation ink. The formulation and storage
of solvent ink and ceramic ink requires the use of solvents. Our formulation of solvent ink is limited as we have
primarily outsourced solvent ink formulation. However, we launched internal formulation and marketing of
ceramic solvent-based ink during 2014 at our facility in Ypsilanti, Michigan. The solvents used in ceramic ink
formulation have low volatility by design. As a result, ceramic ink poses less environmental risk compared with
true solvent inks.

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

Future sales of our hardware products could be limited if we do not comply with current and future
environmental and 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.

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 $9.7 million at December 31, 2014, 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.

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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, 2014, the price of our common stock as reported on The NASDAQ Global Select Market
ranged from a low of $36.62 to a high of $47.75. 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.

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

We maintain an investment portfolio of fixed income debt securities classified as available-for-sale securities. As
a result, our investment portfolio is subject to counterparty risk and volatility if market interest rates fluctuate.

We attempt to limit our exposure to interest rate risk by investing in securities with maturities of less than three
years; however, we may be unable to successfully limit our risk to interest rate fluctuations. This may cause
volatility in our investment portfolio value.

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.

contributions), population demographics, and other various 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.

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.

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 initiatives, such
as proposals for fundamental tax reform in the United States or multi-jurisdictional actions to address “base
erosion and profit-shifting” by multinational companies, could adversely affect our effective tax rate, if enacted.
Any of these changes could negatively impact our net income.

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We may not have the ability to raise the funds necessary to settle conversions of our 0.75% Convertible
Senior Notes due 2019 (“Notes”) in cash, repay the Notes at maturity, or repurchase the Notes upon a
fundamental change.

In September 2014, we completed a private placement of $345 million principal amount of Notes. Holders of the
Notes will have the right to require us to repurchase all or a portion of their Notes upon the occurrence of a
fundamental change at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased,
plus accrued and unpaid interest, if any, as described in Note 7—Convertible Senior Notes, Note Hedges, and
Warrants of the Notes to Consolidated Financial Statements.

Upon conversion of the Notes, we will be required to make conversion payments in cash, unless we elect to
deliver solely shares of our common stock to settle such conversion, as described in Note 7—Convertible Senior
Notes, Note Hedges, and Warrants of the Notes to Consolidated Financial Statements. Moreover, we will be
required to repay the Notes in cash at their maturity, unless earlier converted or repurchased. However, we may
not have enough available cash or be able to obtain financing at the time we are required to make repurchases of
Notes surrendered or pay cash with respect to Notes being converted or at their maturity.

The conditional conversion feature of the Notes, if triggered, may adversely affect our financial condition
and results of operations.

In the event the conditional conversion feature of the Notes is triggered, holders of Notes will be entitled to
convert the Notes at any time during specified periods at their option. If one or more holders elect to convert their
Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock, we
would be required to settle a portion or all of our conversion obligation through the payment of cash, which could
adversely affect our liquidity. Even if holders do not elect to convert their Notes, we could be required under
applicable accounting rules to reclassify all or a portion of the outstanding principal of the Notes as a current
liability, which would result in a material reduction of our net working capital.

The accounting method for convertible debt securities that may be settled in cash (such as the Notes) could
have a material effect on our reported financial results.

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 470-20, Debt with
Conversion and Other Options, requires us to separately account for the liability and equity components of the
Notes that may be settled entirely or partially in cash upon conversion in a manner that reflects our non-
convertible debt interest rate. Accordingly, the equity component of the Notes is included in additional paid-in
capital within stockholders’ equity in our Consolidated Balance Sheet and the value of the equity component is
treated as original issue discount for purposes of accounting for the debt component of the Notes. As a result, we
are required to recognize non-cash interest expense in our Consolidated Statement of Operations in current and
future periods as a result of the amortization of the discounted carrying value of the Notes to their principal
amount over their term. We will report lower net income because ASC 470-20 requires interest to include both
the current period’s amortization of the original issue discount and the Notes’ non-convertible interest rate. This
could adversely affect our future consolidated financial results, the trading price of our common stock, and the
trading price of the Notes.

Under certain circumstances, in calculating earnings per share, convertible debt instruments (such as the Notes)
that may be settled entirely or partially in cash are accounted for utilizing the treasury stock method. The effect
of the treasury stock method is that the shares of common stock issuable upon conversion of the Notes, if any, are
not included in the calculation of diluted earnings per share except to the extent that the conversion value of the
Notes exceeds their principal amount. Under the treasury stock method, diluted earnings per share is calculated
as if the number of shares of common stock that would be necessary to settle such excess were issued, if we
elected to settle such excess in shares. We cannot be sure that accounting standards will continue to permit the
use of the treasury stock method in the future. If we are unable to use the treasury stock method in accounting for
the shares issuable upon conversion of the Notes, if any, then our diluted consolidated earnings per share would
be adversely affected.

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

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

As a Delaware corporation, we are subject to Delaware law, including Section 203 of the Delaware General
Corporation Law, which imposes restrictions on certain transactions between a corporation and certain

significant stockholders. These provisions could also have the effect of delaying or impairing the removal or
replacement of management, proxy contests, or changes in control. Any provision of our amended and restated
certificate of incorporation and amended and restated bylaws that has the effect of delaying or impairing a
change in control of the Company could limit the opportunity for our stockholders to receive a premium for their
shares of our common stock and could affect the price that certain investors may be willing to pay for our
common stock.

Item 1B: Unresolved Staff Comments

None.

Item 2: Properties

As of December 31, 2014, we owned or leased a total of approximately 1.2 million square feet world-wide. The
following table sets forth the location, size, and use of our principal facilities (square footage in thousands):

Location

Fremont, California

(6750 Dumbarton Circle)

. . . . .

Fremont, California

(6700 Dumbarton Circle)

. . . . .

Square
Footage

119

Leased or
Owned

Owned*

Operating Segment

Principal Uses

Corporate
& Fiery

Corporate offices, design engineering,
product testing, sales, marketing,
customer service

Leased**

Fiery

Administrative offices, design engineering,

Meredith, New Hampshire . . . . . .

163

Owned

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

154

Leased***

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

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

Laconia, New Hampshire . . . . . . .

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

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

Lichtenvoorde, Netherlands . . . . .

Tempe, Arizona . . . . . . . . . . . . . . .

Leased

Owned

Leased

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

Leased

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

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

Pittsburgh, Pennsylvania . . . . . . . .

Schiphol-Rijk, The Netherlands . .

Sao Paolo, Brazil . . . . . . . . . . . . . .

Richmond Hill, Ontario, Canada . .

Leased

Leased***

Leased

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product testing

Industrial
Inkjet

Manufacturing (Industrial Inkjet printers),

design engineering, sales, customer service

Manufacturing, (Cretaprint), administrative,

design engineering, sales, customer service

All

APAC corporate offices, design engineering,

sales

Industrial
Inkjet

Fiery &
Productivity
Software

Industrial
Inkjet

Productivity
Software

Fiery &
Productivity
Software

Fiery

Industrial
Inkjet

Productivity
Software
Industrial
Inkjet

Productivity
Software

Manufacturing (digital UV & ceramic ink),

design engineering, sales, customer service

Warehouse

Administrative, design engineering,

customer service, software engineering

Sales, Industrial Inkjet demonstration center

Design engineering, software engineering,

sales, customer service

Manufacturing, (Fiery), distribution,

customer service

Design engineering, sales, customer service,

quality assurance, and software
engineering

Software engineering, sales, customer service

Sales, Industrial Inkjet demonstration center

Administrative, software engineering, sales

EMEA corporate offices, sales, support

services

Design engineering, software engineering,

sales, customer service

Fiery

Design engineering, sales, customer service

On April 26, 2013, we purchased an approximately 119,000 square feet building located at 6750 Dumbarton
Circle, Fremont, California, the related land, and certain other property improvements for a total purchase
price of $21.5 million.

** We entered into a 15-year lease agreement, pursuant to which we leased approximately 59,000 square feet
of a cold shell building located at 6700 Dumbarton Circle, Fremont, California, which is adjacent to the
building that we purchased. The lease commenced on September 1, 2013. See Note 8—Commitments and
Contingencies of the Notes to Consolidated Financial Statements.

*** Currently occupying two facilities as part of our transition into new facilities in 2015.

We leased 26 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, 2014, we are subject to the matter discussed below.

Componex Corporation (“Componex”) vs. EFI

Componex, Inc. 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 other
vendors infringe two patents held by Componex. We moved for summary judgment that, among other things,
Componex’s patents are not valid and that, even if they are, the rolls supplied and used in our products do not
infringe the patents. Componex also moved for summary judgment of infringement. On November 12, 2014, the
district court granted summary judgment that one of the two patents at issue is invalid, that there is no evidence
of infringement of the other patent at issue, and entered judgment in favor of EFI. On December 4, 2014,
Componex filed its notice of appeal to the United States Court of Appeals for the Federal Circuit. The appeal is
currently pending.

Although we do not believe that Componex’s patents or infringement claims based on the patent are valid 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 if we do not prevail on appeal and the district court
subsequently were to reach a different conclusion than in its final judgment. We estimate the range of potential
loss to be between one dollar and $1.5 million.

Other Matters

As of December 31, 2014, we were subject to claims, lawsuits, investigations, and proceedings in addition to the
matter 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 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.

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PART II
Item 5: Market for Registrant’s Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities

Our common stock has traded on The NASDAQ Global Select Market (formerly The NASDAQ National
Market) under the symbol EFII since October 2, 1992. The table below lists the high and low sales price during
each quarter the stock was traded in 2014 and 2013.

2014

2013

High . . .
Low . . .

$47.75
$37.86

$45.46
$36.62

$47.42
$42.75

$46.50
$39.09

$26.15
$18.97

$29.62
$23.82

$32.19
$28.55

$39.87
$30.48

As of January 28, 2015, there were 126 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 2014 or 2013. 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.

Repurchases of Equity Securities

Repurchases of equity securities during the year ended December 31, 2014 were as follows (in thousands except
per share amounts):

Fiscal month

January 2014 . . . . . . . .
February 2014 . . . . . . .
March 2014 . . . . . . . . .
April 2014 . . . . . . . . . .
May 2014 . . . . . . . . . .
June 2014 . . . . . . . . . .
July 2014 . . . . . . . . . . .
August 2014 . . . . . . . .
September 2014 . . . . . .
October 2014 . . . . . . . .
November 2014 . . . . . .
December 2014 . . . . . .

Total

. . . . . . . . . .

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)

85
1,058
1
240
45
—
245
130
257
87
185
7

2,340

$39.54
42.57
42.62
43.92
39.41
—
46.22
43.28
43.20
42.23
44.86
44.44

63
748
—
240
—
—
238
—
232
87
156
7

1,771

$194,915
163,180
163,180
152,639
152,639
152,639
141,639
141,639
131,639
127,965
120,965
120,642

$120,642

(1)

(2)

In November 2013, our Board of Directors approved the repurchase of $200 million of outstanding common
stock. This authorization expires in November 2016. Under this publicly announced plan, we repurchased
1.8 and 0.1 million shares for an aggregate purchase price of $76.8 and $2.6 million during the years ended
December 31, 2014 and 2013, respectively.
Includes 0.6 million shares purchased from employees to satisfy the exercise price of certain stock options
and any tax withholding obligations incurred in connection with such exercises and minimum tax
withholding obligations that arose on the vesting of restricted stock units (“RSUs”).

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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, 2014. 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

$400

$350

$300

$250

$200

$150

$100

$50

12/09

12/10

12/11

12/12

12/13

12/14

Electronics For Imaging, Inc.

NASDAQ Composite

NASDAQ Computer Manufacturers

*$100 invested on 12/31/09 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.

Item 6: Selected Financial Data

The following table summarizes selected consolidated financial data as of and for the five years ended
December 31, 2014. 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)

2014

2013

2012

2011

2010

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

$ 790,427

$ 727,693

$ 652,137

$591,556

$504,007

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

429,737

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

53,439

395,166

174,648

354,821

330,983

267,685

33,886

27,333

(276)

Net income(2)(3)

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

33,714

$ 109,107

83,269

$ 27,465

7,487

Earnings per share
Net income per basic common share . . . . . . . . .

Net income per diluted common share . . . . . . . .

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

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

0.72

0.70

2.34

2.26

1.79

1.74

0.59

0.58

0.16

46,866

48,406

46,643

48,359

46,453

46,234

45,387

47,734

47,579

47,152

(in thousands)

2014

2013

2012

2011

2010

December 31,

Financial Position
Cash, cash equivalents, and short-term

investments . . . . . . . . . . . . . . . . . . . . . . . . . . .
Working capital . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Convertible senior notes, net(4)
. . . . . . . . . . . . . .
Stockholders’ equity . . . . . . . . . . . . . . . . . . . . . .

$ 616,732
684,898
1,304,560
284,818
788,689

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

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

—
767,450

—
650,793

$219,158
244,824
739,734

—
564,783

$229,663
265,250
706,581

—
551,749

(1)

Includes acquired company results of operations beginning on the date of acquisition. See Note 3—Business
Acquisitions of the Notes to Consolidated Financial Statements for a summary of recent acquisitions during
the years ended December 31, 2014, 2013, and 2012.

(2)

Income (loss) from operations includes the following:

K
-
0
1
m
r
o
F

December 31,

(in thousands)

2014

2013

2012

2011

2010

Amortization of acquisition-related

intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . .
Restructuring and other costs . . . . . . . . . . . . . . .
Litigation settlement expenses (recoveries) . . . .
Change in fair value of contingent

consideration . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition-related transaction costs . . . . . . . . .
Gain on sale of building and land (Note 13) . . . .

$20,673
36,061
6,578
897

$ 19,438
25,770
4,834
(3,081)

$18,594
19,721
5,803
256

$11,248
23,370
3,258
—

$12,385
15,924
3,615
—

(3,810)
1,501
—

(5,742)
1,434
(117,216)

(1,360)
2,200
—

1,476
2,327
—

395
1,169
—

Total charges, net of recoveries . . . . . . . . . . . . .

$61,900

$ (74,563) $45,214

$41,679

$33,488

(3) Net income includes the following:

•

Tax benefit from the release of previously unrecognized tax benefits of $2.6, $5.8, $11.8, $2.6, and
$8.5 million for the years ended December 31, 2014, 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 benefit of $3.1 million during the year ended December 31, 2014 resulting from the increased
valuation of intangible assets for Brazilian tax reporting.

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 $3.2 million during 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.

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.

(4)

In September 2014, we completed a private placement of $345 million principal amount of 0.75%
Convertible Senior Notes due 2019 (“Notes”). Holders of the Notes will have the right to require us to
repurchase all or a portion of their Notes upon the occurrence of a fundamental change at a repurchase price
equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if
any, as described in Note 7—Convertible Senior Notes, Note Hedges, and Warrants of the Notes to
Consolidated Financial Statements.

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
“anticipate,” “believe,” “continue,” “estimate,” “expect,” “goal,” “intend,” “may,” “plan,” “potential,”
“project,” “seek,” “should,” “target,” “will,” variations of such words, and similar expressions. 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, including the Company’s most recent Quarterly Report on Form 10-Q and
Current Reports on Form 8-K, and any amendments thereto. 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

We completed a private placement of $345 million principal amount of 0.75% Convertible Senior Notes due
2019 (“Notes”) in September 2014. The Notes were sold under a purchase agreement among the Company,
Morgan Stanley & Co., LLC, and Goldman, Sachs & Co., (together, the “Initial Purchasers”). The Notes were
sold to the Initial Purchasers in reliance on an exemption from registration provided by Section 4 (a)(2) of the

Securities Act for resale to qualified institutional buyers pursuant to Rule 144A under the Securities Act. The net
proceeds from this offering were approximately $336.4 million, after deducting the Initial Purchasers’
commissions and the offering expenses payable by us. As described more fully in Note 7—Convertible Senior
Notes, Note Hedges, and Warrants, we used approximately $29.4 million of the net proceeds to pay the cost of
the Note Hedges (after such cost was partially offset by the proceeds from the Warrant transactions).

In connection with the issuance of the Notes, we entered into an indenture with U.S. Bank, N.A., as trustee.
Under the indenture, the Notes are senior unsecured obligations with interest payable semiannually in arrears on
March 1 and September 1 of each year, commencing March 1, 2015. The Notes will mature on September 1,
2019, unless previously purchased or converted in accordance with their terms prior to such date. We may not
redeem the Notes prior to maturity; however, holders of the Notes may convert them at certain times and upon
the occurrence of certain events in the future.

Key financial results for the year ended December 31, 2014 were as follows:

•

Our results of operations for the year ended December 31, 2014 compared with the prior year reflect
revenue growth, consistent gross profit, consistent operating expenses as a percentage of revenue, and
increased foreign exchange loss. Our revenue growth was driven by increased revenue in all three
operating segments. We completed our acquisitions of DIMS, DirectSmile, Rhapso, and SmartLinc in
2014. We completed our acquisitions of Lector, Metrix, GamSys, and PrintLeader in 2013. Their
results are included in our results of operations commencing on their respective acquisition dates.

Our consolidated revenue increased by 9%, or $62.7 million, from $727.7 million for the year ended
December 31, 2013 to $790.4 million for the year ended December 31, 2014. Industrial Inkjet,
Productivity Software, and Fiery revenue increased by $24.6, $12.3, and $25.8 million, respectively, in
2014 compared with 2013. Recurring ink and maintenance revenue increased by 15% during the year
ended December 31, 2014 compared with the same period in the prior year and represented 28% of
consolidated revenue.

Our gross profit percentage was comparable at 54% during the years ended December 31, 2014 and
2013. Productivity Software and Fiery operating segment gross margin percentages increased by 0.5
and 1.6 points, respectively, offset by the decreased Industrial Inkjet operating segment gross margin
percentage of 1.5 points.

Operating expenses as a percent of revenue increased from 30% in 2013 to 48% in 2014. Operating
expenses increased by $155.8 million between 2013 and 2014 primarily due to the gain on sale of
building and land of $117.2 million, which was recognized in 2013. Excluding the gain on sale of
building and land, operating expenses increased as a percentage of revenue from 46% to 48% between
2013 and 2014. The increase in operating expenses of $38.6 million, excluding the gain on sale of
building and land in 2013, was primarily due to head count increases related to our business
acquisitions, commission payments resulting from increased revenue, trade show expenses, facilities-
related restructuring expenses related to the consolidation of our operations in Germany, acquisition
expenses, legal fees, amortization of intangible assets, and stock-based compensation, partially offset
by the prior year release of reserves related to certain patent litigation, changes in fair value of
contingent consideration, and imputed sublease income related to the deferred property transaction.

K
-
0
1
m
r
o
F

•

Interest expense increased by $3.6 million, from $2.3 million for the year ended December 31, 2013 to
$5.9 million for the year ended December 31, 2014. Interest expense during the year ended
December 31, 2014, consists primarily of interest expense and amortization of debt issuance costs
related to our Notes of $4.7 million and imputed interest expense related to our build-to-suit lease of
$0.9 million, which is compared with imputed interest expense related to the deferred proceeds from
sale of building and land of $1.9 million, net of capitalized interest related to our new corporate
headquarters, and imputed interest expense related to our build-to-suit lease of $0.3 million during the
year ended December 31, 2013.

Interest income and other income (expense), net, decreased from a gain of $0.8 million during the year
ended December 31, 2013, to a loss of $5.5 million during the year ended December 31, 2014,
primarily due to a foreign exchange loss of $6.8 million during the year ended December 31, 2014,
compared to a foreign exchange loss of $0.3 million during the year ended December 31, 2013,
resulting from revaluation of foreign currency denominated net assets (mainly denominated in Euros,
British pounds sterling, Brazilian reais, and Indian rupees), partially offset by hedging gains.

• We recorded a tax provision of $8.4 million in 2014 on pre-tax income of $42.1 million compared to a
tax provision of $64.0 million in 2013 on pre-tax income of $173.1 million. We recognized a tax
benefit of $3.1 million in 2014 resulting from the increased valuation of intangible assets for Brazilian
tax reporting. We recognized a tax charge of $19.4 million in 2013 to establish a valuation allowance
for certain existing California deferred tax assets. We recognized $2.6 million of previously
unrecognized tax benefits in 2014 as compared to $5.8 million in 2013. 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, $3.2 million of the retroactive
credit that related to 2012 was entirely recognized on January 2, 2013.

Results of Operations

The following table presents items in our consolidated statements of operations as a percentage of total revenue
for 2014, 2013, and 2012. These operating results are not necessarily indicative of results for any future period.

For the years ended December 31,

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

100%

2014

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 expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income and other income (expense), net . . . . . . . .

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

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

17
19
8
3
1

—

6
(1)

—

5
(1)

4 %

2013

100%

17
19
6
3
1
(16)

24
—
—

24
(9)

15%

2012

100%

18
19
8
3
1

—

—
—

5
8

13%

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 format, EFI wide format, Jetrion label and
packaging, and Cretaprint ceramic tile decoration industrial digital inkjet printers; UV, LED, ceramic, textile dye
sublimation, and thermoforming ink; digital inkjet printer parts; and professional services. Printing surfaces
include paper, vinyl, corrugated, textile, glass, plastic, aluminum composite, ceramic tile, and many other flexible
and rigid substrates.

