Electronics For Imaging Inc. Annual Report 2015

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FY2015 Annual Report · Electronics For Imaging Inc.

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ELECTRONICS FOR IMAGING, INC.
2016 PROXY STATEMENT AND
2015 ANNUAL REPORT

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

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held on May 12, 2016

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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 12, 2016 at
8 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, 2016.

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

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

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

Only stockholders of record at the close of business on March 28, 2016 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 1, 2016

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 12, 2016

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 12, 2016 at 8 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 4, 2016 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, 2016; 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 March 28, 2016 (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 47,188,521 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
23,594,261 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 not be counted in determining 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 will
not be counted in determining 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, 2016 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, 2016; 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

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

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 2017, pursuant to Securities and
Exchange Commission (the “SEC”) Rule 14a-8, is currently expected to be December 2, 2016. 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 2017 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 12, 2017 and not later than the
close of business on February 10, 2017 (the “Discretionary Vote Deadline”). These deadlines are subject to
change if the date of the 2017 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 2017 annual meeting.

Additional Copies

The Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015 (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 12, 2016: The
Company’s Proxy Statement dated April 1, 2016 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 2015 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 March 28, 2016
are set forth below.

Name of Nominee and Principal Occupation

Age Director Since

Eric Brown(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

2011

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

Gill Cogan(1)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

1992

Founding Partner, Opus Capital Ventures LLC

Guy Gecht . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

2000

Chief Executive Officer and President of the Company

Thomas Georgens(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

2008

Self-Employed

Richard A. Kashnow(2)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74

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. From September
2004 until December 2005, Mr. Brown served on the board of directors and the audit committee of Verity, Inc., a
provider of business search and process management software, that was acquired by Autonomy Corporation plc.
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 a B.S. and 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, listed on the
NASDAQ Global Select Market. 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. From April 2014 until May 2015,

Mr. Georgens served as 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., a public company listed on the NASDAQ Global Select Market. 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 who faced
similar 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 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 seven (7) meetings in 2015. 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 2015.

Audit Committee

The Audit Committee currently consists of Directors Brown (Chairman), Georgens and Kashnow. The
Audit Committee held eight (8) meetings in 2015. 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 nine (9) meetings in 2015. 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 two (2) meetings in 2015. 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 March 2016, 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.

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 2015 DIRECTOR COMPENSATION

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

2015 is summarized as follows:

Name(1)
(a)

Fees earned or
paid in cash
(b)

Stock
awards
(2)(3)
(c)

Option
awards
(2)(4)
(d)

Non-equity
incentive plan
compensation
(e)

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

$62,000
58,500
50,500
61,500
53,500

$310,505
$ —
339,835(5) —
—
310,505
—
310,505
—
310,505

$ —
—
—
—
—

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

$ —
—
—
—
—

All other
compensation
(g)

$ —
—
—
—
—