Productivity Software, which includes (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) Fiery Self Serve (formerly
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, 2014, 2013, and 2012 was as follows (in
thousands):

K
-
0
1
m
r
o
F

For the years ended December 31,

2014

2013

2012

% change

2014
over
2013

2013
over
2012

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

$379,170
130,743
280,514

48% $354,614
118,409
17
254,670
35

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

49% 7% 11%
10
16
10
35

14
11

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

$790,427

100% $727,693

100% $652,137

100% 9% 12%

Overview

Revenue was $790.4, $727.7, and $652.1 million for the years ended December 31, 2014, 2013, and 2012,
respectively, resulting in a 9% increase in 2014 compared with 2013 and a 12% increase in 2013 compared with
2012. The $62.7 million increase in 2014 compared with 2013 consisted of increased Industrial Inkjet,
Productivity Software, and Fiery revenue of $24.6, $12.3, and $25.8 million, respectively. 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.

Our revenue growth was primarily driven by the strength of our Industrial Inkjet operating segment in the digital
printing markets in which it participates, the benefits of the acquisition strategy in our Productivity Software
operating segment with respect to both product offerings and our distribution channel, and product launches by
the leading printer manufacturers in the Fiery operating segment.

Industrial Inkjet Revenue

Industrial Inkjet revenue increased by $24.6 million, or 7%, in 2014 compared with 2013. Industrial Inkjet
revenue in the super-wide and wide format products lines is benefiting from the ongoing analog to digital and
solvent to UV migration. The Industrial Inkjet revenue increase was primarily due to:

•

significantly increased UV and LED ink revenue resulting from the high utilization our UV printers are
experiencing in the field, partially offset by decreased solvent printer installed base demand measured
by solvent ink usage,

strong demand for our printers incorporating LED technology such as:

the GS5500LXr 5-meter and GS3250LXr 3-meter roll-to-roll digital UV inkjet super-wide format
printers,

the newly launched H1625 digital UV inkjet wide format printer,

the HS100 digital UV inkjet press representing an alternative to analog presses utilizing pin & cure
technology, and

other super-wide and wide format digital inkjet printers,

partially offset by decreased ceramic tile decoration digital inkjet printer revenue due to softness in the
global construction market. Companies are delaying investment in new equipment, especially in China.

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
pin & cure technology and representing an alternative to analog presses, which was launched during the second
quarter of 2013, and our next generation Cretaprint C3 ceramic tile decoration digital inkjet printer, which was
launched during the fourth quarter of 2012.

Productivity Software Revenue

Productivity Software revenue increased by $12.3 million, or 10%, in 2014 compared with 2013, primarily due to
increased recurring maintenance revenue resulting from our business acquisition strategy; increased Radius,
Pace, and web-to-print license revenue, as well as license and subscription revenue from recently acquired
businesses. Productivity Software revenue benefited from our acquisitions of SmartLinc, Rhapso, DirectSmile,
and DIMS, which closed in 2014, and GamSys, Metrix, and Lector, which closed in 2013. Our acquisitions have
increased the international presence of our Productivity Software business and significantly increased our
recurring maintenance revenue base.

Productivity Software revenue increased by $14.9 million, or 14%, in 2013 compared with 2012, primarily due to
increased Monarch, Radius, and Pace revenue, as well as revenue from recently acquired businesses. Productivity
Software revenue benefited from our acquisitions of GamSys, Metrix, and Lector, which closed in 2013, and
Metrics, OPS, and Technique, which closed in 2012.

Fiery Revenue

Fiery revenue increased by $25.8 million, or 10%, in 2014 compared with 2013. Although end customer and
reseller channel preference for Fiery products drives demand, most Fiery revenue relies on the leading printer
manufacturers to design, develop, and integrate Fiery technology into their print engines. The Fiery revenue
increase is primarily due to:

•

new product launches by these printer manufacturers with increased speed, quality, and versatility have
made the DFE a more significant consideration for the customer resulting in increased stand-alone
Fiery DFE revenue,

•

significant investment in research and development has resulted in advances in color management,
speed, and field presence, which have led to increased DFE market share,

integration of Fiery DFEs with certain Industrial Inkjet and Productivity Software products, and

increased sales of Fiery Self Serve payment solutions, and low reseller inventory.

Fiery revenue increased by $26.3 million, or 11%, in 2013 compared with 2012. 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.

Revenue by Geographic Region

Our revenue by geographic region for the years ended December 31, 2014, 2013, and 2012 was as follows (in
thousands):

For the years ended December 31,

2014

2013

2012

% change

2014
over
2013

2013
over
2012

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

$438,421
244,545
107,461
27,733
79,728

55% $412,127
207,665
31
107,901
14
21,977
4
85,924
10

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

54% 6% 16%
18
30
(0)
16
26
4
(7)
12

6
5
(21)
15

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

$790,427

100% $727,693

100% $652,137

100% 9% 12%

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.

Overview

Our consolidated revenue increase of $62.7 million, or 9% in 2014 compared with 2013, resulted from increased
revenue in the Americas, EMEA, and Japan, partially offset by decreased revenue in APAC, excluding Japan.

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, excluding Japan, partially offset by decreased revenue in
Japan.

Americas Revenue

Americas revenue increased by $26.3 million, or 6%, in 2014 compared with 2013 resulting from increased
revenue in all three of our operating segments. Decreased ceramic tile decoration digital inkjet revenue partially
offset double digit percentage growth in super-wide and wide format digital inkjet printer revenue.

Americas revenue increased by $58.0 million, or 16%, in 2013 compared with 2012. Americas revenue increased
in all three of our operating segments. 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

K
-
0
1
m
r
o
F

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

EMEA revenue increased by $36.9 million, or 18%, in 2014 compared with 2013 resulting from increased
revenue in all three of our operating segments. Decreased ceramic tile decoration digital inkjet revenue partially
offset double digit percentage growth in super-wide and wide format digital inkjet printer revenue. We drove
significant sales into the EMEA region through our 2014 acquisitions of SmartLinc, Rhapso, DirectSmile, and
DIMS.

EMEA revenue increased by $12.3 million, or 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 benefited from product launches by the leading
printer manufacturers, which had previously been delayed.

Japan Revenue

Japan revenue increased by $5.8 million, or 26%, in 2014 compared with 2013 primarily due to primarily due to
increased Fiery revenue and super-wide and wide format industrial digital inkjet printer sales.

Japan revenue decreased by $5.9 million, or 21%, in 2013 compared with 2012 primarily due to a 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, ex Japan, Revenue

APAC, excluding Japan, revenue decreased by $6.2 million, or 7%, in 2014 compared with 2013 due to increased
revenue in all three of our operating segments. Decreased ceramic tile decoration digital inkjet revenue partially
offset double digit percentage growth in super-wide and wide format digital inkjet printer revenue. Decreased
ceramic tile decoration digital inkjet printer revenue primarily resulted from the slowdown in the global
construction industry, especially in China.

APAC, excluding Japan, revenue increased by $11.2 million, or 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.

Revenue Concentration

A substantial portion of our revenue over the years has been attributable to sales of products through the leading
printer manufacturers and independent distributor channels. We have a direct relationship with several leading
printer manufacturers and work closely to design, develop, and integrate Fiery technology into their print
engines. 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 drive 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 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 DFE products to a relatively

small number of leading printer manufacturers. Xerox provided 11% of our revenue for the year ended
December 31, 2014, and 12% of our revenue for the years ended December 31, 2013 and 2012.

Our reliance on revenue from the leading printer manufacturers was 33% during 2014 and 2013 and 32% during
2012. Over time, we expect our revenue from the leading printer manufacturers 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.

Gross Profit

Gross profit by operating segment, excluding stock-based compensation, for the years ended December 31, 2014,
2013, and 2012 was as follows (in thousands):

2014

2013

2012

Industrial Inkjet

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

$379,170
143,981

$354,614
140,095

$320,228
127,783

38.0%

39.5%

39.9%

Productivity Software

$130,743
94,733

$118,409
85,246

$103,466
74,426

72.5%

72.0%

71.9%

Fiery

$280,514
193,585

$254,670
171,642

$228,443
153,805

69.0%

67.4%

67.3%

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A reconciliation of operating segment gross profit to the consolidated statements of operations for the years
ended December 31, 2014, 2013, and 2012 is as follows (in thousands):

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

$432,299
(2,562)

$396,983
(1,817)

$356,014
(1,193)

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

$429,737

$395,166

$354,821

2014

2013

2012

Overview

Our gross profit percentages were comparable at 54% during the years ended December 31, 2014, 2013, and
2012.

Industrial Inkjet Gross Profit

The Industrial Inkjet gross profit percentage decreased from 39.5% in 2013 to 38.0% in 2014 primarily due to
relatively fixed manufacturing costs being spread over lower ceramic tile decoration digital inkjet printer
revenue.

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.

Productivity Software Gross Profit

The Productivity Software gross profit percentage increased from 72.0% in 2013 to 72.5% in 2014 primarily due
to efficiencies gained through increased revenue, achievement of certain post-acquisition cost synergies, and
price increases on annual maintenance renewal contracts.

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.

Fiery Gross Profit

The Fiery gross profit percentage increased from 67.4% in 2013 to 69.0% in 2014 primarily due to a mix shift
from lower margin embedded DFEs to higher margin stand-alone DFEs and higher average selling price on
DFEs for newly launched printers by the leading printer manufacturers.

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.

Operating Expenses

Operating expenses for the years ended December 31, 2014, 2013, and 2012 were as follows (in thousands):

For the years ended December 31,

% change

2014

2013

2012

2014
over
2013

2013
over
2012

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

$134,732
147,383
66,932
20,673
6,578
—

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

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

5% 7%
10
7
(6)
40
5
6
36
(17)
— — (100)

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

$376,298

$ 220,518

$320,935

71% (31)%

Operating expenses, net of gain on sale of building and land, increased by $155.8 million, or 71%, in 2014 as
compared with 2013, and decreased by $100.4 million, or 31%, in 2013 as compared with 2012.

Operating expenses increased between 2013 and 2014 primarily due to the gain on sale of building and land of
$117.2 million, which was recognized in 2013. Excluding the gain on sale of building and land, operating
expenses increased by $38.6 million and increased as a percentage of revenue from 46% in 2013 to 48% in 2014.
The increase in operating expenses, excluding the gain on sale of building and land in 2013, was primarily due to
head count increases related to our business acquisitions, variable compensation due to improved profitability,
commission payments resulting from increased revenue, trade show expenses, facilities-related restructuring
expenses related to the consolidation of our operations in Germany, acquisition expenses, legal fees, amortization
of intangible assets, and stock-based compensation, offset by the prior year release of reserves related to certain
patent litigation, changes in fair value of contingent consideration, and imputed sublease income related to the
deferred property transaction.

Operating expenses decreased 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. The increase in operating expenses, 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, legal fees, depreciation expense related to our
deferred property transaction, and stock-based compensation, partially offset the release of reserves related to
certain patent litigation, changes in fair value of contingent consideration, and imputed sublease income related
to the deferred property transaction.

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, 2014,
2013, and 2012 were $134.7 million, or 17% of revenue, $128.1 million, or 17% of revenue, and $120.3 million,
or 18% of revenue, respectively.

Research and development expenses increased by $6.6 million, or 5%, in 2014 as compared with 2013.
Personnel-related expenses increased by $3.6 million primarily due to head count increases related to our
business acquisitions, net of reduced variable compensation. Prototypes and non-recurring engineering,
consulting, contractor, freight, and related travel expenses increased by $1.5 million primarily due to accelerated
product development efforts in advance of new product launches earlier in 2014. Stock-based compensation
expense increased by $1.2 million primarily due to new RSUs issued at a higher stock price compared to the
prior year, increased Employee Stock Purchase Plan (“ESPP”) expense due to our appreciating stock price, and
increased employee participation compared to the prior year. Facility and information technology expenses
related to our research and development activities increased by $0.3 million.

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 related to our
research and development activities increased by $2.5 million.

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Research and development head count was 1,067, 1,011, and 967 as of December 31, 2014, 2013, and 2012,
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, 2014, 2013, and 2012 were $147.4 million, or
19% of revenue, $137.6 million, or 19% of revenue, and $125.5 million, or 19% of revenue, respectively.

Sales and marketing expenses increased by $9.8 million, or 7%, in 2014 as compared with 2013. Personnel-
related expenses increased by $4.8 million primarily due to head count increases related to our business
acquisitions and increased commission payments resulting from increased revenue, net of reduced variable
compensation. Trade show and marketing program spending, including consulting, contractor, travel, and freight,
increased by $0.3 million. Stock-based compensation expense increased by $2.6 million primarily due to new

RSUs issued at a higher stock price compared to the prior year, increased ESPP expense due to our appreciating
stock price, and increased employee participation compared to the prior year. The remaining increase of $2.1
million is primarily due to facility and information technology expenses related to our sales and marketing
activities.

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 head count was 762, 721, and 613 as of December 31, 2014, 2013, and 2012, respectively,
including 304, 276, and 207 in customer service head count 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, 2014, 2013, and 2012 were $66.9 million, or 8%
of revenue, $47.8 million, or 6% of revenue, and $50.7 million, or 8% of revenue, respectively.

General and administrative expenses increased by $19.1 million, or 40%, in 2014 as compared with 2013.
Personnel-related expenses increased by $1.5 million primarily due to head count increases related to our
business acquisitions, net of reduced variable compensation. Stock-based compensation expense increased by
$5.7 million primarily due to new RSUs issued at a higher stock price compared to the prior year, increased
ESPP expense due to our appreciating stock price, and increased employee participation compared to the prior
year. Imputed sublease income of $3.1 million, partially offset by imputed depreciation of $1.4 million, was
accrued during the year ended December 31, 2013 related to the deferred proceeds from sale of building and
land. Legal and travel expenses increased by $1.2 million due to increased litigation activity in 2014. Litigation
settlement expenses increased general and administrative expenses by $4.2 million compared with 2013 due to
the settlement of a patent infringement claim in 2013, which resulted in the release of $3.3 million of litigation
reserves compared with litigation settlement expense of $0.9 million in 2014. The remaining increase of $2.9
million is primarily due to facility expenses related to our new corporate headquarters.

The estimated probability or actual achievement of several earnout performance targets was reduced during the
year ended December 31, 2014, net of earnout interest accretion, resulting in a reduction of the associated
liability and a credit to general and administrative expense of $3.8 million. A similar change in the estimated
probability or actual achievement of several earnout performance targets during the year ended December 31,
2013, net of earnout interest accretion, resulted in a reduction of the associated liability and a credit to general
and administrative expense of $5.7 million.

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 Foster City facility prior to its sale. Acquisition-related expenses decreased by $0.8 million. Legal fees
increased by $1.7 million due to increased litigation activity in 2013. Litigation settlement expenses reduced
general and administrative expenses by $3.3 million compared with 2012 primarily due to the settlement of a
patent infringement claim resulting in the release of related litigation reserves. Facility and information
technology expenses decreased by $0.8 million.

The estimated probability or actual achievement of several earnout performance targets was reduced during the
year ended December 31, 2013, net of earnout interest accretion, resulting in a reduction of the associated
liability and a credit to general and administrative expense of $5.7 million. A similar change in the estimated
probability or actual achievement of several earnout performance targets during the year ended December 31,
2012, net of earnout interest accretion, resulted in a reduction of the associated liability and a credit to general
and administrative expense of $1.4 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, 2014, 2013, and 2012 were $36.1 million,
or 5% of revenue, $25.8 million, or 4% of revenue, and $19.7 million, or 3% 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.

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Stock-based compensation expense increased by $10.3 million, or 40%, in 2014 as compared with 2013 due to
new RSUs issued at a higher stock price compared to the prior year, increased ESPP expense due to our
appreciating stock price, and increased employee participation compared to the prior year.

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 RSUs.

Amortization of Identified Intangibles

Amortization of identified intangibles for the years ended December 31, 2014, 2013, and 2012 was $20.7 million,
or 3% of revenue, $19.4 million, or 3% of revenue, and $18.6 million, or 3% of revenue, respectively.

Amortization of identified intangibles increased by $1.3 million, or 6%, in 2014 as compared with 2013
primarily due to amortization of intangible assets identified through the business acquisitions that closed during
2014 and 2013, partially offset by decreased amortization due to Pace, Entrac, Streamline, and Raster intangible
assets becoming fully amortized.

Amortization of identified intangibles increased by $0.8 million, or 5%, in 2013 as compared with 2012
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.

Restructuring and Other

During the years ended December 31, 2014, 2013, and 2012, cost reduction actions were taken to lower our
operating expense run rate as we continue to analyze our cost structure and re-align our organization following
business acquisitions. These charges primarily relate to cost reduction actions undertaken to integrate recently
acquired businesses, consolidate facilities, and lower our operating expense run rate. 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.

Restructuring and other costs for the years ended December 31, 2014, 2013, and 2012 were $6.6, $4.8, and $5.8
million, respectively. Restructuring and other charges include severance costs of $3.2, $2.2, and $2.9 million
related to head count reductions of 130, 106, and 117 for the years ended December 31, 2014, 2013, and 2012,
respectively. Severance costs include severance payments, related employee benefits, retention bonuses,
outplacement fees, and relocation costs.

Facilities relocation and downsizing costs for the years ended December 31, 2014, 2013, and 2012 were $2.0,
$0.3, and $0.3 million, respectively. Facilities restructuring and other costs are primarily related to the
consolidation of our German operations in 2014, relocation of our corporate headquarters as well as certain
manufacturing and administrative facilities in 2013, and facilities downsizing and relocation costs related to
various facilities in the Fiery operating segment in 2012. Integration expenses for the years ended December 31,
2014, 2013, and 2012 of $1.4, $1.4, and $1.7 million, respectively, were required to integrate our business
acquisitions. Acquisition-related executive retention expense of $0.9 million was recognized during each of the
years ended December 31, 2013 and 2012, respectively, coinciding with the continuing employment of a former
shareholder of an acquired company.

Gain on Sale of Building and Land

On November 1, 2012, we sold the 294,000 square foot building located 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 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 use of a portion of the facility by the purchaser. 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 at an implied market rate based on the level
of sublease income realized prior to our sale of the facility. 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 $117.2 million on the sale of the property. We
incurred imputed financing and depreciation expense, net of imputed sublease income, of $1.6 million between
November 2012, when we sold the building, and the fourth quarter of 2013, when we vacated the building.

Interest Expense

Interest expense for the years ended December 31, 2014, 2013, and 2012 was $5.9, $2.3, and $0.7 million,
respectively.

Interest expense increased by $3.6 million in 2014 compared with 2013. Interest expense increased primarily due
to $4.7 million of interest expense and amortization of debt issuance costs related to our Notes and increased
imputed interest expense of $0.6 million related to our build-to-suit lease, partially offset by imputed interest
expense of $3.0 million related to the deferred proceeds from sale of building and land in 2013, net of capitalized
interest of $1.1 million related to our new corporate headquarters.

Interest expense increased by $1.6 million in 2013 compared with 2012. Interest expense increased primarily due
to imputed interest expense of $0.3 million related to our build-to-suit lease and increased imputed interest
expense of $1.3 million related to the deferred proceeds from sale of building and land in 2013.

Interest Income and Other Income (Expense), Net

Interest income and other income (expense), net, includes interest income, gains and losses from sales of our cash
equivalents and short-term investments, and net foreign currency transaction gains and losses. Interest income
and other income (expense), net, for the years ended December 31, 2014, 2013, and 2012 was $(5.5), $0.8, and
$1.8 million, respectively.

Interest income and other income (expense), net, decreased by $6.3 million from a gain of $0.8 million in 2013 to
a loss of $5.5 million in 2014 primarily due to a foreign exchange loss of $6.8 million during the year ended
December 31, 2014, compared to a foreign exchange loss of $0.3 million during the year ended December 31,
2013, resulting from revaluation of foreign currency denominated net assets (mainly denominated in Euros,
British pounds sterling, Brazilian reais, and Indian rupees), partially offset by hedging gains. Investment income
increased by $0.3 million from $1.1 million in 2013 to $1.4 million in 2014 primarily resulting from increased
investments in 2014, which were made possible by the proceeds from the Notes.

Interest income and other income (expense), net, decreased by $1.0 million from a gain of $1.8 million in 2012 to
a gain of $0.8 million in 2013 primarily due to a foreign exchange loss of $0.3 million during the year ended
December 31, 2013, compared to a foreign exchange gain of $0.6 million during the year ended December 31,
2012, resulting from revaluation of foreign currency denominated net assets (mainly denominated in Euros,
British pounds sterling, Brazilian reais, and Indian rupees).

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, unless the simplified method is elected. 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, 2014 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 Industrial Inkjet, Productivity Software, and Fiery reporting units exceed their carrying values by $713, $407,
and $412 million, respectively, or 387%, 277%, and 463%, 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

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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 8.8%, 8.7%, or 4.6%, respectively, or a decrease of 7.8%, 8.0%,
or 7.0%, 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.

Income before Income Taxes

Income before income taxes for the years ended December 31, 2014, 2013, and 2012 were as follows (in
thousands):

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

$15,090
26,997

$127,232
45,906

$ 5,615
29,408

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

$42,087

$173,138

$35,023

2014

2013

2012

For the year ended December 31, 2014, pretax net income of $42.1 million consisted of U.S. and foreign pretax
net income of $15.1 and $27.0 million, respectively. The pretax net income attributable to U.S. operations
included amortization of identified intangibles of $7.1 million, stock-based compensation of $36.1 million,
restructuring and other costs of $2.2 million, acquisition-related costs of $1.1 million, litigation settlement
expense of $0.9 million, and interest expense and amortization of debt issuance costs related to our Notes of $4.7
million, partially offset by the change in fair value of contingent consideration of $0.4 million. The pretax net
income attributable to foreign operations included amortization of identified intangibles of $13.6 million,
restructuring and other costs of $4.4 million, acquisition-related costs of $0.4 million, and earnout interest
accretion of $0.6 million, partially offset by the change in fair value of contingent consideration of $4.1 million.
The exclusion of these items from net income would result in a U.S. and foreign pretax net income of $66.8 and
$41.9 million, respectively, for the year ended December 31, 2014.

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, and acquisition-related transaction costs of $0.6 million, partially
offset by the change in fair value of contingent consideration of $1.5 million, net of accretion 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 patent litigation of $3.3 million. The exclusion of
these items from net income would result in a U.S. and foreign pretax net income of $44.7 and $53.6 million,
respectively, for the year ended December 31, 2013.

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. The
exclusion of these items from net income would result in a U.S. and foreign pretax net income of $36.1 and $44.4
million, respectively, for the year ended December 31, 2012.

Provision for (Benefit from) Income Taxes

We recorded a tax provision of $8.4 million in 2014 on pre-tax income of $42.1 million, a tax provision of $64.0
million in 2013 on pre-tax income of $173.1 million, and a tax benefit of $48.2 million in 2012 on pre-tax
income of $35.0 million.

The provisions for income taxes before discrete items were $14.7, $11.5, and $17.2 million for the years ended
December 31, 2014, 2013, and 2012, 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, tax benefit related to the liquidation
of a subsidiary, tax effects of stock-based compensation expense pursuant to ASC 718-740, Stock
Compensation—Income Taxes, and changes in the valuation allowance for financial reporting 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, 2014, 2013, and 2012 (in millions):

Provision for income taxes before discrete items . . . . . . . . . . . . .
Interest related to unrecognized tax benefits . . . . . . . . . . . . . . . .
Benefit related to the 2012 U.S. federal research and

development tax credit

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefit related to capital loss due to liquidation of subsidiary . . .
Benefit related to increased value of intangibles . . . . . . . . . . . . .
Tax deductions related to ESPP dispositions . . . . . . . . . . . . . . . .
Provision for (benefit from) 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

2014

2013

2012

$14.7
0.4

$11.5
0.4

$ 17.2
0.3

(3.2)
—
—
—
(3.1) —
(0.6)

(0.6)

—
(2.6)

(0.1)
(5.8)

—
(43.6)
(6.5)
(0.6)

(1.9)
(10.5)

tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(0.2)

(0.5)

Benefit related to net adjustments due to foreign audit

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

—

(1.6)

(0.8)

Provision related to valuation allowance for California deferred

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

—
—
(0.2)

19.4
45.4
(0.9)

—
—
(1.3)

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

$ 8.4

$64.0

$(48.2)

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During the year ended December 31, 2014, we recognized a $3.1 million tax benefit related to the increased
valuation of intangible assets for Brazilian tax reporting resulting from the merger of our Brazilian subsidiaries.

In 2013, pursuant to the American Taxpayer Relief Act of 2012, we recognized tax benefits of $3.2 million
resulting from the renewal of the U.S. federal research and development tax credit retroactive to the beginning of
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.

The benefit from the 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 and 2012.

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. 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 recorded a deferred tax asset of $47.9 million. While this gain was required to be reported in 2012 for
income tax purposes, we recognized the gain for financial reporting purposes and reversed the $47.9 million
deferred tax asset when we vacated the facility in 2013.

We earn a significant amount of our operating income outside the U.S., which is 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 2014, we realigned the
ownership of Radius and other recently acquired Productivity Software intellectual property to both augment
operational synergies and parallel our worldwide supply chain. 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 these reorganizations was the
recognition of tax benefits of $0.3 and $6.5 million in 2014 and 2012, respectively. The $6.5 million tax benefit
recorded 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.

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 for jurisdictions
in a net deferred tax asset position was cumulative pre-tax income during the three years ended December 31,
2014. 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. 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 research and development
credits being generated that exceed the utilization of these tax attributes. As a result, we recorded a charge of
$19.4 million to establish a valuation allowance against our California state deferred tax assets as of
December 31, 2013.

As of December 31, 2014, 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 related to the realization of existing California
and Luxembourg deferred tax assets.

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 costs, expenses, and gains.

We believe the presentation of non-GAAP net income and non-GAAP earnings per diluted share provides
important supplemental information regarding non-cash expenses and significant 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.

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 the amortization of acquisition-related intangibles,
stock-based compensation expense, restructuring and other expenses, acquisition-related transaction expenses,
costs to integrate such acquisitions into our business, changes in the fair value of contingent consideration,
litigation settlement charges and reversals, non-cash interest expense related to our Notes, 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, and the tax effects of those adjustments. Effective in 2014, we
use 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 profit.

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These excluded items are described below:

•

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.

Restructuring and other consists of:

O Restructuring charges incurred as we consolidate the number and size of our facilities and, as a

result, reduce the size of our workforce.

O Acquisition-related executive deferred compensation costs, which are dependent on the continuing
employment of a former stockholder of an acquired company, were amortized on a straight-line
basis during 2013 and 2012.

O 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.

Non-cash interest expense on our Notes. Our Notes may be settled in cash on conversion. We are
required to separately account for the liability (debt) and equity (conversion option) components of the
Notes in a manner that reflects our non-convertible debt borrowing rate. Accordingly, for GAAP
purposes, we are required to amortize a debt discount equal to the fair value of the conversion option as
interest expense on our $345 million of 0.75% convertible senior notes that were issued in a private
placement in September 2014 over the term of the Notes.

Imputed net expenses related to sale of building and land. On November 1, 2012, we sold the 294,000
square foot building located 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, 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 facility during the fourth quarter of 2013. Prior to vacating the building, the
proceeds from the sale were recognized as deferred proceeds from property transaction on our
Consolidated Balance Sheet. Imputed interest expense and depreciation, net of accrued sublease
income and capitalized interest, was accrued during the years ended December 31, 2013 and 2012,
related to the deferred property transaction.

Gain on sale of building and land. On November 1, 2012, we sold the aforementioned building and
land 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.

Litigation settlements. In conjunction with our acquisition of Cretaprint, we assumed a contingent
liability related to the alleged infringement of certain patents. Because the former owners of Cretaprint
agreed to indemnify EFI against any potential liability, 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
in 2013, which resulted in EFI having no liability related to any potential infringement of the patent.
Because this matter is no longer subject to appeal, we reversed this liability by recognizing a credit
against general and administrative expense in 2013. In addition, we settled or accrued reserves related
to several unrelated litigation claims in 2014, 2013, and 2012 in aggregate amounts of $0.9, $0.2, and
$0.3 million, respectively.

•

Tax effects of non-GAAP adjustments are as follows:

O Effective in 2014, we are 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 profit. The long-term average tax rate is calculated in accordance with the principles of

ASC 740, after excluding the tax effect of the non-GAAP items described above, to estimate the
non-GAAP income tax provision in each jurisdiction in which we operate.

O In addition to excluding the tax effect of the non-GAAP items described above, we have excluded
the following from our non-GAAP net income for the year ended December 31, 2013 and 2012:

–

Tax charge of $19.4 million in 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 $43.6 million in 2012 resulting from a capital loss related to the liquidation of
a wholly-owned subsidiary.

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

Tax benefit of $5.8 and $11.8 million for the years ended December 31, 2013 and 2012,
respectively, resulting from the release of previously unrecognized tax benefits to facilitate
comparability of our operating performance between the periods. These tax benefits
primarily resulted from the release of previously unrecognized tax benefits resulting from the
expiration of U.S. federal statutes of limitations.

Tax benefit of $3.2 million from the retroactive renewal of the 2012 U.S. federal research
and development tax credit on January 2, 2013. The tax benefit had been previously
recognized in our non-GAAP net income for the year ended December 31, 2012.

Interest expense accrued on prior year tax reserves of $0.3 million for the years ended
December 31, 2013 and 2012.

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.

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Reconciliation of GAAP Net Income to Non-GAAP Net Income
(unaudited)

(millions, except per share data)

For the years ended December 31,

2014

2013

2012

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

$ 33.7

$ 109.1

$ 83.3

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 provisions, net of releases . . . . . . . . .
Sublease income related to deferred property

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

Depreciation expense related to deferred property

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

Interest income and other income (expense), net:
Interest expense related to deferred property

20.7
36.1
6.6
—

1.5
(3.8)
0.9

—

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

(3.1)

(0.5)

1.4

0.3

transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash interest expense related to our Notes . . . . . . .
Tax effect of non-GAAP net income . . . . . . . . . . . . . . . . . . .

—
3.5
(12.1)

1.9
—
41.9

0.6
—
(67.4)

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

$ 87.1

$ 76.6

$ 61.5

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

$ 1.80

$ 1.58

$ 1.29

Shares for purposes of computing diluted non-GAAP net

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

48.4

47.7

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, inventory valuation and
purchase commitment reserves, warranty obligations, litigation, restructuring activities, 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 valuation and purchase commitment reserves,

warranty reserves,

litigation accruals,

•

restructuring 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. Significant management judgments and estimates must be made and used in connection
with the revenue recognized in any accounting period. Please refer to Note 1—The Company and its Significant
Accounting Policies of the Notes to Consolidated Financial Statements for a more thorough and complete
description of our revenue recognition accounting policy. For purposes of evaluating and understanding the
judgments required, our revenue recognition policy is summarized below.

Product revenue includes hardware (industrial digital inkjet printers including components placed under
maintenance agreements, ink required for industrial digital inkjet printers, design-licensed solutions including
upgrades, and DFEs), software licensing and development, and royalties. Service revenue includes software
license maintenance agreements, industrial digital inkjet printer maintenance and service, customer support,
training, and consulting. The timing of revenue recognition for each of these categories is discussed below.

We recognize revenue on the sale of printers, ink, and DFEs 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. We recognize revenue when persuasive evidence of an
arrangement exists, delivery has occurred, the fee is fixed or determinable, and collection 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.

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For multiple element arrangements, we allocate revenue to the software deliverables and the non-software
deliverables as a group based on the relative selling prices of all of the deliverables in the arrangement. For non-
software deliverables, we allocate the arrangement consideration based on the relative selling price of the
deliverables using best estimate of the sales price (“BESP”). For software deliverables (including post-contract
customer support, professional services, hosting, and training), we generally use vendor-specific objective
evidence of the fair value of the sales price (“VSOE”), when available. The selling price for each element is
based upon the following hierarchy: VSOE if available, third party evidence (“TPE”) if VSOE is not available, or
BESP if neither VSOE nor TPE are available.

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 such 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. These services require that we perform significant, extensive, and complex design, development,
modification, or implementation activities of our customers’ systems. Performance will often extend over long
periods, and our right to receive future payment depends on our future performance in accordance with these
agreements.

The key estimates and assumptions and corresponding uncertainties for recognizing revenue are summarized as
follows:

Key Estimates and Assumptions

Key Uncertainties

We establish VSOE of selling price using the price
charged for a deliverable when sold separately and
generally evidenced by a substantial majority of
historical stand-alone transactions falling within a
reasonably narrow range. In addition, we consider major
service type, customer type, and other variables in
determining VSOE. Our revenue estimates and
assumptions are based on our ability to assert and
maintain VSOE.

BESP is generally evidenced by a majority of historical
transactions falling within a reasonable price range. We
also consider multiple factors, including, but not limited
to, cost of products, gross margin objectives, historical
pricing practices, customer type, and distribution
channels. Our revenue estimates and assumptions are
based on our ability to maintain consistent BESP.

Distributors and resellers participate in various
marketing and other programs, and we maintain
estimated accruals and allowances for these programs
based on contractual terms and historical experience.

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.

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.

As our business and offerings evolve over time,
modifications to our pricing and discounting
methodologies, changes in the scope and nature of
service offerings and/or changes in customer
segmentation may result in a lack of consistency
required to establish and/or maintain VSOE or to
maintain consistent BESP. Additionally,
technological changes resulting in variability in
product costs and gross margins may require changes
to our BESP model. Changes in BESP may result in a
different allocation of revenue to the deliverables in
multiple-element arrangements. These factors, among
others, may adversely impact the amount of revenue
and gross margins we report in a particular period.

If we experience changes in market or competitive
conditions resulting in credits issued to our
distributors and partners deviating significantly from
our estimates, our revenues may be adversely
impacted.

Revenue recognition is dependent on proper
identification of the separate units of accounting in an
arrangement and determining whether they have
stand-alone value. Significant contract interpretation
can be 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.

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.

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 $155.4 million, net of
allowance for doubtful accounts and revenue reserves of $17.5 million, as of December 31, 2014. 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.

Inventory valuation. Management estimates potential future inventory obsolescence and noncancellable
purchase commitments in order to properly value inventory and establish adequate reserves for potential losses
on purchase commitments. Significant management judgment and estimates must be made related to inventory
valuation including the evaluation of current economic trends, changes in customer demand, product design
changes, product life and demand, and the acceptance of our products.

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. Warranty
reserves were $9.7 million as of December 31, 2014.

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

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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.

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, 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.

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 of the
Notes to Consolidated Financial Statements. 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.

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.

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, 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.

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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 for jurisdictions
in a net deferred tax asset position was cumulative pre-tax income over the three years ended December 31,
2014. 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. 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 research and
development credits being generated exceeding the utilization of these tax attributes.

Current and noncurrent deferred tax assets, net of current and noncurrent deferred tax liabilities, as of
December 31, 2014 were $35.4 million, net of our valuation allowance of $32.3 million.

In accordance with ASC 740-10-25-5 through 17, Income Taxes—Basic Recognition Threshold, we account for
uncertainty in income taxes by recognizing a tax position only when it is more likely than not that the tax
position, based on its technical merits, will be sustained upon ultimate settlement with the applicable tax
authority. The tax benefit to be recognized is the largest amount of tax benefit that is greater than fifty percent
likely of being realized upon ultimate settlement with the applicable tax authority that has full knowledge of all
relevant information.

Significant management judgment is required in evaluating our uncertain tax positions. Our gross unrecognized
benefits are $35.0 million as of December 31, 2014. 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, 2014, we have permanently reinvested $97.5 million of unremitted foreign earnings. Should
these earnings be remitted to the U.S., the tax on these earnings would be $17.5 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, unless the simplified method is elected. 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 and intangible asset impairment,
including the following:

•

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

O financial condition and operating performance of the reporting unit being evaluated relative to

companies operating in the same or similar businesses,

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

O 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,

reasonable gross profit levels,

estimated control premium a willing buyer is likely to pay, including consideration of the following:

O 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

O weighted average and median control premiums offered in relevant industries,

O industry specific control premiums, and

O specific transaction control premiums.

•

significant events or changes in circumstances including the following:

O significant negative industry or economic trends,

O significant decline in our stock price for a sustained period,

O our market capitalization relative to net book value,

O significant changes in the manner of our use of the acquired assets,

O significant changes in the strategy for our overall business, and

O 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, 2014 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 2015 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, Business
Combinations. The fundamental requirement of ASC 805 is that the acquisition method of accounting be used for
all business combinations. Please refer to Note 1—The Company and its Significant Accounting Policies of the
Notes to Consolidated Financial Statements for our accounting policy 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 $1.5, $1.4, and $2.2 million were expensed during the years ended December 31,
2014, 2013, and 2012, respectively, associated with businesses acquired during the periods reported and
anticipated transactions.

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 a 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 an imputed financing obligation. 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, Sale-Leaseback Transactions, 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 square 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
21% of our total assets, and approximately 22% of our total liabilities as of December 31, 2014.

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 income and other income (expense), net.

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 accumulated other comprehensive income
(“OCI”), adjusted for deferred income taxes.

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Consequently, determination of the functional currency of each entity has a material impact on our financial
position and results of operations. Management assesses the salient economic factors, both individually and
collectively when determining the functional currency. The economic factors that must be evaluated include cash
flow, sales price, sales market, expense, financing, and intercompany transaction indicators.

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 increased by $261.7 million to $616.7 million as of
December 31, 2014 from $355.0 million as of December 31, 2013. The increase was primarily due to proceeds
from the issuance of our Notes, net of debt issuance payments, of $336.4 million and proceeds from warrants of
$34.5 million, net of purchases of Note Hedges of $63.9 million and repurchases of treasury stock of $76.8
million. The remaining increase in cash, cash equivalents, and short-term investments of $31.5 million was due
to cash flows provided by operating activities of $82.3 million, proceeds from ESPP purchases of $8.6 million,
and proceeds from common stock option exercises of $7.7 million, offset by cash consideration paid for business
acquisitions of $22.0 million, net of cash acquired, acquisition-related contingent consideration payments of

$10.6 million excluding the portion included in operating activities, net settlement of shares for the exercise price
of certain stock options and any tax withholding obligations incurred in connection with such exercises and
minimum tax withholding obligations that arose on the vesting of RSUs of $24.3 million, and cash payments for
property and equipment of $15.9 million, including final payments related to the build-out of our new corporate
headquarters facility in Fremont, California.

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, cash consideration paid for business acquisitions of $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 the exercise price of certain
stock options and any tax withholding obligations incurred in connection with such exercises and minimum tax
withholding obligations that arose on the vesting of RSUs 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.

(in thousands)

2014

2013

2012

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

$ 298,133
318,599

$ 177,084
177,957

$283,996
80,966

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

$ 616,732

$ 355,041

$364,962

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

$ 82,341
(180,657)
220,825
(1,460)

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

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

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

$ 121,049

$(106,912) $163,938

As of December 31, 2014, we have approximately $97.5 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
$124.1 and $62.9 million as of December 31, 2014 and 2013, 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—Commitments and Contingencies of the Notes to
Consolidated Financial Statements), and other liquidity requirements associated with our existing operations
through at least the next twelve months. We believe that the most strategic uses of our cash resources include
business acquisitions, strategic investments to gain access to new technologies, repurchases of shares of our
common stock, and working capital. At December 31, 2014, cash, cash equivalents, and short-term investments
available were $616.7 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 $82.3, $89.3, and $53.4 million for the years ended December 31,
2014, 2013, and 2012, respectively.

Net cash provided by operating activities in 2014 consists primarily of net income of $33.7 million and non-cash
charges and credits of $71.1 million, partially offset by the net change in operating asset and liabilities of $22.5
million. Non-cash charges and credits of $71.1 million consist primarily of $31.1 million of depreciation and
amortization, $36.1 million of stock-based compensation, provision for inventory obsolescence of $6.3 million,
provision for bad debts and sales-related allowances of $7.4 million, and non-cash accretion of interest expense
related to our Notes and imputed build-to-suit financing obligation of $4.4 million, partially offset by $5.8
million of deferred tax credits, $3.4 million of contingent consideration payments related to businesses acquired,
and $5.0 million of other non-cash charges and credits. The net change in operating assets and liabilities of $22.5
million consists primarily of increased accounts receivable of $27.1 million, increased gross inventories of $11.9
million, and decreased net income taxes payable of $5.6 million, partially offset by decreased other current assets
of $13.4 million and increased accounts payable and accrued liabilities of $8.7 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 68, 61, and 71 days at December 31, 2014, 2013, and 2012, 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 increased during the year ended December 31, 2014, compared with December 31, 2013, primarily due to
trade receivables acquired through business acquisitions, international sales with extended payment terms, and a
non-linear sales cycle resulting in significant billings at the end of the year. 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.

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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 10 days
from date of sale, which are subject to a servicing obligation.

Trade receivables sold cumulatively under these facilities were $6.2 and $20.8 million throughout 2014 on a
nonrecourse and recourse basis, respectively, which approximates the cash received. The receivables that were
sold to third parties were removed from the Consolidated Balance Sheets and were reflected as cash provided by
operating activities in the Consolidated Statements of Cash Flows.

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. The result is lower inventory turnover for Industrial Inkjet inventories compared with Fiery
inventories.

Our net inventories increased by $3.8 million from $68.3 million at December 31, 2013 to $72.1 million at
December 31, 2014 as additional inventories are required to support increased revenue. Inventory turnover was
5.3 turns during the quarters ended December 31, 2014 and 2013. 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 $3.1, $7.2, and $8.9 million in 2014, 2013, and
2012, respectively. Our working capital, defined as current assets minus current liabilities, was $684.9 and
$399.7 million at December 31, 2014 and 2013, respectively.

Investing Activities

Net cash provided by (used for) investing activities was $(180.7), $(161.9), and $133.1 million for the years
ended December 31, 2014, 2013, and 2012, respectively.

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

2014

2013

2012

$(281,962)

$(145,088)

$ (64,528)

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

139,185

47,375

80,992

Purchases, net of proceeds from sales, of property and

equipment

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

(15,900)

(49,815)

(6,147)

Proceeds from sale of building and land, net of direct

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

—

179,173

Businesses and technology purchased, net of cash acquired,

and post-acquisition non-competition agreements . . . . . . . .

(21,980)

(14,688)

(61,591)

Proceeds from notes receivable of acquired businesses and

other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

263

5,216

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

$(180,657)

$(161,862)

$133,115

Acquisitions

SmartLinc, Rhapso, DirectSmile, and DIMS were acquired in 2014 for aggregate cash consideration of $20.4
million, net of cash acquired, plus additional future cash earnouts contingent on achieving certain performance
targets; technology was acquired from Polymeric for $1.1 million; $0.3 million was paid related to the GamSys
acquisition, which was dependent on accounts receivable collections; and purchase price adjustments of
$0.2 million were paid with respect to the acquisitions of Metrix, Lector, and Rhapso.

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.

Cretaprint, FX Colors, Metrics, OPS, and Technique 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.

Earnout payments of $0.6 million were made during the year ended December 31, 2012 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 $15.9, $49.8, and $6.1 million in 2014, 2013, and 2012,
respectively, including the purchase of ceramic ink formulation equipment and the purchase and build-out of our
corporate headquarters facility. This facility serves as our worldwide corporate headquarters, as well as
engineering, marketing, and administrative operations for our Fiery operating segment. We relocated our former
headquarters on October 31, 2013. Please refer to Note 8—Commitments and Contingencies of the Notes to
Consolidated Financial Statements for additional information.

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.

Investments

Purchases of marketable securities, net of proceeds from sales and maturities, were $142.8 and $97.7 million in
2014 and 2013, respectively. Proceeds from sales and maturities of marketable securities, net of purchases, were
$16.5 million in 2012. 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.

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Financing Activities

Net cash provided by (used for) financing activities was $220.8, $(33.4), and $(22.7) million for the years ended
December 31, 2014, 2013, and 2012, respectively.

In September 2014, we completed a private placement of $345 million principal amount of Notes. The net
proceeds from this offering were $336.4 million, after deducting commissions and offering expenses paid by us.
We used approximately $29.4 million of the net proceeds to pay the cost of the Note Hedges (after such cost was
partially offset by the proceeds from the Warrant transactions). We used approximately $10.0 million of the net
proceeds from the Notes to repurchase 0.2 million shares of our common stock from purchasers of the Notes in
privately negotiated transactions effected through one of the Initial Purchasers, as our agent.

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 employee purchases of ESPP shares. We
received proceeds from the exercise of stock options of $7.7, $5.2, and $12.2 million and employee purchases of
ESPP shares of $8.6, $7.1, and $6.8 million in 2014, 2013, and 2012, 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 timing and

number of stock options exercised by employees that had participated in these plans, net settlement options, and
general market conditions. We anticipate that cash provided from the exercise of stock options will decline over
time as we have shifted to issuance of RSUs, rather than stock options. Although we may grant stock option
awards from time to time, the granting of stock options is no longer our usual practice.

The primary use of funds for financing activities in 2014, 2013, and 2012 was $101.1, $35.7, and $35.2 million,
respectively, of cash used to repurchase outstanding shares of our common stock including cash used for net
settlement of shares for the exercise price of certain stock options and any tax withholding obligations incurred in
connection with such exercises and minimum tax withholding obligations that arose on the vesting of RSUs. 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 1.8 and
0.1 million shares for an aggregate purchase price of $76.8 and $2.6 million during the years ended
December 31, 2014 and 2013, respectively.

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, 2014 of $6.2, $4.5, $2.0, and $1.2 million are related to
the previously accrued Cretaprint, Metrics, Technique, and GamSys contingent consideration liabilities,
respectively. Earnout payments during the year ended December 31, 2013 of $8.9, $4.5, $1.9, $0.7, and $0.6
million are 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 and
$0.3 million related to previously accrued Streamline and Radius contingent consideration liabilities,
respectively. The portion of the Metrics and Radius earnouts representing performance targets achieved in excess
of amounts assumed in the opening balance sheet as of the respective acquisition date was $3.4 and $1.6 million
during the years ended December 31, 2014 and 2013, respectively, and is reflected as cash used for operating
activities in the Consolidated Statements of Cash Flows.

Other Commitments

Our Industrial Inkjet inventories consist of inventories required for our internal manufacturing operations and
inventory purchased from third party contract manufacturers. Raw materials and finished goods, print heads,
frames, digital UV ink, ceramic digital ink, and other components are required to support of our internal
manufacturing operations. Solvent ink and certain sub-assemblies are purchased from third party contract
manufacturers.

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 memory subsystems, processors, and ASICs 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 and Off-Balance Sheet Financing

The impact of contractual obligations on our liquidity and capital resources in future periods should be analyzed
in conjunction with the factors that impact our cash flows from operating activities discussed previously. The
following table summarizes our significant contractual obligations at December 31, 2014 and the effect that 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, 2014, with the exception of acquisition-
related contingent consideration liabilities, unrecognized tax benefits, and our Notes.

(in thousands)

Operating lease obligations . . . . . . . . . . . . . . . . . . . . . .
Contingent consideration liabilities(1)
. . . . . . . . . . . . . .
Purchase obligations(2)
. . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . .
Convertible senior notes(3)
Unrecognized tax benefits(4) . . . . . . . . . . . . . . . . . . . . . .

Payments due by period

Total

$ 36,471
12,277
23,364
357,880
34,969

Less than 1
year

Between
1-3 years

Between
3-5 years

More than
5 years

$ 5,317
8,254
23,364
2,530
—

$ 8,611
4,023
—
5,175
—

7,054
—
—
350,175
—

$15,489
—
—
—
—

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

$464,961

$39,465

$17,809

$357,229

$15,489

(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)

(3) Obligations related to our $345 million principal amount of our Notes, which is due in 2019. Estimated

interest payments for our long-term debt, assuming no early retirement of debt obligations are $12.9 million
through 2019.

(4) As of December 31, 2014, our liability for unrecognized tax benefits, including interest and penalties, is
reflected in our Consolidated Balance Sheet as $16.5 million of “noncurrent income taxes payable” and
$19.5 million as a reduction of “deferred tax assets.” Due to the uncertainty of the timing of future
payments, unrecognized tax benefits are presented in the total column on a separate line in this table. See
Note 11—Income Taxes of the Notes to the Consolidated Financial Statements for additional discussion of
unrecognized tax benefits.

Purchase obligations in the table above include agreements to purchase goods or services that are enforceable,
non-cancellable, and legally binding 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

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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.

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 $2.9 million at
December 31, 2014. We hedge balance sheet remeasurement exposures using forward contracts not designated as
hedging instruments with notional amounts of $86.5 million at December 31, 2014 consisting of hedges of
Brazilian real, British pound sterling, and Euro-denominated intercompany loans with notional amounts of $63.8
million, hedges of British pound sterling and Euro-denominated trade receivables with notional amounts of $20.8
million, and a hedge of Indian rupee net monetary assets with a notional amount of $1.9 million.

Since Europe represents a significant portion of our revenue and cash flow, SEC Division of Corporation Finance
Disclosure Guidance Topic 4 (“Guidance Topic 4”), European Sovereign Debt, 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 26% of our receivables are with
European customers as of December 31, 2014. Of this amount, 22% of our European receivables (6% 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.

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 Condensed 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 favorable impact on the fair
value of our investment portfolio. Increases or decreases in interest rates could have a material impact on interest
earnings related to new investments during the period. We do not currently hedge these interest rate exposures.

Interest Rate Risk

Hypothetical changes in the fair values of financial instruments held by us at December 31, 2014 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

$ 425,116

No change in
interest rates

$ 422,267

Valuation of
securities assuming
an interest rate
increase of 100
basis points

$ 418,851

Guidance Topic 4 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 $42.2 million, which represents 16% of our money market funds and available-for-sale
securities at December 31, 2014. Our European debt investments are with corporations domiciled in the northern
and central European countries of Sweden, Germany, Netherlands, Switzerland, Luxembourg, Norway, France,
Belgium, Finland, 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, although we do have some exposure due
to the interdependencies among the European Union countries.

As of December 31, 2014, we have $345 million principal amount of Notes outstanding. We carry these
instruments at face value less unamortized discount on our Consolidated Balance Sheets. Since these instruments
bear interest at fixed rates, we have no financial statement risk associated with changes in interest rates.
However, the fair value of these instruments fluctuates when interest rates change. Please refer to Note 7—
Convertible Senior Notes, Note Hedges, and Warrants of the Notes to Consolidated Financial Statements for
additional information.

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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 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 $2.9 million at December 31, 2014. We
hedge balance sheet remeasurement exposures using forward contracts not designated as hedging instruments
with notional amounts of $86.5 million at December 31, 2014 consisting of hedges of Brazilian real, British
pound sterling, and Euro-denominated intercompany loans with notional amounts of $63.8 million, hedges of
British pound sterling and Euro-denominated trade receivables with notional amounts of $20.8 million, and a
hedge of Indian rupee net monetary assets with a notional amount of $1.9 million.

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, 2014 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 . . . . . . . . . . . . . . . . . . .

$792,043

Income from operations . . . . . . .

$ 53,822

$790,427

$ 53,439

$788,811

$ 53,056

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, 2014 and 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations for the Years Ended December 31, 2014, 2013, and 2012 . . . . . . . .
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2014, 2013, and

2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2014, 2013, and

2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows for the Years Ended December 31, 2014, 2013, and 2012 . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unaudited Quarterly Consolidated Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

80
82
83

85
86
87
145

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Electronics For Imaging, Inc.
Fremont, California

We have audited the accompanying consolidated balance sheet of Electronics For Imaging, Inc. and subsidiaries
(collectively, the “Company”) as of December 31, 2014 and the related consolidated statements of operations,
comprehensive income, cash flows, and stockholders’ equity for the year then ended. Our audit also included the
financial statement schedule (2014) listed in the Index at Item 15. These consolidated financial statements and
financial statement schedule are the responsibility of the Company’s management. Our responsibility is to
express an opinion on the 2014 consolidated financial statements and financial statement schedule (2014) based
on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial
position of Electronics For Imaging, Inc. and subsidiaries as of December 31, 2014 and the results of their
operations and their cash flows for the year then ended, in conformity with accounting principles generally
accepted in the United States of America. Also, in our opinion, such financial statement schedule (2014), when
considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the Company’s internal control over financial reporting as of December 31, 2014, based on the
criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated February 17, 2015, expressed an unqualified
opinion on the Company’s internal control over financial reporting.

/S/ DELOITTE & TOUCHE LLP
San Jose, California
February 17, 2015

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Electronics For Imaging, Inc.:

In our opinion, the consolidated balance sheet as of December 31, 2013 and the related consolidated statements
of operations, comprehensive income, stockholders’ equity, and cash flows for each of the two years in the
period ended December 31, 2013 present fairly, in all material respects, the financial position of Electronics For
Imaging, Inc. and its subsidiaries at December 31, 2013, and the results of their operations and their cash flows
for each of the two 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
for each of the two years in the period ended December 31, 2013 presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related consolidated financial statements. These
financial statements and financial statement schedule are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements and financial statement schedule based on
our audits. We conducted our audits of these statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit
includes 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. We believe that our audits provide a reasonable basis for our opinion.

/S/ PRICEWATERHOUSECOOPERS LLP
San Jose, California
February 19, 2014

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Electronics For Imaging, Inc.
Consolidated Balance Sheets

December 31,

2014

2013

(in thousands)

Assets
Current assets:

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term investments, available for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, net of allowances of $17.5 and $16.4 million, respectively . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes receivable and deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 298,133
318,599
155,421
72,132
18,618
15,804

$ 177,084
177,957
130,717
68,345
20,945
25,516

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

878,707
86,197
245,443
62,571
22,062
9,580

600,564
84,829
233,203
68,722
34,300
4,766

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,304,560

$1,026,384

Liabilities and Stockholders’ Equity
Current liabilities:

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes payable and deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Convertible senior notes, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Imputed financing obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncurrent contingent and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncurrent deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncurrent income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

86,940
63,183
41,927
1,759

193,809
284,818
12,472
5,440
3,820
15,512

515,871

75,132
78,515
42,569
4,654

200,870
—
11,500
6,815
6,738
33,011

258,934

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; 49,671 and 47,370

shares issued, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital
Treasury stock, at cost; 2,736 and 396 shares, respectively . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

497
568,896
(113,992)
(7,357)
340,645

474
474,330
(12,897)
(1,388)
306,931

Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

788,689

767,450

Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,304,560

$1,026,384

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,

2014

2013

2012

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of revenue(1)

$790,427
360,690

$ 727,693
332,527

$652,137
297,316

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

429,737

395,166

354,821

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

134,732
147,383
66,932
20,673
6,578
—

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

120,298
125,513
50,727
18,594
5,803
—

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

376,298

220,518

320,935

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

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

53,439
(5,859)
(5,493)

42,087
(8,373)

174,648
(2,306)
796

173,138
(64,031)

33,886
(709)
1,846

35,023
48,246

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

$ 33,714

$ 109,107

$ 83,269

Net income per basic common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net income per diluted common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0.72

0.70

2.34

2.26

1.79

1.74

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

46,866

46,643

46,453

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

48,406

48,359

47,734

(1)

Includes stock-based compensation expense as follows:

Cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,562
8,818
7,070
17,611

1,817
7,568
4,500
11,885

1,193
5,719
3,320
9,489

2014

2013

2012

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 (losses), net of tax benefit of $0.2 million and tax

provisions of less than $0.1 and $0.1 million for the years ended
December 31, 2014, 2013, and 2012, respectively . . . . . . . . . . . . . . . . . . . .

Reclassification adjustments included in net income, net of tax benefits of
less than $0.1 million for the years ended December 31, 2014, 2013, and
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net unrealized investment gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Currency translation adjustments, net of tax provisions of less than $0.1 and

$0.1 million and tax benefit of $0.6 million for the years ended December 31,
2014, 2013, and 2012, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gains (losses) on cash flow hedges . . . . . . . . . . . . . . . . . . . . . . . . . . .

For the years ended December 31,

2014

2013

2012

$33,714

$109,107

$83,269

(344)

198

(24)

(368)

(23)

(100)

(5,576)
(25)

(1,733)
33

(1,304)
28

Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$27,745

$107,450

$82,091

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 businesses acquired . . . . . . . . . . . . . . . .
Non-cash acquisition-related compensation costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of building and land, net of relocation costs paid . . . . . . . . . . . . . . . . . . .
Non-cash accretion of interest expense on convertible notes and imputed financing

obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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,

2014

2013

2012

$ 33,714

$ 109,107

$ 83,269

31,099
(5,836)
8,491
(9,789)
7,408
6,300
36,061
(3,428)
—
—

4,433
(3,608)

(27,143)
(11,868)
13,409
8,729
(5,631)

28,830
53,846
6,867
(7,024)
9,595
4,508
25,770
(1,563)
940
(118,492)

27,032
(52,821)
417
(1,360)
3,250
3,231
19,721
—
907
—

271
(5,295)

—
1,870

(4,409)
(13,683)
(7,117)
11,819
(4,631)

(29,325)
(6,853)
(4,840)
9,464
(608)

Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

82,341

89,339

53,354

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 and technology purchased, net of cash acquired, and post-acquisition non-
competition agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from notes receivable of acquired businesses and other investments . . . . . . .

(281,962)
139,185
(15,900)
—

(145,088)
47,375
(49,815)
91

(64,528)
80,992
(6,147)
179,173

(21,980)
—

(14,688)
263

(61,591)
5,216

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

(180,657)

(161,862)

133,115

Cash flows from financing activities:

Proceeds from issuance of convertible notes, net of debt issuance costs paid . . . . . . . .
Purchase of convertible note hedges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

336,365
(63,928)
34,535
16,317
(101,095)
(564)
(10,594)
9,789

—
—
—
12,303
(35,734)
(1,860)
(15,123)
7,024

—
—
—
18,958
(35,176)
(6,914)
(969)
1,360

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

220,825

(33,390)

(22,741)

Effect of foreign exchange rate changes on cash and cash equivalents . . . . . . . . . . . . .

(1,460)

(999)

210

Increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

121,049
177,084

(106,912)
283,996

163,938
120,058

Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 298,133

$ 177,084

$283,996

See accompanying notes to consolidated financial statements.

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements

Note 1: The Company and Its Significant Accounting Policies

The Company

We are a world leader in customer-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 inks include digital UV and
LED ink, textile dye sublimation, and thermoforming ink. Our award-winning business process automation
solutions are integrated from creation to print and are vertically integrated with our industrial digital inkjet
printers and products produced by the leading printer manufacturers that are driven by our Fiery DFEs.

Our product portfolio includes industrial inkjet products (“Industrial Inkjet”), including VUTEk super-wide and
EFI wide format industrial digital inkjet printers, Jetrion label and packaging digital inkjet printing systems, 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
intercompany accounts and transactions have been eliminated in consolidation.

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, inventory valuation and purchase commitment reserves, warranty obligations, litigation reserves,
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 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.

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Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

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.

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 these 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, 2014, 2013, and 2012. We have determined that gross unrealized losses on
short-term investments at December 31, 2014 and 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.

We classify our investments as current or noncurrent based on the nature of the investments and their availability
for use in current operations.

Fair Value of Financial Instruments

We assess the fair value of our financial instruments each reporting period. The carrying amounts of 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, derivative instruments, and
convertible senior notes 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, industrial digital 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.

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

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.

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.

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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,
Software—Revenue Recognition, and if applicable, SEC Staff Accounting Bulletin (“SAB”) 104. Revenue
Recognition, 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

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

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 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 in accordance with Accounting Standards Update (“ASU”) 2009-13. The
sales price for each element is determined using VSOE when available (including post-contract customer
support, professional services, hosting, and training). When VSOE is not available, then TPE is used. If VSOE or
TPE are not available, then 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 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 four quarters
immediately preceding the end of each reporting period 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.

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

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 operating leases 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 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.

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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, 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.

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

We recognize losses on long-term fixed price contracts in the period that the contractual loss becomes probable
and estimable. We record amounts invoiced to customers in excess of revenue recognized as deferred revenue
until the revenue recognition criteria are met. We record revenue that is earned and recognized in excess of
amounts invoiced on fixed price contracts as trade receivables.

Deferred Revenue and Related Deferred Costs

Deferred revenue represents amounts received in advance for product support contracts, software customer
support contracts, consulting and integration projects, or product sales. Product support contracts include 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, under the percentage of
completion method, or in accordance with our revenue recognition policy. Deferred cost of revenue related to
unrecognized revenue on shipments to customers was $2.0 and $6.6 million as of December 31, 2014 and 2013,
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 $2.6 and $5.2 million consisting
of $1.3 and $4.3 million of sales-type lease receivables, included within other current assets and other assets, and
$1.3 and $0.9 million of trade receivables having a contractual maturity in excess of one year at December 31,
2014 and 2013, 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.

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

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
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 a limited number of suppliers for certain key components and a few key contract manufacturers to
manufacture our Fiery DFEs, our label and packaging digital inkjet printer, certain Industrial Inkjet
subassemblies, and solvent ink. Any disruption or termination of these arrangements could materially adversely
affect our operating results.

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.

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 $6.2 and $8.3 million during the years ended December 31, 2014 and 2013, 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 10 days from the date of sale, which are subject to a servicing obligation. Trade receivables
sold under these facilities were $20.8 and $12.9 million during the years ended December 31, 2014 and 2013,
respectively, which approximates the cash received.

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. These liabilities were determined to not be material at December 31, 2014
and 2013.

We report collections from the sale of trade receivables to third parties as operating cash flows in the
Consolidated Statements of Cash Flows.

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Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

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 excess 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.

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.

Depreciation expense was $9.9, $9.4, and $8.4 million for the years ended December 31, 2014, 2013, and 2012,
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
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

Goodwill is recorded when the consideration paid for an acquisition exceeds the fair value of net tangible and
intangible assets acquired. We perform our annual goodwill impairment analysis in the fourth quarter of each
year or more frequently if we believe indicators of impairment exist. Triggering events that may require an
impairment analysis include indicators such as adverse industry or economic trends, restructuring actions,
significant changes in the manner of our use of the acquired assets, significant changes in the strategy for our
overall business, lower projections of profitability, significant decline in our stock price for a sustained period, or
a sustained decline in our market capitalization.

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

According to the provisions of ASC 350-20-35, a two-step impairment test of goodwill is required, unless the
simplified method is elected. 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. We have not been required
to perform this second step of the process because the fair value of our reporting units have exceeded their
carrying value as of December 31, 2014, 2013, and 2012.

Long-lived Assets, including Intangible Assets

Purchased intangible assets are amortized on a straight-line basis over their economic lives of three to seven
years for developed technology, four to nine years for customer contracts/relationships, five years for covenants
not to compete, and three to eighteen years for trademarks and trade names as we believe this method most
closely reflects the pattern in which the economic benefits of the assets will be consumed. No changes have been
made to the useful lives of amortizable identifiable intangible assets in 2014, 2013, or 2012. Intangible
amortization expense was $20.7, $19.4, and $18.6 million for the years ended December 31, 2014, 2013, or 2012,
respectively.

We review the carrying values of long-lived assets whenever events and circumstances, such as reductions in
demand, lower projections of profitability, significant changes in the manner of our use of acquired assets, or
significant negative industry or economic trends, indicate that the net book value of an asset may not be
recovered through expected future cash flows from its use and eventual disposition. If this review indicates that
an impairment has occurred, the impaired asset is written down to its fair value, which is typically calculated
using quoted market prices and/or expected future cash flows. Our estimates regarding future anticipated net
revenue and cash flows, the remaining economic life of the products and technologies, or both, may differ from
those used to assess the recoverability of assets. In that event, impairment charges or shortened useful lives of
certain long-lived assets may be required, resulting in charges to our Consolidated Statements of Operations
when such determinations are made. No asset impairment charges were recognized during the years ended
December 31, 2014, 2013, or 2012.

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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. Estimated future hardware and software warranty costs
are recorded as a cost of product revenues when the related revenue is recognized, based on historical and
projected warranty claim rates, historical and projected cost-per-claim, and knowledge of specific product
failures that are outside our typical experience. Factors that affect our warranty liability include the number of
installed units subject to warranty protection, product failure rates, estimated material costs, estimated
distribution costs and estimated labor costs.

Warranty reserves were $9.7 and $11.0 million as of December 31, 2014 and 2013, respectively.

Litigation Accruals

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

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.

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.

Research and Development

Research and development costs were $134.7, $128.1, and $120.3 million for the years ended December 31,
2014, 2013, and 2012, 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 $4.3, $4.1, and $3.5
million for the years ended December 31, 2014, 2013, and 2012, 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 by 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.

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

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 related to realization of existing California
and Luxembourg deferred tax assets, we have determined that is more likely than not that we will realize the
benefit related to all other deferred tax assets. To the extent we increase a valuation allowance, we include an
expense in the Consolidated Statement of Operations in the period in which such determination is made.

In accordance with ASC 740-10-25-5 through 17, we account for uncertainty in income taxes by recognizing a
tax position only when it is more likely than not that the tax position, based on its technical merits, will be
sustained upon ultimate settlement with the applicable tax authority. The tax benefit to be recognized is the
largest amount of tax benefit that is greater than fifty percent likely of being realized upon ultimate settlement
with the applicable tax authority that has full knowledge of all relevant information. 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.

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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;

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;

when making adjustments to finalize preliminary accounting during the measurement period, which
may be up to one year, 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; and

upon final determination of the fair value of assets acquired and liabilities assumed during the
measurement period, any subsequent adjustments are recorded to our Consolidated Statements of
Operations.

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

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 $1.4 and $2.6 million as of December 31, 2014 and 2013, respectively, which is not discounted, based
on an examination of historical trends, our claims experience, and related actuarial analysis and estimates. The
primary estimates used in the development of our accrual at December 31, 2014 and 2013 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, including the severity of claims and medical
cost inflation, 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.

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.

Forfeitures are 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 volatility, expected term, and interest rate assumptions. Expected volatility is based on the
historical volatility of our stock over a preceding period commensurate with the expected term of the option. The
expected term is based on management’s consideration of the historical life of the options, the vesting period of
the options granted, and the contractual period of the options granted. The risk-free interest rate for the expected
term of the option is based on the U.S. Treasury yield curve in effect at the time of grant. Expected dividend
yield was not considered in the option pricing formula since we do not pay dividends and have no current plans
to do so in the future.

Foreign Currency Translation

In preparing our consolidated financial statements, we 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 income and other income (expense), net. Net gains or

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

losses resulting from foreign currency transactions, including hedging gains and losses, are reported in interest
income and other income (expense), net, and were a loss of $6.8 and $0.3 for the years ended December 31, 2014
and 2013, respectively, and gain of $0.6 million for the year ended December 31, 2012.

For 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, 2014 and 2013 was an unrealized loss of $7.2 and
$1.6 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 DirectSmile, for which we consider the Euro to
be the subsidiaries’ functional currency; our Spanish subsidiary, Cretaprint, for which we consider the Euro to be
the subsidiary’s functional currency; our U.K. subsidiary, Electronics For Imaging United Kingdom Limited, for
which we consider the British pound sterling to be the subsidiary’s 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 New Zealand subsidiary contains the Prism operations in New Zealand for which we consider the
New Zealand dollar to be the functional currency; our Australian subsidiary contains the Prism, OPS, and Metrix
operations in Australia for which we consider the Australian dollar to be the 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.

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. 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 shares of restricted stock having a dilutive effect, non-vested
restricted stock for which the performance criteria have been met, and the assumed conversion of our convertible
senior notes having a dilutive effect using the treasury stock method as well as the dilutive effect of our warrants
when the stock price exceeds the conversion or strike price. Any potential shares that are anti-dilutive as defined
in ASC 260, Earnings Per Share, are excluded from the effect of dilutive securities.

Derivative Instruments and Risk Management

Our derivative instruments consist of foreign currency exchange contracts as described below:

Cash Flow Hedges

We utilize foreign currency exchange forward contracts to hedge foreign currency exchange exposures related to
forecasted operating expenses denominated in Indian rupees. These derivative instruments are designated and
qualify as cash flow hedges and in general, closely match the underlying forecasted transactions in duration. The

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Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

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. We measure the effectiveness of hedges of
forecasted transactions by comparing the fair value of the designated foreign currency exchange forward
purchase contracts with the fair values of the forecasted transactions. The ineffective portion of the derivative
hedging gain or loss, as well as changes in the derivative time value (which is excluded from the assessment of
hedge effectiveness), are recognized as a component of interest income and other income (expense), net.

Balance Sheet Hedges

We utilize foreign currency exchange forward and option contracts to hedge against the short-term impact of
foreign currency exchange rate fluctuations related to certain foreign-currency-denominated monetary assets and
liabilities, primarily consisting of Brazilian real, British pound sterling, and Euro-denominated intercompany
loans, British pound sterling and Euro-denominated trade receivables, and Indian rupee net monetary assets.
These derivative instruments are not designated as hedging instruments and do not subject us to material balance
sheet risk due to exchange rate movements because the gains and losses on these contracts are intended to offset
the gains and losses in the underlying foreign currency denominated monetary assets and liabilities. 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 income and other income (expense), net, generally in the same period as the remeasurement gain (loss) of
the related foreign currency denominated assets and liabilities.

Factors that could have an impact on the effectiveness of our balance sheet and cash flow hedging program
include the accuracy of forecasts and the volatility of foreign currency markets. These programs reduce, but do
not entirely eliminate, the impact of currency exchange movements. The maturities of these instruments are
generally less than one year. Currently, we do not enter into any foreign exchange forward contracts to hedge
exposures related to firm commitments or nonmarketable investments. We do not have any leveraged derivatives,
nor do we use derivative contracts for speculative purposes. The related cash flow impacts of our derivative
contracts are reflected as cash flows from operating activities in the Consolidated Statements of Cash Flows.

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 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

Revenue Recognition. The FASB issued ASU 2014-09, Revenue from Contracts with Customers, in May 2014.
ASU 2014-09 significantly enhances the comparability of revenue recognition practices across entities,
industries, jurisdictions, and capital markets. The principles-based guidance in ASU 2014-09 provides a
framework for addressing revenue recognition issues comprehensively. The core principle of the standard is that
revenue should be recognized in an amount that reflects the consideration that the entity expects to be entitled in
exchange for goods or services, which are referred to as performance obligations.

100

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

The guidance requires comprehensive annual and interim disclosures regarding the nature, amount, timing, and
uncertainty of recognized revenue. Qualitative and quantitative disclosures will be required regarding:

•

contracts with customers, including revenue and impairments recognized, disaggregation, and
information about contract balances and performance obligations,

significant judgments and changes in judgments required to determine the timing of satisfaction of
performance obligations over time and determine the transaction price, amounts allocated to
performance obligations, and the timing for recognizing revenue resulting from the satisfaction of
performance obligations, and

assets recognized from the costs to obtain or fulfill a contract.

ASU 2014-09 will be effective in the first quarter of 2017. We are evaluating the impact of ASU 2014-09 on our
revenue and results of operations.

Discontinued Operations. In April 2014, the FASB issued ASU 2014-08, Reporting Discontinued Operations
and Disclosures of Disposals of Components of an Entity, which is effective in the first quarter of 2015. Under
the new guidance, a discontinued operation is a component or group of components of an entity that are either
disposed or classified as held for sale and represents a strategic shift that has (or will have) a major effect on our
operations and financial results. A strategic shift includes disposal of a major geographic area of operations,
major line of business, major equity method investment, or other major components of an entity. This differs
from current guidance, which defines discontinued operations as disposals of a component of an entity that is a
reportable segment, an operating segment, a reporting unit, a subsidiary, or an asset group.

A business activity that upon acquisition qualifies as held for sale will also be a discontinued operation under the
new guidance.

Presentation as a discontinued operation is no longer prohibited if there are operations and cash flows of the
component that have not been eliminated from the reporting entity’s ongoing operations, or if there is significant
continuing involvement with a component after its disposal. Additional disclosures are required when an entity
retains significant continuing involvement with a discontinued operation after its disposal, including the amount
of cash flows to and from a discontinued operation.

Discontinued operations are excluded from income from continuing operations and presented as a separate
component of income before income taxes when the requirements of ASU 2014-08 have been met. Consolidated
net income is not impacted by the segregation of discontinued operations within the Consolidated Statements 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. Our liability for gross unrecognized tax benefits was $35.0 and $33.0 million as
of December 31, 2014 and 2013, respectively.

As of January 1, 2014, we reclassified $26.0 million of unrecognized tax benefits as a reduction of deferred tax
assets in accordance with ASU 2013-11, which was effective in the first quarter of 2014. We are required to
reclassify gross unrecognized tax benefits against net operating loss carryforwards, similar tax loss
carryforwards, and tax credit carryforwards that are available to settle additional income taxes that would result
from the disallowance of a tax position.

101

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Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Supplemental Disclosure of Cash Flow Information

(in thousands)

For the years ended December 31,

2014

2013

2012

Net cash paid for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 6,157

$ 7,883

$ 4,384

Cash paid for interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

128

210

Acquisition of businesses, technology, and post-acquisition non-

competition agreements:

Cash paid for acquisitions, excluding contingent consideration . . . .
Cash acquired in acquisitions, excluding restricted cash . . . . . . . . . .

$23,888
(1,908)

$15,541
(853)

$66,050
(5,059)

Net cash paid for acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$21,980

$14,688

$60,991

Non-cash investing and financing activities:
Non-cash acquisition of property under a build-to-suit lease . . . . . .
Property and equipment received, but not paid . . . . . . . . . . . . . . . . .

$ —
2,275

$11,230
7,210

$ —
1,042

$ 2,275

$18,440

$ 1,042

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. 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 shares of restricted stock having a dilutive effect, non-vested
restricted stock for which the performance criteria have been met, and the assumed conversion of our Notes
having a dilutive effect using the treasury stock method as well as the dilutive effect of our warrants when the
stock price exceeds the conversion price. Any potential shares that are anti-dilutive as defined in ASC 260 are
excluded from the effect of dilutive securities.

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 in accordance with ASC 260-10-45-48. Accordingly, performance-based RSUs, which vested on
various dates during the years ended December 31, 2014, 2013, and 2012 based on achievement of specified
performance criteria related to revenue and non-GAAP operating income targets and market-based RSUs and
stock options, which vested on various dates during the years ended December 31, 2013 and 2012 based on
achievement of specified stock prices for defined periods are included in the determination of net income per
diluted common share as of the beginning of the period.

102

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Basic and diluted earnings per share for the years ended December 31, 2014, 2013, and 2012 are reconciled as
follows (in thousands, except for per share amounts):

2014

2013

2012

Basic net income per share:
Net income available to common shareholders . . . . . . . . . . . . . . . .

$33,714

$109,107

$83,269

Weighted average common shares outstanding . . . . . . . . . . . . . . . .
Basic net income per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

46,866
0.72

46,643
2.34

46,453
1.79

Dilutive net income per share:
Net income available to common shareholders . . . . . . . . . . . . . . . .

$33,714

$109,107

$83,269

Weighted average common shares outstanding . . . . . . . . . . . . . . . .
Dilutive stock options and restricted stock . . . . . . . . . . . . . . .

46,866
1,540

46,643
1,716

46,453
1,281

Weighted average common shares outstanding for purposes of

computing diluted net income per share . . . . . . . . . . . . . . . . . . .

48,406

48,359

47,734

Dilutive net income per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0.70

2.26

1.74

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 the assumed exercise of stock options, vesting
of restricted stock, and shares to be purchased under our ESPP having an anti-dilutive effect of less than
0.1 million shares for the year ended December 31, 2014, the assumed vesting of restricted stock having an anti-
dilutive effect of less than 0.1 million shares for the year ended December 31, 2013, and the assumed exercise of
stock options having an anti-dilutive effect of 0.4 million shares for the year ended December 31, 2012.

The weighted-average number of common shares outstanding does not include the effect of the potential
common shares from our Notes and warrants, which were issued in September 2014. The effects of these
potentially outstanding shares were not included in the calculation of diluted net income per share because the
effect would have been anti-dilutive since the conversion price of the Notes and the strike price of the warrants
exceeded the average market price of our common stock. We have the option to pay cash, issue shares of
common stock, or any combination thereof for the aggregate amount due upon conversion of the Notes. Our
intent is to settle the principal amount of the Notes in cash upon conversion. As a result, only amounts payable in
excess of the principal amount of the Notes are considered in diluted net income per share under the treasury
stock method. Please refer to Note 7—Convertible Senior Notes, Note Hedges, and Warrants of the Notes to
Consolidated Financial Statements for additional information.

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Note 3: Business Acquisitions

We acquired four business process automation businesses during 2014, which have been integrated into our
Productivity Software operating segment. 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 has been integrated into our Fiery operating
segment.

These acquisitions were accounted for as purchase business combinations. We allocated the purchase price to the
tangible and identifiable intangible assets acquired and liabilities assumed on the basis of their estimated fair

103

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

value on the acquisition date. 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.

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 2014 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
2014, during the respective measurement periods, which end at various dates in 2015. 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.

2014 Acquisitions

Productivity Software Operating Segment

We acquired privately-held SmartLinc, Rhapso, DirectSmile, and DIMS, which have been integrated into our
Productivity Software operating segment, for aggregate cash consideration of $20.4 million, net of cash acquired,
plus additional potential future cash earnouts, which are contingent on achieving certain performance targets.

The fair value of the earnouts related to the 2014 acquisitions are currently estimated to be $7.4 million by
applying the income approach in accordance with ASC 805-30-25-5. Key assumptions include discount rates
between 4.7% and 5.2% and probability-adjusted revenue levels. Probability-adjusted revenue is a significant
input that is not observable in the market, which ASC 820-10-35, refers to as a Level 3 input. These contingent
liabilities are reflected in the Consolidated Balance Sheet as of December 31, 2014, as current and noncurrent
liabilities of $4.1 and $3.3 million, respectively. In accordance with ASC 805-30-35-1, changes in the fair value
of contingent consideration subsequent to the acquisition date are recognized in general and administrative
expenses.

SmartLinc, a Wisconsin corporation headquartered in Milwaukee, Wisconsin, was acquired on January 16, 2014,
and provides business process automation software for shipping and logistics operations.

Rhapso, a societe anonyme organized under French law headquartered in Les Ulis, France, was acquired on
April 14, 2014, and provides printing, packaging, and scheduling software to European customers in the
corrugated packaging market sector.

DirectSmile, a limited liability company under German law headquartered in Berlin, Germany, was acquired on
July 18, 2014, and provides software solutions for variable data printing, cross media marketing automation, and
image personalization technologies.

104

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

DIMS, a limited liability company under Dutch law headquartered in Lichtenvoorde, Netherlands, was acquired
on September 15, 2014, and is a leading supplier of business process automation software for high end,
multilingual, and multi-national print and packaging companies with a large portion of its installed base in
Europe. The DIMS solution will be integrated into our Fiery digital front end (“DFE”) so that DIMS customers
can realize the benefits of having Fiery driven print engines as part of their digital workflow.

2013 Acquisitions

Productivity Software Operating Segment

We acquired privately-held PrintLeader, GamSys, Metrix, and Lector, which have been integrated into our
Productivity Software operating segment, for aggregate cash consideration of $12.9 million, net of cash acquired,
an additional $0.9 million paid upon collection of accounts receivable, additional future cash earnouts contingent
on achieving certain performance targets, and $0.7 million of potential accounts receivable payments dependent
on collections.

The fair value of the PrintLeader, GamSys, and Metrix earnouts are currently estimated to be $3.0 million, which
is net of earnout payments of $1.2 million in 2014. Key assumptions include discount rates between 4.5% and
6.0% and probability-adjusted revenue levels. These contingent liabilities are reflected in the Consolidated
Balance Sheet as of December 31, 2014, as current and noncurrent liabilities of $2.2 and $0.8 million,
respectively.

PrintLeader, a Florida corporation headquartered in Palm City, Florida, was acquired on May 8, 2013, and
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 also provide PrintSmith products to the PrintLeader customer base, while continuing to support
existing PrintLeader customers.

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GamSys, a limited liability company under Belgium law headquartered in LaReid, Belgium, was acquired on
May 31, 2013, and 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, a proprietary limited company incorporated and registered in New South Wales, Australia, headquartered
in Edmonds, Washington, was acquired on October 16, 2013, and 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, a limited liability company under German law headquartered in Mönchengladbach, Germany, was
acquired on November 13, 2013, and 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.

105

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

2012 Acquisitions

Industrial Inkjet Operating Segment

On January 10, 2012, we purchased privately-held Cretaprint, a sociedad de responsabilidad limitada
headquartered in Castellon, Spain, for cash consideration of $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.

We paid contingent consideration related to the Cretaprint acquisition of $6.2 and $8.9 million in 2014 and 2013,
respectively. Acquisition-related executive retention expense of $0.9 million was recognized during each of the
years ended December 31, 2013 and 2012, respectively, coinciding with the continuing employment of a former
shareholder of an acquired company, thereby increasing the liability for contingent consideration accordingly.

Productivity Software Operating Segment

We acquired privately-held Metrics, OPS, and Technique, which have been integrated into our Productivity
Software operating segment, for aggregate cash consideration of $31.1 million, net of cash acquired, plus
additional future cash earnouts contingent on achieving certain performance targets.

The fair value of the Metrics, OPS, and Technique earnouts are currently estimated to be $2.0 million, which is
net of earnout payments of $6.5 and $4.5 million in 2014 and 2013, respectively. Key assumptions include
discount rates between 4.2% and 6.4% and probability-adjusted revenue levels. These contingent liabilities are
reflected in the Consolidated Balance Sheet as of December 31, 2014, as a current liability.

Metrics, a Brazilian limited liability company headquartered in Sao Paolo, Brazil, was acquired on April 10,
2012, and 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.

Online Print Marketing Ltd., a private limited liability company incorporated in Ireland and DataCreation Pty.
Ltd., a private limited company incorporated in Australia, together doing business as Online Print Solutions
(“OPS”), which is headquartered in Dublin, Ireland, was acquired on October 1, 2012, and 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.

Technique, a private limited company incorporated in England and Wales, which is headquartered in Leeds,
U.K., was acquired on November 16, 2012, and 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. FX Colors develops and provides technology and software for industrial printing.

106

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

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.

Valuation Methodologies

Intangible assets acquired in 2014, 2013, and 2012 consist of customer relationships, trade names, existing
technology, backlog, and IPR&D. Each intangible asset valuation methodology for each acquisition assumes
discount rates between 13% and 24%.

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-weighting 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.

Trade Names were valued using the relief from royalty method, which is an income approach, 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 name.

Existing Technology was valued using the relief from royalty method based on royalty rates for similar
technologies. The value of existing technology is derived from consistent and predictable revenue, including the
opportunity to cross-sell 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.

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IPR&D was valued using the relief from royalty method 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, 2014 . . . . . . . . . . . . . . . . . .

20%
17%
76% 50-53%
100%
82%

17%
73%
100%

DIMS

GamSys

Technique

IPR&D is subject to amortization after product completion over the product life or otherwise subject to
impairment in accordance with acquisition accounting guidance.

107

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

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

Customer relationships . . . . . . . . . .
Existing technology . . . . . . . . . . . .
Trade names . . . . . . . . . . . . . . . . . .
IPR&D . . . . . . . . . . . . . . . . . . . . . .
Backlog . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
Goodwill

Net tangible assets (liabilities) . . . .

Total purchase price . . . . . . . . . . . .

2014 Acquisitions

2013 Acquisitions

2012 Acquisitions

Productivity Software

Industrial Inkjet

Productivity Software

SmartLinc, Rhapso,
DirectSmile, DIMS

PrintLeader, GamSys,
Metrix, Lector

Cretaprint

Metrics, OPS, Technique

Weighted
average
useful life

5 years
4 years
4 years
—
—
—

Weighted
average
useful life

5-6 years
3-4 years
3-4 years

—
—
—

Purchase
Price
Allocation

$ 8,569
4,890
1,231
389
—
21,078

36,157
(3,758)

$32,399

Purchase
Price
Allocation

$ 5,540
2,060
670
150
—
13,365

21,785
(3,441)

$18,344

Weighted
average
useful life

Purchase
Price
Allocation

5 years
3 years
6 years
—
1 year
—

$ 8,000
7,070
4,970
—
1,290
22,794

44,124
3,078

$47,202

Weighted
average
useful life

5-6 years
3-4 years
3-4 years

—
—
—

Purchase
Price
Allocation

$14,880
4,580
1,080
90

—
31,100

51,730
(4,942)

$46,788

The initial preliminary purchase price allocations were adjusted by $0.2, $1.1, and $0.4 million during 2014,
2013, and 2012, respectively.

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 in 2013 related to our acquisitions of Cretaprint, OPS, and
Technique. 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.

The initial preliminary allocation of the Metrics purchase price was adjusted 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.

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.

The results of operations of our business acquisitions have been included in our consolidated results of operations
from their respective acquisition dates. Pro forma results of operations have not been presented because the
business acquisitions, individually and collectively, were 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,
that was generated by our acquisitions is not deductible for tax purposes.

108

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Note 4: Balance Sheet Components

Inventories

Inventories, net of allowances, as of December 31, 2014 and 2013 are as follows (in thousands):

Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2014

2013

$33,903
2,308
35,921

$35,470
3,434
29,441

$72,132

$68,345

Property and Equipment, Net

Property and equipment, net, as of December 31, 2014 and 2013 are as follows (in thousands):

Land, buildings, and improvements (including build-to-suit lease) . . . . $ 71,522 $ 72,601
50,280
Equipment and purchased software . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,808
Furniture and leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . .

54,766
14,425

2014

2013

Less accumulated depreciation and amortization . . . . . . . . . . . . . . . . . .

140,713
(54,516)

135,689
(50,860)

$ 86,197 $ 84,829

We entered into a 15-year lease agreement on September 1, 2013 pursuant to which we leased approximately
59,000 square feet in Fremont, California. The leased facility was a cold shell requiring additional build-out and
tenant improvements. As explained in Note 8—Commitments and Contingencies of the Notes to Consolidated
Financial Statements, we are deemed to be the accounting owner of the facility. The capitalized cost under the
build-to-suit lease was $10.9 and $11.1 million based on the estimated replacement cost of the unfinished space,
including capitalized interest, which has been reduced by accumulated depreciation.

Accrued and Other Liabilities

Accrued and other liabilities as of December 31, 2014 and 2013 are as follows (in thousands):

Accrued compensation and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warranty provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued royalty payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contingent liabilities—current
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2014

2013

$28,632
9,682
5,017
8,254
11,598
$63,183

$32,375
11,047
3,915
14,803
16,375
$78,515

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109

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Accumulated Other Comprehensive Income (Loss) (“OCI”)

OCI classified within stockholders’ equity in our Consolidated Balance Sheets as of December 31, 2014 and
2013 are as follows (in thousands):

Net unrealized investment gains (losses) . . . . . . . . . . . . . . . . . . . . . . . .
Currency translation losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized losses on cash flow hedges . . . . . . . . . . . . . . . . . . . . . . .

2014

2013

$ (141)
(7,177)
(39)

227
(1,601)
(14)

$(7,357)

$(1,388)

Amounts reclassified out of OCI were less than $0.1million, net of tax, for the years ended December 31, 2014
and 2013 and $0.1 million, net of tax, for the year ended December 31, 2012, and consisted of unrealized gains
from investments in debt securities and are reported within interest income 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, 2014 and 2013 are as follows (in thousands, except for weighted average useful life):

December 31, 2014

December 31, 2013

Weighted
average
useful life
(years)

Gross
carrying
amount

Accumulated
amortization

Weighted
remaining
average
useful life
(years)

Goodwill

. . . . . . . . . . . . . . . . . . . . . . . . . — $245,443 $

—

Customer relationships and other
. . . . . .
5.5
Existing technology . . . . . . . . . . . . . . . . .
3.9
13.4
Trademarks and trade names . . . . . . . . . .
IPR&D . . . . . . . . . . . . . . . . . . . . . . . . . . . —

$ 54,205 $ (21,979)
(110,189)
114,951
(25,181)
50,375
—
389

Amortizable intangible assets . . . . . . . . .

6.5

$219,920 $(157,349)

—

2.9
2.2
8.6
—

5.1

Net carrying
amount

Gross carrying
amount

Accumulated
amortization

Net carrying
amount

$245,443

$233,203

— $233,203

$ 32,226
4,762
25,194
389

$109,906
132,192
58,867
150

$ (77,922)
(122,857)
(31,614)
—

$ 31,984
9,335
27,253
150

$ 62,571

$301,115

$(232,393)

$ 68,722

Acquired customer relationships and other; existing technology; trademarks and trade names; are amortized over
their estimated useful lives of three to eighteen 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 $20.7, $19.4, and $18.6 million for the years ended December 31, 2014, 2013, and 2012,
respectively. IPR&D is subject to amortization after product completion over the product life or otherwise
subject to impairment in accordance with acquisition accounting guidance.

110

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

As of December 31, 2014, 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,

2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Future
amortization
expense

$18,162
14,598
11,123
6,715
3,708
8,265

$62,571

Goodwill Rollforward

The goodwill rollforward for the years ended December 31, 2014 and 2013 as required by ASC 805 is as follows
(in thousands):

Industrial
Inkjet

Productivity
Software

Fiery

Total

Ending Balance, December 31, 2012 . . . . . . . . . . . . . . . . . . . .

$ 60,745

$ 94,185

$64,526

$ 219,456

Additions (PrintLeader, GamSys, Metrix, and Lector

acquisitions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Opening balance sheet adjustments . . . . . . . . . . . . . . . . . . . . . . .
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

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Additions (SmartLinc, Rhapso, DirectSmile, and DIMS

— $ 21,078
128
—
(6,417)
(2,580)

$ — $ 21,078
128
(8,966)

—
31

Ending Balance, December 31, 2014 . . . . . . . . . . . . . . . . . . . .

$ 59,124

$121,486

$64,833

$ 245,443

Accumulated Impairment as of December 31, 2014,

recognized in 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(103,991) $ — $ — (103,991)

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 2014 and 2013 and because our reporting units are susceptible to fair
value fluctuations, we determined that the quantitative analysis should be performed.

111

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

According to the provisions of ASC 350-20-35, a two-step impairment test of goodwill is required. In the first
step, the fair value of each reporting unit is compared to its carrying value. If the fair value exceeds carrying
value, goodwill is not impaired and further testing is not required. If the carrying value exceeds fair value, then
the second step of the impairment test is required to determine the implied fair value of the reporting unit’s
goodwill. The implied fair value of goodwill is calculated by deducting the fair value of all tangible and
intangible net assets of the reporting unit, excluding goodwill, from the fair value of the reporting unit as
determined in the first step. If the carrying value of the reporting unit’s goodwill exceeds its implied fair value,
then an impairment loss must be recorded equal to the difference.

To identify suitable comparable companies under the market approach, consideration was given to the financial
condition and operating performance of the reporting unit being evaluated relative to companies operating in the
same or similar businesses, potentially subject to corresponding economic, environmental, and political factors
and considered to be reasonable investment alternatives. Consideration was given to the investment
characteristics of the subject companies relative to those of similar publicly traded companies (i.e., guideline
companies), which are actively traded. In applying the Public Company Market Multiple Method, 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. Three, five, and four
suitable guideline companies were identified for the Industrial Inkjet, Productivity Software, and Fiery reporting
units, respectively.

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 7% in 2014 was less than historical normalized growth rates for the
Industrial Inkjet operating segment due to the impact of the slowdown of the global construction
market on this reporting unit.

Productivity Software revenue growth of 10% in 2014 exceeded historical normalized growth rates due
to eleven acquisitions completed during the years ended December 31, 2014, 2013, and 2012.

Fiery revenue growth of 10% and 11% in 2014 and 2013, respectively, 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.

112

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

•

Despite the ongoing economic uncertainty, our reporting units’ revenue is assumed to grow at historical
normalized rates between 2015 and 2019 for the following primary reasons:

O 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 and will continue to mitigate the decreased revenue in our ceramic tile
decoration digital inkjet business caused by the slowdown in the global construction industry.

O 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 this operating segment to further
consolidate the business process automation and cloud-based order entry and order management
software industries in the Americas and world-wide.

O Long-term industry growth after 2020.

O 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 2014 and 2013.

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 conservative five-year financial
forecasts included consolidated annual revenue growth rates ranging from 6% to 8%, 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. Percentages of revenue over the five-year forecast horizon were compared to
approximate percentages realized by the guideline companies. To assess the reasonableness of the estimated
control premium of 10.7%, 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:

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•

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.

113

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

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, 2014 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
2015 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.

Long-Lived Assets

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, 2014, 2013, or 2012.

Note 6: Investments and Fair Value Measurements

Our available-for-sale short-term investments as of December 31, 2014 and 2013 are as follows (in thousands):

Amortized cost

Gross unrealized
gains

Gross
unrealized losses

Fair value

December 31, 2014
U.S. Government and sponsored entities . . . . . . . . . .
Corporate debt securities . . . . . . . . . . . . . . . . . . . . . .
Municipal securities . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset-backed securities . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . .
Mortgage-backed securities—residential

$ 75,993
218,493
2,375
19,061
2,898

Total short-term investments . . . . . . . . . . . . . . . . . . .

$318,820

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

$ 34
74
1
270
13

$392

$ 36
273
7
97
28

$441

$(112)
(433)
—
(65)
(3)

$(613)

(7)
(42)
(2)
(9)
(10)

$ (70)

$ 75,915
218,134
2,376
19,266
2,908

$318,599

$ 28,909
114,564
15,324
14,236
4,924

$177,957

114

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, 2014 and 2013 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, 2014
U.S. Government and sponsored entities . . . .
Corporate debt securities . . . . . . . . . . . . . . . .
Asset-backed securities . . . . . . . . . . . . . . . . .
Mortgage-backed securities—residential . . . .

$120,433
147,141
14,261
640

Total

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

$282,475

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

$(112)
(433)
(65)
(2)

$(612)

(7)
(42)
(2)
(9)
(8)

Total

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

$ 60,026

$ (68)

$ —
—
120
—

$ 120

$ —
—
—
—
188

$ 188

$ —
—

(1)

—

$120,433
147,141
14,381
640

$ (1)

$282,595

$ —
—
—
—

(2)

$ 16,294
29,125
6,243
6,705
1,847

$(112)
(433)
(66)
(2)

$(613)

(7)
(42)
(2)
(9)
(10)

$ (2)

$ 60,214

$ (70)

For fixed income securities that have unrealized losses as of December 31, 2014, 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 we 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, 2014 were temporary in nature.

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Amortized cost and estimated fair value of investments at December 31, 2014 is summarized by maturity date as
follows (in thousands):

Mature in less than one year . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mature in one to three years . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$160,880
157,940

$161,059
157,540

Total short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$318,820

$318,599

Amortized cost

Fair value

For the year ended December 31, 2014, net realized gains of less than $0.1 million were recognized. For the year
ended December 31, 2013, net realized losses of $0.1 million were recognized, which were 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, net realized losses of $0.1 million were recognized, which were comprised of $0.2
million in realized gains from sale of investments, partially offset by $0.3 million in realized losses. As of
December 31, 2014 and 2013, net unrealized losses of $0.2 million and net unrealized gains of $0.4 million,
respectively, were included in OCI in the accompanying Consolidated Balance Sheets.

115

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 conclusions
of management and not conclusions or statements of any third party.

116

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, 2014 and 2013 in order of liquidity as follows (in thousands):

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

Significant
other
Observable
Inputs
(Level 2)

Unobservable
Inputs
(Level 3)

December 31, 2014
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, 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 . . . . . . . . . . . . . . . . . . . . . . . .

Total

$ 25,841
139,206
233,758
2,376
19,266
2,908

$423,355

$25,841
63,291
—
—
—
—

$89,132

$ —

75,915
233,758
2,376
19,012
2,908

$333,969

$ 12,277
1,369

$ 13,646

$ —
—

$ —

$ —
—

$ —

$ 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

$ —
—

$ —

$ —
—

$ —

$ —
—
—
—
254
—

254

$12,277
1,369

$13,646

$ —
—
—
—
101
—

101

$21,052
2,554

$23,606

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Money market funds consist of $25.8 and $52.6 million, which have been classified as cash equivalents as of
December 31, 2014 and 2013, respectively. U.S. government and sponsored entities securities include $63.3
million, which have been classified as cash equivalents at December 31, 2014. Municipal securities include
$2.1 million, which have been classified as cash equivalents at December 31, 2013. Corporate debt securities
include $15.6 and $2.6 million, which have been classified as cash equivalents at December 31, 2014 and 2013,
respectively.

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

117

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 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, 2014 and 2013.

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. Asset-backed securities in the portfolio are predominantly collateralized by credit cards and
auto loans. We also hold two asset-backed securities collateralized by mortgage loans, which have been fully
reserved.

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.

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,
2014, 2013, and 2012.

Liabilities for Contingent Consideration

Acquisition-related liabilities for contingent consideration (i.e., earnouts) are related to the purchase business
combinations of DIMS, DirectSmile, and SmartLinc in 2014, 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 $12.3 and $21.1 million as of December 31, 2014 and 2013,
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 retention 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 retention expense of $0.9 million was recognized during each of the years ended December 31,
2013 and 2012, respectively, 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, 2014 as current and noncurrent
liabilities of $8.3 and $4.0 million, respectively.

118

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

The OPS, Technique, and DIMS earnout performance probability percentages were reduced or not achieved in
2014, partially offset by increased performance achievement with respect to the Metrics earnout performance
target in 2014. The Entrac, Cretaprint, Streamline, OPS, and Alphagraph earnout performance probability
percentages were reduced or not achieved in 2013, partially offset by an increase in the performance probability
percentage with respect to the Metrics earnout performance target in 2013. Consequently, the decrease in the fair
value of contingent consideration was $4.5 and $7.1 million, partially offset by $0.7 and $1.4 million of earnout
interest accretion related to all acquisitions, during the years ended December 31, 2014 and 2013, 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.

Changes in the contingent liability for contingent consideration during the years ended December 31, 2014 and
2013 are summarized as follows:

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

Fair value of contingent consideration at December 31, 2013 . . . . . . . . . . . . . . . .
Fair value of SmartLinc contingent consideration at January 16, 2014 . . . . . . . . .
Fair value of DirectSmile contingent consideration at July 18, 2014 . . . . . . . . . . .
Fair value of DIMS contingent consideration at September 15, 2014 . . . . . . . . . .
Changes in valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency adjustment

$ 38,050
389
2,640
1,123
940
(5,779)
(16,683)
372

$ 21,052
1,546
4,162
4,456
(3,813)
(14,047)
(1,079)

Fair value of contingent consideration at December 31, 2014 . . . . . . . . . . . . . . . .

$ 12,277

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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.

We assessed the probability of achieving the revenue performance targets for the contingent consideration
associated with each acquisition at percentage levels between 60% and 100% as of each respective acquisition
date based on an assessment of the historical performance of each acquired entity, our current expectations of
future performance, and other relevant factors. A change in probability-adjusted revenue of five percentage
points from the level assumed in the current valuations would result in an increase in the fair value of contingent
consideration of $1.0 million or a decrease of $0.4 million resulting in a corresponding adjustment to general and
administrative expense. Likewise, a change in the discount rate of one percentage point results in an increase in
the fair value of contingent consideration of $0.2 million or a decrease of $0.4 million.

119

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

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 $1.4 and $2.6 million as of December 31, 2014 and 2013, respectively, which are not discounted,
based upon examination of historical trends, historical actuarial analysis, our claims experience, and other
various estimates. The primary estimates used in the development of our accrual as of December 31, 2014 and
2013, include total plan 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 during the years ended December 31, 2014 and 2013 are
summarized as follows:

Fair value of self-insurance liability at December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions to reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: insurance claims and administrative fees paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fair value of self-insurance liability at December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions to reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: insurance claims and administrative fees paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,375
11,590
2,333
(12,744)

$ 2,554
12,146
2,291
(15,622)

Fair value of self-insurance liability at December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,369

ASC 820-10-50-2 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. Changes in unobservable inputs to the fair value measurement of the self-insurance liability
will not materially impact the fair value estimate.

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 $89.5 and $27.2 million as of December 31, 2014 and 2013, respectively.
The fair value of our derivative assets and liabilities that were designated for cash flow hedge accounting
treatment having notional amounts of $2.9 and $2.5 million as of December 31, 2014 and 2013, respectively, was
not material.

Fair Value of Convertible Senior Notes

In September 2014, we issued $345 million aggregate principal amount of 0.75% Convertible Senior Notes due
2019 (“Notes”). The Notes are carried at their original issuance value, net of unamortized debt discount, and are
not marked to market each period. The approximate fair value of the Notes as of December 31, 2014 was
approximately $350 million and was considered a Level 2 fair value measurement. Fair value was estimated
based upon actual quotations obtained at the end of the reporting period or the most recent date available. A
substantial portion of the market value of our Notes in excess of the outstanding principal amount relates to the
conversion premium.

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Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Note 7: Convertible Senior Notes, Note Hedges, and Warrants

0.75% Convertible Senior Notes Due 2019

In September 2014, we completed a private placement of $345 million principal amount of 0.75% Convertible
Senior Notes due 2019 (“Notes”). The Notes were sold to the initial purchasers for resale to qualified institutional
buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. The net proceeds from this offering
were approximately $336.4 million, after deducting the initial purchasers’ commissions and the offering
expenses payable by us. We used approximately $29.4 million of the net proceeds to pay the cost of the Note
Hedges described below (after such cost was partially offset by the proceeds from the Warrant transactions also
described below).

The Notes are senior unsecured obligations of EFI with interest payable semiannually in arrears on March 1 and
September 1 of each year, commencing March 1, 2015. The Notes are not callable and will mature on
September 1, 2019, unless previously purchased or converted in accordance with their terms prior to such date.
Holders of the Notes who convert in connection with a “fundamental change,” as defined in the Indenture, may
require us to purchase for cash all or any portion of their Notes at a purchase price equal to 100 percent of the
principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any.

The initial conversion rate is 18.9667 shares of common stock per $1,000 principal amount of Notes, which is
equivalent to an initial conversion price of approximately $52.72 per share of common stock. Upon conversion of
the Notes, holders will receive cash, shares of common stock or a combination thereof, at our election. Our intent
is to settle the principal amount of the Notes in cash upon conversion. If the conversion value exceeds the
principal amount, we would deliver shares of our common stock for our conversion obligation in excess of the
aggregate principal amount. As of December 31, 2014, none of the conditions allowing holders of the Notes to
convert had been met.

Throughout the term of the Notes, the conversion rate may be adjusted upon the occurrence of certain events.
Holders of the Notes will not receive any cash payment representing accrued and unpaid interest upon conversion
of a Note. Holders may convert their Notes only under the following circumstances:

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•

during any calendar quarter commencing after the calendar quarter ending on December 31, 2014 (and
only during such calendar quarter), if the last reported sale price of our common stock for at least 20
trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the
last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the
conversion price on each applicable trading day;

during the five business day period after any five consecutive trading day period (“Notes Measurement
Period”) in which the “trading price” (as the term is defined in the Indenture) per $1,000 principal
amount of notes for each trading day of such Notes Measurement Period was less than 98% of the
product of the last reported stock price on such trading day and the conversion rate on each such
trading day;

upon the occurrence of specified corporate events; or

at any time on or after March 1, 2019 until the close of business on the second scheduled trading day
immediately preceding the maturity date.

We separated the Notes into liability and equity components in order to record the issuance of the Notes. The
carrying amount of the liability component was calculated by measuring the estimated fair value of a similar
liability that does not have an associated convertible feature. The carrying amount of the equity component
representing the conversion option was determined by deducting the fair value of the liability component from

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Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

the face value of the Notes as a whole. The excess of the principal amount of the liability component over its
carrying amount (“debt discount”) is amortized to interest expense over the term of the Notes using the effective
interest method with an effective interest rate of 4.98% per annum (5.46% inclusive of debt issuance costs). The
equity component is not remeasured as long as it continues to meet the conditions for equity classification.

We allocated the total transaction costs incurred by the Note issuance to the liability and equity components
based on their relative values. Issuance costs of $7.0 million attributable to the $281.4 million liability
component are being amortized to expense over the term of the Notes, and issuance costs of $1.6 million
attributable to the $63.6 million equity component were offset against the equity component in stockholders’
equity. Additionally, we recorded a deferred tax liability of $23.7 million on the debt discount, which is not
deductible for tax purposes.

The Notes consist of the following at December 31, 2014 (in thousands):

Liability component . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: debt discount, net of amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$345,000
60,182

Net carrying amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$284,818

Equity component
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: debt issuance costs allocated to equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 63,643
(1,582)

Net carrying amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 62,061

Interest expense recognized related to the Notes during the year ended December 31, 2014 was as follows (in
thousands):

0.75% coupon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of debt discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 798
419
3,461

$4,678

Note Hedges

We entered into convertible note hedge transactions with respect to our common stock (“Note Hedges”). In
September 2014, we paid an aggregate amount of $63.9 million for the Note Hedges. The Note Hedges will
expire upon maturity of the Notes. The Note Hedges are intended to offset the potential dilution upon conversion
of the Notes and/or offset any cash payments we are required to make in excess of the principal amount upon
conversion of the Notes in the event that the market value per share of our common stock, as measured under the
terms of the Note Hedges, is greater than the strike price of the Note Hedges. The strike price of the Note Hedges
initially correspond to the conversion price of the Notes and is subject to anti-dilution adjustments substantially
similar to those applicable to the conversion price of the Notes. The Note Hedges are separate transactions and
are not part of the Notes. Holders of the Notes will not have any rights with respect to the Note Hedges.

Warrants

Concurrently with entering into the Note Hedges, we separately entered into warrant transactions (“Warrants”),
whereby we sold warrants to acquire shares of our common stock at a strike price of $68.86 per share. We
received aggregate proceeds of $34.5 million from the sale of the Warrants. If the average market value per share

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Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

of our common stock for the reporting period, as measured under the Warrants, exceeds the strike price of the
Warrants, the Warrants will have a dilutive effect on our earnings per share. The Warrants are separate
transactions and are not part of the Notes or the Note Hedges and are accounted for as a component of additional
paid-in capital. Holders of the Notes and Note Hedges will not have any rights with respect to the Warrants.

Income tax reporting on the Note Hedges

We have elected to integrate the Notes with the Note Hedges to create a synthetic debt instrument, which results
in an original issue discount (“OID”) debt instrument for income tax reporting purposes; therefore, the cost of the
Note Hedges will be accounted for as interest expense over the term of the Notes for income tax reporting
purposes. The associated income tax benefit of $23.8 million established upon issuance of the Notes will be
realized over the term of the Notes and was recorded as an increase to both noncurrent deferred tax assets and
additional paid-in-capital. Over the term of the Notes, the additional interest expense deducted for income tax
purposes will reduce noncurrent deferred tax assets. During the year ended December 31, 2014, tax benefits of
$1.4 million associated with the additional interest deductions was accounted for as a reduction to non-current
deferred tax assets.

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 $12.3 and $21.1 million as of
December 31, 2014 and 2013, 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, 2014
as current and noncurrent liabilities of $8.3 and $4.0 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 $6.9 million as of December 31, 2014.

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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 $1.4 and $2.6 million as of December 31, 2014 and 2013, respectively, which are not discounted,
based upon examination of historical trends, historical actuarial analysis, our claims experience, and other
various estimates. The primary estimates used in the development of our accrual as of December 31, 2014 and
2013, include total plan enrollment (including employee contributions), population demographics, and historical
claims costs incurred.

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.

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Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Lease Commitments

As of December 31, 2014, 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 our build-to-suit lease, and
future minimum sublease receipts, for each of the next five years and thereafter as of December 31, 2014 are as
follows (in thousands):

Fiscal Year

2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total

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

Future Minimum
Lease Payments

Future Minimum
Sublease Receipts

$ 5,317
4,141
4,470
3,775
3,279
15,489

$36,471

$187
187
106
40
20
—

$540

Rent expense was approximately $6.1, $6.1, and $7.1 million for the years ended December 31, 2014, 2013, and
2012, respectively. Sublease rental income was approximately $3.1 and $1.7 million for the years ended
December 31, 2013 and 2012, respectively. Sublease income results primarily from the imputed sublease of the
portion of the building occupied by the purchaser before we vacated the facility in September 2013.

We entered into a 15-year lease agreement pursuant to which we leased approximately 59,000 square feet of a
building located in Fremont, California. The lease commenced on September 1, 2013. Minimum lease payments
are $18.5 million, net of 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 facility and/or
(ii) purchase the facility. This location contains the engineering, marketing, and administrative operations for our
Fiery operating segment. We relocated our former corporate headquarters to the adjacent building, which we
purchased during the fourth quarter of 2013.

The leased facility was a cold shell requiring additional build-out and tenant improvements. The landlord paid
the costs of the build-out up to $4.5 million, including all structural improvements, and we paid the costs of
tenant improvements beyond that amount. We paid $5.3 million of tenant improvements, including furniture and
equipment and capitalized interest. The landlord is responsible for any costs related to force majeure events that
result in any damage to the facility. We were 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 for events outside of our control.
As such, we are deemed to be the accounting owner of the facility. As of December 31, 2014, we have
capitalized $10.9 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
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

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Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

commencement. As of December 31, 2014, the imputed financing obligation in connection with the facility was
$12.5 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

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, Guarantees, 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, 2014 and 2013 were as follows (in
thousands):

Balance at January 1, . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provisions, net of releases . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 11,047
9,874
(11,239)

$ 10,158
11,267
(10,378)

Balance at December 31,

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

$ 9,682

$ 11,047

2014

2013

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In the normal course of business and in an effort to facilitate the sales of our products, we sometimes indemnify
other parties, including customers, lessors, and parties to other transactions with us. When we indemnify these
parties, typically those provisions protect other parties against losses arising from our infringement of third party
intellectual property rights. Those provisions 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

As of December 31, 2014, we are subject to the various claims, lawsuits, investigations, or proceedings discussed
below.

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Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

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 other vendors infringe
two patents held by Componex. We moved for summary judgment that, among other things, Componex’s patents
are not valid and that, even if they are, the rolls supplied and used in our products do not infringe the patents.
Componex also moved for summary judgment of infringement. On November 12, 2014, the district court granted
summary judgment that one of the two patents at issue is invalid, that there is no evidence of infringement of the
other patent at issue, and entered judgment in favor of EFI. On December 4, 2014, Componex filed its notice of
appeal to the United States Court of Appeals for the Federal Circuit. The appeal is currently pending.

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 arguing that the patent at issue is not valid. We also moved to strike Digitech’s infringement
contentions as lacking a proper basis. 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.
In August 2013, Digitech filed its notice of appeal to the United States Court of Appeals for the Federal Circuit
(“Court of Appeals”). On July 11, 2014, the Court of Appeals affirmed the District Court’s judgment in its
entirety. The Court of Appeals’ decision is final; consequently, we do not have any material liability in this
matter.

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 in
light of prior art. The Federal Patent Court held a hearing on the validity of the patent in October 2013 and,
following the hearing, declared the relevant claims in Durst’s patents to be invalid.

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Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

In November 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 is reached in EFI’s nullity
proceeding.

Durst did not appeal the Federal Patent Court’s decision, which is now final. Accordingly, on April 22, 2014, we
requested that the Regional Court lift its stay, dismiss Durst’s infringement case, and impose certain costs of the
proceeding on Durst. On May 15, 2014, the Dusseldorf court dismissed the case. We no longer have any
potential liability in this matter.

B.V.B.A Omnigraphics, formerly N.V. Perfectproof Europe (“Perfectproof”) v. EFI GmbH

On December 31, 2001, Perfectproof filed a complaint against BEST GmbH, currently EFI GmbH, in the
Tribunal de Commerce of Brussels, 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 $1.2 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 of less than $0.1 million was
adopted by the court on February 10, 2014. We have no further liability in this matter.

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Other Matters

As of December 31, 2014, we were 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 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.

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 million shares for an aggregate purchase price of
$19.3 million during the year ended December 31, 2013.

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 $200 million of outstanding common stock. This
authorization expires in November 2016. Under this publicly announced plan, we repurchased 1.8 and 0.1 million
shares for an aggregate purchase price of $76.8 and $2.5 million during the years ended December 31, 2014 and

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Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

2013, respectively. These repurchases included the use of a portion of the net proceeds from the Notes offering to
repurchase of 0.2 million shares for an aggregate purchase price of $10.0 million as authorized under the stock
repurchase program in a privately negotiated transaction concurrently with the closing of the Notes offering
effected through one of the initial purchasers as our agent.

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 or tax
obligations incurred in connection with RSUs. Employees surrendered 0.6 and 0.5 million shares for an
aggregate purchase price of $24.3 and $13.9 million for the years ended December 31, 2014 and 2013,
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 and trade receivables, as well as reduce earnings and cash flow volatility
resulting from shifts in market rates. Our objective is to offset gains and losses resulting from these exposures
with losses and gains on the derivative contracts used to hedge them, thereby reducing volatility of earnings or
protecting fair values of assets and liabilities. We do not have any leveraged derivatives, nor do we use derivative
contracts for speculative purposes. ASC 815, Derivatives and Hedging, requires the fair value of all derivative
instruments, including those embedded in other contracts, to be recorded as assets or liabilities in our
Consolidated Balance Sheet. 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 Brazilian real, British pound
sterling, and Euro-denominated intercompany loans, British pound sterling and Euro-denominated trade
receivables, and Indian rupee-denominated net monetary assets. As of December 31, 2014, we had not entered
into hedges against any other currency exposures.

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

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Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

exposure in Indian rupees, the collection of British pound sterling and Euro-denominated trade receivables, or the
settlement of Brazilian real, British pound sterling, and Euro-denominated intercompany loans). We do not
believe there is 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.

Cash Flow Hedges

Foreign currency derivative contracts with notional amounts of $2.9 and $2.5 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, 2014 and 2013, 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 Statements 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.

Balance Sheet Hedges

Forward contracts not designated as hedging instruments with notional amounts of $86.6 and $24.7 million are
used to hedge foreign currency balance sheet exposures at December 31, 2014 and 2013, 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 income 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 consist of hedges of Brazilian real, British
pound sterling, and Euro-denominated intercompany loans with notional amounts of $63.8 and $24.7 million at
December 31, 2014 and 2013, respectively, hedges of British pound sterling and Euro-denominated trade
receivables with notional amounts of $20.8 million at December 31, 2014, and a hedge of Indian rupee net
monetary assets with a notional amount of $1.9 million at December 31, 2014.

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Note 11: Income Taxes

The components of income before income taxes for the years ended December 31, 2014, 2013, and 2012 are as
follows (in thousands):

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

$15,090
26,997

$127,232
45,906

$ 5,615
29,408

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

$42,087

$173,138

$35,023

2014

2013

2012

129

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

The provision for (benefit from) income taxes for the years ended December 31, 2014, 2013, and 2012 is
summarized as follows (in thousands):

Current:

U.S. Federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 5,050
1,237
7,922

$ 6,589
(3,250)
6,845

$ (4,788)
1,841
7,522

Total current

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

14,209

10,184

4,575

2014

2013

2012

Deferred:

(94)
846
(6,588)

20,875
33,532
(560)

(35,487)
(9,648)
(7,686)

Total deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5,836)

53,847

(52,821)

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

$ 8,373

$64,031

$(48,246)

The reconciliation of the income tax provision (benefit) computed at the federal statutory rate to the actual tax
provision (benefit) for the years ended December 31, 2014, 2013, and 2012 is as follows (in thousands):

Tax provision at federal statutory rate . . . . . . . . . . . . . .
State income taxes, net of federal benefit . . . . . . . . . . . .
Research and development credits . . . . . . . . . . . . . . . . .
Effect of foreign operations . . . . . . . . . . . . . . . . . . . . . .
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

2014

2013

2012

$14,731
360
(2,629)
(2,293)
382
(3,130)

35.0% $60,598
467
0.9
(6,793)
(6.2)
(7,417)
(5.4)
58
0.8
— —
(7.4)

35.0% $ 12,257
(5,074)
0.3
(629)
(3.9)
(300)
(4.3)
720
(0.1)
(6,494)

35.0%
(14.5)
(1.8)
(0.9)
2.0
(18.5)

(2,088)

(5.0)

(4,427)

(2.6)

— —

(11,431)
(38,859)

(32.6)
(111.1)

ASC 718-740 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,793

6.6

1,764

1.0

1,528

Valuation allowance changes affecting provision for

income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for (benefit from) reassessment of taxes from
filing of prior year tax returns . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

— —

20,012

11.6

274

— —
0.6
247

(72)
(159)

(0.1)
(0.1)

—
(238)

—
(0.6)

4.4

0.8

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

$ 8,373

19.9% $64,031

36.8% $(48,246)

(137.8)%

Pursuant to the American Taxpayer Relief Act of 2012, on January 2, 2013, we recognized a tax benefit of $3.2
million resulting from 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.

130

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

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 research and development credits being generated that exceed the utilization of these tax
attributes. As a result, we recorded a charge of $19.4 million to establish a valuation allowance against our
California deferred tax assets that may not be realized.

The benefit for the 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.
The impact of the prior year adjustment is immaterial to our consolidated financial statements for the years ended
December 31, 2013 and 2012.

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. 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 foreign 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, 2014, we
have permanently reinvested $97.5 million of unremitted foreign earnings. Should these earnings be remitted to
the U.S., the tax on these earnings would be $17.5 million.

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The tax effects of temporary differences that give rise to deferred tax assets (liabilities) as of December 31, 2014
and 2013 are as follows (in thousands):

2014

2013

Reserves and accruals not currently deductible for tax purposes . . . . . . . . . . . . . . . . . . . . . .
Net operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax credit carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 13,776
10,528
54,321
2,403
7,778
2,956

$ 14,157
11,264
57,000
2,463
8,856
2,494

Gross deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

91,762

96,234

Depreciation and Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(22,917)
(1,153)

(17,148)
(1,746)

Gross deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(24,070)

(18,894)

Deferred tax valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(32,337)

(28,845)

Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 35,355

$ 48,495

We have $24.3 million ($51.1 million for state tax purposes) and $37.0 million ($30.6 million for state tax
purposes) of loss and credit carryforwards at December 31, 2014 for U.S. federal tax purposes. A majority of

131

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

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. We also have a valuation allowance related
to California and Luxembourg deferred tax assets.

As a result of certain realization requirements of ASC 718, the table of deferred tax assets and liabilities shown
above does not include certain deferred tax assets as of December 31, 2014, that arose directly from tax
deductions related to equity compensation greater than compensation recognized for financial reporting. Equity
will be increased by $2.3 million if and when such deferred tax assets are ultimately realized. The company uses
tax law ordering when determining when excess tax benefits have been realized.

A reconciliation of the change in the gross unrecognized tax benefits from January 1, 2012 to December 31, 2014
is as follows (in millions):

Federal, State,
and Foreign
Tax

Accrued
Interest and
Penalties

Gross
Unrecognized
Income Tax
Benefits

Balance at January 1, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . .
Additions for tax positions related to 2014 . . . . . . . . . . . . . . . . . . . . . . .
Reductions due to lapse of applicable statute of limitations . . . . . . . . . .

Balance at December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 34.6
0.1
5.0
(0.4)
(10.3)

$ 29.0
2.7
7.3
(1.9)
(1.1)
(3.6)

$ 32.4
0.9
3.6
(2.7)

$ 34.2

$ 1.0
0.3
—
—
(0.5)

$ 0.8
0.3
—
—
(0.1)
(0.4)

$ 0.6
0.4
—
(0.2)

$ 0.8

$ 35.6
0.4
5.0
(0.4)
(10.8)

$ 29.8
3.0
7.3
(1.9)
(1.2)
(4.0)

$ 33.0
1.3
3.6
(2.9)

$ 35.0

As of December 31, 2014, 2013, and 2012, gross unrecognized benefits that would affect the effective tax rate if
recognized were $32.1, $33.0, and $29.8 million, respectively, offset by deferred tax benefits of $0.7, $1.1, and
$2.4 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. It
is reasonably possible that our gross unrecognized tax benefits will decrease up to $1.1 million in the next twelve
months. These adjustments, if recognized, would positively impact our effective tax rate, and would be
recognized as additional tax benefits in our Consolidated Statements of Operations.

In accordance with ASU 2013-11, which became effective in the first quarter of 2014, we recorded $19.5 million
of gross unrecognized tax benefits as an offset to deferred tax assets as of December 31, 2014, and the remaining
$15.5 million has been recorded as non-current income taxes payable.

132

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

We recognize potential accrued interest and penalties related to unrecognized tax benefits in income tax expense.
At December 31, 2014, 2013, and 2012, we have accrued $0.9, $1.0, and $1.2 million, respectively, for potential
payments of interest and penalties.

We are subject to examination by the Internal Revenue Service (“IRS”) for the 2011-2013 tax years, state tax
jurisdictions for the 2010-2013 tax years, the Netherlands tax authority for the 2012- 2013 tax years, and the
Spanish tax authority for the 2010-2013 tax years.

Note 12: Employee Benefit Plans

Equity Incentive Plans

Subsequent to stockholder approval of our 2009 Equity Incentive Award Plan, no awards may be granted under
any of our prior plans. As of December 31, 2014, we had outstanding equity awards under two equity incentive
plans, including the 2009 Plan (defined below) and one prior equity incentive plan.

Our primary equity incentive plans are summarized as follows:

2009 Stock Plan

As most recently amended 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 up to 11.6 million shares and authorize the granting of performance-
based awards under the plan through the 2018 annual meeting of stockholders.

The 2009 Plan provides for grants of stock options (both incentive and nonqualified stock options), restricted
stock awards, 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
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.

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Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

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 2,900 employees and consultants and 5
non-employee directors were eligible to participate in the 2009 Plan.

There were 2.5, 2.7, and 3.2 million shares outstanding and 3.4, 4.5, and 0.8 million shares available for grant
under the 2009 Plan as of December 31, 2014, 2013, and 2012, 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, 2014, 2013, and 2012, there were less than 0.1, 0.5, and 0.6 million shares outstanding,
respectively, under the 2007 Plan.

Amended and Restated 2000 Employee Stock Purchase Plan

As most recently amended on June 4, 2013, 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 million shares. The share increase was intended to ensure that we continue to have a sufficient reserve of
common stock available under the ESPP to provide our eligible employees with the opportunity to acquire our
common stock through participation in a payroll deduction-based ESPP designed to operate in compliance with
Section 423 of the IRC. The ESPP does not provide for an automatic increase in the number of shares reserved
for issuance under the ESPP.

The ESPP is qualified under Section 423 of the IRC. Eligible employees may contribute from one to ten percent
of their base compensation. 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 each of the years ended December 31, 2014, 2013, and 2012, there were 0.6 million shares were issued
under the ESPP at an average purchase price of $13.54, $12.39, and $12.24, respectively. As of December 31,
2014, there was $2.7 million of total unrecognized compensation cost related to stock-based compensation
arrangements granted under the ESPP, which is expected to be recognized over a period of 1.8 years. At
December 31, 2014, 2013, and 2012, there were 1.8, 2.4, and 1.0 million shares, respectively, of our common
stock reserved for issuance under the ESPP.

134

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Employee 401(k) Plan

We sponsor a 401(k) Savings Plan (“401(k) Plan”) that provides 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. In 2014, 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 $2.1, $2.0,
and $1.9 million during the years ended December 31, 2014, 2013, and 2012, 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, RSUs, and ESPP purchases related to all stock-based compensation plans based on the
fair value of such awards on the date of grant. We amortize stock-based compensation cost on a graded vesting
basis over the vesting period, after assessing estimated forfeitures and 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. We value market-based awards using a Monte Carlo valuation model.

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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.

Stock-based compensation expense related to stock options, employee stock purchases under the ESPP, and
RSUs under ASC 718 for the years ended December 31, 2014, 2013, and 2012 is summarized as follows (in
thousands):

2014

2013

2012

Employee stock options . . . . . . . . . . . . . . . . . . . . . . . . . .
RSUs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ESPP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

264
32,429
3,368

921
22,026
2,823

$ 1,039
15,750
2,932

Total stock-based compensation . . . . . . . . . . . . . . . . . .
Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

36,061
(10,045)

25,770
(7,535)

19,721
(5,682)

Stock-based compensation expense, net of tax . . . . . . .

$ 26,016

$18,235

$14,039

135

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

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.

Stock options were not granted during the years ended December 31, 2014 and 2013. The estimated weighted
average fair value per share of stock options granted and the assumptions used to estimate fair value for the year
ended December 31, 2012 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, 2014, 2013, and 2012 are as follows:

Weighted average fair value per share . . . . . . . . . . . . . .
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected term (in years) . . . . . . . . . . . . . . . . . . . . . . . .

Stock Option Activity

Stock Options

2012

$6.62
43.8%
0.5%
4.0

2014

ESPP

2013

2012

11.12

7.53
25% - 28% 25% - 38% 32% - 49%
0.1% - 0.5% 0.1% - 0.4% 0.1% - 0.2%
0.5 - 2.0

0.5 - 2.0

4.70

Stock options outstanding and exercisable, including performance-based and market-based options, as of
December 31, 2014, 2013, and 2012 and activity for each of the years then ended are summarized 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, 2012 . . . . . . . . . . . . . . . . . . . . . . .

2,453

$14.67

Options granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options forfeited and expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options outstanding at December 31, 2012 . . . . . . . . . . . . . . . . . . . .

126
(258)
(785)
1,536

Options granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Options forfeited and expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options outstanding at December 31, 2013 . . . . . . . . . . . . . . . . . . . .

(42)
(434)
1,060

(4)
(490)
567

Options vested and expected to vest at December 31, 2014 . . . . . . . .

Options exercisable at December 31, 2014 . . . . . . . . . . . . . . . . . . . . .

562

492

16.57
15.74
15.56
$14.19

—
25.63
11.93
$14.66

—
25.63
15.72
$13.67

$13.66

$13.47

136

2.97

2.96

2.82

$16,536

$16,403

$14,450

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, 2014, 2013, and 2012. The total intrinsic value of options
exercised, determined as of the date of option exercise, was $13.2, $5.5, and $1.4 million for the years ended
December 31, 2014, 2013, and 2012, respectively. There was $0.1 million of total unrecognized compensation
cost related to stock options expected to vest as of December 31, 2014 that is expected to be recognized as
expense over a weighted average period of 0.6 years.

Stock options outstanding and exercisable as of December 31, 2014 are summarized as follows (shares in
thousands):

Range of exercise prices

$9.12 to $10.80 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$11.40 to $11.40 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$11.92 to $12.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$12.05 to $12.05 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$13.72 to $13.72 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$14.28 to $14.28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$15.25 to $15.25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$16.32 to $16.32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$16.57 to $16.57 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$17.97 to $17.97 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Options outstanding

Options exercisable

Weighted
average
remaining
contractual
term (years)

Weighted
average
exercise price

55
130
55
4
75
78
1
40
109
20

567

1.73
2.64
2.12
1.88
2.84
3.86
0.37
0.62
4.68
3.38

2.97

$10.71
11.40
11.92
12.05
13.72
14.28
15.25
16.32
16.57
17.97

$13.67

39
130
55
4
75
66
1
40
63
20

493

Weighted
average
exercise
price

$10.69
11.40
11.92
12.05
13.72
14.28
15.25
16.32
16.57
17.97

$13.47

K
-
0
1
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Non-vested RSUs

Non-vested RSUs 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 RSUs 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, 2014, 2013, and 2012 were $41.71, $29.11, and
$16.05, respectively.

137

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Non-vested RSUs, including performance-based and market-based RSUs, as of December 31, 2014, 2013, and
2012, and activity for each of the years then ended, are summarized as follows (shares in thousands):

Weighted
average grant
date fair value

Non-vested at January 1, 2012 . . . . . . . . . . . . . . . . . . . . .

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

1,272
(1,174)
(184)

41.71
21.94
23.62

Non-vested at December 31, 2014 . . . . . . . . . . . . . . . . . .

2,003

$35.91

Vested RSUs

Performance-based RSUs that vested based on annual financial results are included in the period that the
performance criteria were met. The grant date fair value of RSUs that vested during the years ended
December 31, 2014, 2013, and 2012 were $21.94, $14.4, and $16.9 million, respectively. Aggregate intrinsic
value of RSUs vested and expected to vest at December 31, 2014 was $74.6 million, calculated as the closing
price per share of our common stock on the last trading day of the fiscal period multiplied by 1.7 million RSUs
vested and expected to vest at December 31, 2014. There was approximately $31.7 million of unrecognized
compensation costs related to RSUs expected to vest as of December 31, 2014. That cost is expected to be
recognized over a weighted average period of 1.3 years.

138

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Performance-based and Market-based RSUs and Stock Options

Performance-based and market-based RSUs included in the tables above as of December 31, 2014, 2013, and
2012, and activity for each of the years then ended, are summarized below (in thousands):

Non-vested at January 1, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . .

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Non-vested at December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . .

Non-vested at December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . .

Non-vested at December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . .

Performance-based

Market-based

RSUs

517

474
(353)
(27)

611

524
(291)
(164)

680

709
(403)
(134)

852

Stock
Options

—

(5)
(6)

—
—
—

RSUs

111

—
(25)
—

—
(86)
—

—

—
—

Stock
Options

178

—
—
(47)

131

—
(131)
—

—

—
—
—

—

Approximately 18% of the non-vested performance-based RSUs at December 31, 2014 subsequently vested
during the first quarter of 2015 based on achievement of specified performance criteria related to revenue and
non-GAAP operating income targets.

We use the BSM option pricing model to value performance-based awards. We use a Monte Carlo option pricing
model to value market-based awards. Performance-based and market-based stock options were not granted
during the years ended December 31, 2014, 2013, and 2012. The estimated grant date fair value per share of
performance-based and market-based RSUs granted and the assumptions used to estimate grant date fair value
for the years ended December 31, 2014, 2013, and 2012 are as follows:

Year ended December 31, 2014 Grants
Grant date fair value per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service period (years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derived service period (years)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Implied volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Performance-based Market-based

RSUs

$40.30 to $42.04
1.0 - 4.0

$32.10

1.53
35.0%
2.3%

Year ended December 31, 2013 Grants
Grant date fair value per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service period (years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$23.14 to $30.63
1.0 - 4.0

Year ended December 31, 2012 Grants
Grant date fair value per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service period (years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$17.21 to $15.64
1.0 - 3.0

139

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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, non-
GAAP operating income, non-GAAP earnings per share or other targets during the service period; otherwise,
they are forfeited. Non-GAAP operating income is defined as operating income determined in accordance with
GAAP, adjusted to remove the impact of certain expenses. Non-GAAP earnings per share is defined as net
income determined in accordance with GAAP, adjusted to remove the impact of certain expenses, divided by the
weighted average number of common shares and dilutive potential common shares outstanding during the period
as more fully defined in Note 2—Earnings Per Share of the Notes to Consolidated Financial Statements.

The grant date fair value per share determined in accordance with the BSM valuation model is being amortized
over the service period of the performance-based 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. 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.

Market-based awards vest when our average closing stock price exceeds defined multiples of the closing stock
price on a specified date for 90 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.

Note 13: Gain on Sale of Building and Land

On November 1, 2012, we sold the 294,000 square foot building located 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, 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 the purchaser’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 at an implied market rate based on the level
of sublease income realized prior to our sale of the facility. 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 $117.2 million on the sale of the property. We
incurred imputed financing and depreciation expense, net of imputed sublease income, of $1.6 million between
November 2012, when we sold the building, and the fourth quarter of 2013, when we vacated the building.

140

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

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, net of accumulated depreciation, 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, Property, Plant, and Equipment. Relocation costs include costs incurred to relocate
information technology equipment, lab equipment, office furniture, and related overtime.

Note 14: Restructuring and Other

During the years ended December 31, 2014, 2013, and 2012, cost reduction actions were taken to lower our
operating expense run rate as we continue to analyze our cost structure and re-align our cost structure following
our business acquisitions. These charges primarily relate to cost reduction actions undertaken to integrate
recently acquired businesses, consolidate facilities, and lower our operating expense run rate. 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.

K
-
0
1
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F

Facilities relocation and downsizing costs for the years ended December 31, 2014, 2013, and 2012 were $2.0,
$0.3, and $0.3 million, respectively. Facilities restructuring and other costs are primarily related to the
consolidation of our German operations in 2014, relocation of our corporate headquarters, as well as certain
manufacturing and administrative facilities, in 2013, and facilities downsizing and relocation costs related to
various facilities in the Fiery operating segment in 2012. Integration expenses for the years ended December 31,
2014, 2013, and 2012 of $1.4, $1.4, and $1.7 million, respectively, were required to integrate our business
acquisitions. Acquisition-related executive retention expense of $0.9 million was recognized during each of the
years ended December 31, 2013 and 2012, respectively, coinciding with the continuing employment of a former
shareholder of an acquired company.

141

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Restructuring and other reserve activities for the years ended December 31, 2014 and 2013 are summarized as
follows (in thousands):

2014

2013

Reserve balance at January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash acquisition-related compensation and restructuring . .
Cash payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

873 $ 1,670
1,251
3,583
(940)
(4,691)

4,400
2,177
(27)
(5,321)

Reserve balance at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,102 $

873

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 (“CODM”) to allocate resources and evaluate
operating segment performance. Our CODM is comprised of our Chief Executive Officer, Chief Operating
Officer, and Chief Financial Officer. The CODM group is focused on assessment and resource allocation among
the Industrial Inkjet, Productivity Software, and Fiery businesses.

Our operating segments are integrated through their reporting and operating structures, shared technology and
practices, shared sales and marketing, and combined production facilities. 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 CODM 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:

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.

142

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

DFE solutions such as Fiery Central, Command WorkStation, and MicroPress, (iv) Fiery Self Serve (formerly
Entrac), our self-service and payment solution, (v) PrintMe, our mobile printing application, and (vi) stand-alone
software-based solutions such as our proofing and scanning solutions.

Our CODM 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, income taxes,
various non-recurring charges, and other separately managed general and administrative expenses.

Operating segment profit (i.e., gross profit), excluding stock-based compensation expense, for the years ended
December 31, 2014, 2013, and 2012 is summarized as follows (in thousands):

2014

2013

2012

Industrial Inkjet

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

$379,170
143,981

$354,614
140,095

$320,228
127,783

38.0%

39.5%

39.9%

Productivity Software

$130,743
94,733

$118,409
85,246

$103,466
74,426

72.5%

72.0%

71.9%

Fiery

$280,514
193,585

$254,670
171,642

$228,443
153,805

69.0%

67.4%

67.3%

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A reconciliation of operating segment gross profit to the Consolidated Statements of Operations for the years
ended December 31, 2014 and 2013, and 2012 is as follows (in thousands):

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

$432,299
(2,562)

$396,983
(1,817)

$356,014
(1,193)

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

$429,737

$395,166

$354,821

2014

2013

2012

143

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Tangible and intangible assets, net of liabilities, are summarized by operating segment as of December 31, 2014,
2013, and 2012 as follows (in thousands):

Industrial
Inkjet

Productivity
Software

Fiery

Corporate and
Unallocated
Net Assets

Total

December 31, 2014
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 59,124 $121,486 $64,833
1,211
Identified intangible assets, net . . . . . . . . . . .
Tangible assets, net of liabilities . . . . . . . . . .
23,017
Net tangible and intangible assets . . . . . . . . . $184,053 $147,103 $89,061

34,425
(8,808)

26,935
97,994

December 31, 2013
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 61,704 $106,697 $64,802
2,015
Identified intangible assets, net . . . . . . . . . . .
25,735
Tangible assets, net of liabilities . . . . . . . . . .
Net tangible and intangible assets . . . . . . . . . $190,490 $125,580 $92,552

33,271
(14,388)

33,436
95,350

$ — $245,443
62,571
480,675
$788,689

—
368,472
$368,472

—

$ — $233,203
68,722
465,525
$767,450

358,828
$358,828

Corporate and unallocated assets consist of cash and cash equivalents, short-term investments, corporate
headquarters facility, convertible notes, imputed financing obligation, taxes receivable, and taxes payable.

Geographic Regions

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 region 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 ship-to destination for the years ended December 31, 2014, 2013, and 2012 was as follows
(in thousands):

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

$438,421
244,545
107,461
27,733
79,728

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

$354,114
195,397
102,626
27,870
74,756

Total Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$790,427

$727,693

$652,137

2014

2013

2012

Our tangible long-lived assets consist primarily of property and equipment, net, of $86.2 million. Of this amount,
$80.6 million resides in the Americas, $4.8 million resides in EMEA, consisting primarily of the Technique
building and Cretaprint equipment and leasehold improvements, and $0.8 million resides in APAC, consisting
primarily of India leasehold improvements and equipment.

Major Customers

One customer, Xerox, provided revenue in excess of 10% of consolidated revenue by providing 11% of our
consolidated revenue for the year ended December 31, 2014 and 12% of our consolidated revenue for the years
ended December 31, 2014, 2013, and 2012.

One customer, Xerox, had an accounts receivable balance greater than 10% of our net consolidated accounts
receivables at December 31, 2014 and 2013, accounting for 11% and 13%, respectively.

144

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, 2014
and 2013. The information for each of these quarters is unaudited, but has been prepared on the same basis as our
audited consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K. In the
opinion of management, all necessary adjustments (consisting only of normal recurring adjustments) have been
included that are required to state fairly our unaudited quarterly results when read in conjunction with our audited
consolidated financial statements and the notes thereto appearing in this Annual Report on Form 10-K. These
operating results are not necessarily indicative of the results for any future period.

(in thousands except per share data)

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income per basic common share . . . . . . . . . . . . . . . . . . . . . . .
Net income per diluted common share . . . . . . . . . . . . . . . . . . . . . .

$188,688
102,975
10,787
10,082
0.22
0.21

$
$

$192,965
103,773
12,470
6,912
0.15
0.14

$
$

$197,674
108,797
12,922
4,805
0.10
0.10

$
$

$211,100
114,192
17,260
11,915
0.25
0.25

$
$

2014

(in thousands except per share data)

2013

$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
$
(235) $117,562

$
$
$

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145

Item 9: Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure

None.

Item 9A: Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as this term is defined in Rule 13a-15(e) and 15d-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 Interim Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosure. Our management, including the Chief
Executive Officer and Interim 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 Interim Chief Financial Officer have concluded that our disclosure controls and
procedures were effective to provide reasonable assurance as of December 31, 2014.

(b) 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 Interim Chief Financial Officer,
assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2014. 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 (2013). Based on our assessment
using those criteria, we concluded that our internal control over financial reporting was effective as of
December 31, 2014.

We have excluded SmartLinc, Rhapso, DirectSmile, and DIMS from our assessment of internal control over
financial reporting as of December 31, 2014 because they were acquired by us during fiscal year ended
December 31, 2014. SmartLinc, Rhapso, DirectSmile, and DIMS are wholly-owned by us with total assets and
total revenue representing 3.1% and 1.2%, respectively, of the related consolidated financial statement amounts
as of and for the year ended December 31, 2014.

Deloitte & Touche LLP, an independent registered public accounting firm, has audited the effectiveness of our
internal control over financial reporting as of December 31, 2014, as stated in their report included in this Annual
Report on Form 10-K.

146

There has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the
Exchange Act) identified in connection with our evaluation that occurred during the fourth quarter of fiscal 2014
that has materially affected or is reasonably likely to materially affect our internal control over financial
reporting.

(d) Report of Independent Registered Public Accounting Firm

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Electronics For Imaging, Inc.
Fremont, California

We have audited the internal control over financial reporting of Electronics For Imaging, Inc. and subsidiaries
(collectively, the “Company”) as of December 31, 2014, based on criteria established in Internal Control—
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission. As described in Management’s Report on Internal Control over Financial Reporting, management
excluded from its assessment the internal control over financial reporting at SmartLinc, Inc. (“SmartLinc),
Rhapso S.A. (“Rhapso”), DirectSmile GmbH (“DirectSmile”), and DiMS! organizing print BV (“DIMS”) from
its assessment of internal control over financial reporting as of December 31, 2014 because they were acquired in
purchase business combinations during 2014. SmartLinc, Rhapso, DirectSmile, and DIMS represent
approximately 3.1% and 1.2% of the total consolidated assets and total consolidated revenue, respectively, of the
Company as of and for the year ended December 31, 2014. Accordingly, our audit did not include the internal
control over financial reporting at SmartLinc, Rhapso, DirectSmile, and DIMS. The Company’s management is
responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on
Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal
control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained in all material respects. Our audit
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the
company’s principal executive and principal financial officers, or persons performing similar functions, and
effected by the company’s board of directors, management, and other personnel 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 (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) 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 (3) 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 the inherent limitations of internal control over financial reporting, including the possibility of
collusion or improper management override of controls, material misstatements due to error or fraud may not be

147

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prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal
control over financial reporting to future periods are subject to the risk that the controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2014, based on the criteria established in Internal Control—Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the consolidated financial statements and financial statement schedule as of and for the year
ended December 31, 2014 of the Company and our report dated February 17, 2015 expressed an unqualified
opinion on those financial statements and financial statement schedule.

/S/ DELOITTE & TOUCHE LLP
San Jose, California
February 17, 2015

Item 9B: Other Information

None.

148

PART III

Item 10: Directors, Executive Officers and Corporate Governance

Information regarding our directors is incorporated by reference from the information contained under the
caption “Election of Directors” in our Proxy Statement for our 2015 Annual Meeting of Stockholders (the
“2015 Proxy Statement”). Information regarding our current executive officers is incorporated by reference from
information contained under the caption “Executive Officers” in our 2015 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 2015 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 2015 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 2015 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 2015 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 2015 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 2015 Proxy Statement.

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Securities Authorized for Issuance Under Equity Compensation Plans

The following table sets forth information as of December 31, 2014 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 . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,569,675

$13.67(1)

5,994,821(2)

Equity compensation plans not approved by

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

—

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

2,569,675

—

$13.67

—

5,994,821

(1) Calculated without taking into account 2,002,587 shares of RSUs that will become issuable as those units vest,

(2)

without any cash consideration or other payment required for such shares.
Includes 3,442,322 shares available under the 2009 Plan, 767,798 treasury shares available due to net share
settlement, and 1,784,701 shares available under the ESPP.

149

Item 13: Certain Relationships and Related Transactions, and Director Independence

The information required by this item is incorporated by reference from the information contained under the
caption “Certain Relationships and Related Transactions, and Director Independence” in our 2015 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 2015 Proxy Statement.

150

PART IV

Item 15: Exhibits and Financial Statement Schedules

(a) Documents Filed as Part of this Report

(1)

Index to Financial Statements

The Financial Statements required by this item are submitted in Item 8 of this Annual Report on Form 10-K as
follows:

Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets as of December 31, 2014 and 2013 . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations for the Years Ended December 31, 2014, 2013, and

2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2014,

2013, and 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2014,

2013, and 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Cash Flows for the Years Ended December 31, 2014, 2013, and

2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

80
82

86
87

(2) Financial Statement Schedule

Schedule II—Valuation and Qualifying Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

155

(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.)

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(3) Exhibits

Exhibit
No.

Description

3.1

3.2

4.1

4.2

10.1*

10.2*

10.3*

10.4*

10.5*

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)

Indenture (including Form of Notes) with respect to the Company’s 0.75% Convertible Senior
Notes due 2019, dated as of September 9, 2014, between the Company and U.S. Bank National
Association, as trustee(20)

Agreement dated December 6, 2000, by and between Adobe Systems Incorporated and the
Company(4)

Electronics For Imaging, Inc. 2004 Equity Incentive Plan(5)

Electronics For Imaging, Inc. 2007 Equity Incentive Award Plan(6)

Electronics For Imaging, Inc. 2007 Equity Incentive Award Plan Stock Option Grant Notice and
Stock Option Agreement(7)

Electronics For Imaging, Inc. 2007 Equity Incentive Award Plan Restricted Stock Award Grant
Notice and Restricted Stock Award Agreement(7)

151

Exhibit
No.

10.6*

10.7*

10.8*

10.9*

Description

Electronics For Imaging, Inc. 2007 Equity Incentive Award Plan Restricted Stock Unit Award Grant
Notice and Restricted Stock Unit Award Agreement (7)

Electronics For Imaging, Inc. 2009 Equity Incentive Award Plan Stock Option Grant Notice and
Stock Option Agreement(8)

Electronics For Imaging, Inc. 2009 Equity Incentive Award Plan Restricted Stock Unit Award Grant
Notice and Restricted Stock Unit Award Grant Agreement(8)

Electronics For Imaging, Inc. 2009 Equity Incentive Award Plan Restricted Stock Award Grant
Notice and Restricted Stock Award Grant Agreement(8)

10.10*

Electronics For Imaging, Inc. 2009 Equity Incentive Award Plan(9)

10.11*

Form of Indemnification Agreement(3)

10.12*

Form of Indemnity Agreement(10)

10.13+

10.14+

10.15+

10.16

10.17

10.18

10.19

10.20

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(11)

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(12)

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(13)

Purchase and Sale Agreement and Joint Escrow Instructions dated as of July 18, 2012 by and
between the Company and Gilead Sciences, Inc.(14)

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.(15)

Lease Agreement dated as of November 1, 2012 by and between the Company and Gilead Sciences,
Inc.(15)

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(16)

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(16)

10.21*

EFI Section 16 2014—Executive Team Bonus Program(17)

10.22*

10.23*

Employment Agreement Effective January 27, 2014 by and between the Company and Guy
Gecht(17)

Employment Agreement Effective January 16, 2014 by and between the Company and David
Reeder(18)

10.24*

Offer Letter dated January 9, 2014 by and between the Company and David Reeder(18)

10.25*

Employment Agreement Effective January 16, 2014 by and between the Company and Marc Olin(18)

10.26*

Addendum to EFI 2014 Section 16 Officer—Executive Performance Bonus Program*(19)

152

Exhibit
No.

10.27

10.28

12.1

23.1

23.2

24.1

31.1

31.2

32.1

Description

Form of Call Option Confirmation relating to the Company’s 0.75% Convertible Senior Notes due
2019(20)

Form of Warrant Confirmation relating to the Company’s 0.75% Convertible Senior Notes due
2019(20)

Computation of Ratios of Earnings to Fixed Charges

List of Subsidiaries

Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm

Consent of PricewaterhouseCoopers LLP, 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)

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.333-116548) 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 June 6, 2013 (File No. 18805)
and incorporated herein by reference

153

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(10)

(11)

(12)

(13)

(14)

(15)

(16)

(17)

(18)

(19)

(20)

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.
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 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 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.
Filed as an exhibit to the Company’s Current Report on Form 8-K filed on January 28, 2014 (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 March 31,
2014. (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, 2014.
(File No. 18805) and incorporated herein by reference.
Filed as an exhibit to the Company’s Current Report on Form 8-K filed on September 9, 2014 (File No.
000-18805) and incorporated herein by reference.

(b) List of Exhibits

See Item 15(a).

154

ELECTRONICS FOR IMAGING, INC.
Schedule II
Valuation and Qualifying Accounts

(in thousands)

Year Ended December 31, 2014
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$16,433

$7,408

$ —

$(6,324)

$17,517

Year Ended December 31, 2013
Allowance for bad debts and sales-related

allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12,850

9,595

Year Ended December 31, 2012
Allowance for bad debts and sales-related

allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12,031

3,250

—

(6,012)

16,433

(2,431)

12,850

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155

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 17, 2015

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 Marc Olin 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

/s/ MARC OLIN
Marc Olin

/s/ ERIC BROWN
Eric Brown

/s/ GILL COGAN
Gill Cogan

/s/ THOMAS GEORGENS
Thomas Georgens

/s/ RICHARD A. KASHNOW
Richard A. Kashnow

/s/ DAN MAYDAN
Dan Maydan

Title

Date

Chief Executive Officer, Director
(Principal Executive Officer)

February 17, 2015

Interim Chief Financial Officer (Principal February 17, 2015
Financial and Accounting Officer)

February 17, 2015

Director

156

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CORPORATE DIRECTORY

Stockholder Information
Independent Accounting Firm
Deloitte Touche LLP
San Jose, California

Listing
Electronics For Imaging, Inc. is listed
on the NASDAQ Stock Market LLC
The trading symbol is EFII

Transfer Agent & Registrar
American Stock Transfer & Trust Company, LLC
6201 15th Avenue
Brooklyn, New York 11219
Telephone: (800) 937-5449

Annual Meeting
The annual meeting of Stockholders will
be held on May 13, 2015

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

Corporate Officers

Guy Gecht
Chief Executive Officer and President

Marc Olin
Interim Chief Financial Officer
Chief Operating Officer

Board of Directors

Gill Cogan (1)(2)
Chairman of the Board of the Company
Founding Partner,
Opus Capital Ventures LLC

Guy Gecht
Chief Executive Officer and President of the
Company

Eric Brown (3)
Chief Financial Officer
Chief Operating Officer
Tanium, Inc.

Thomas Georgens (3)
Chairman of the Board of Directors 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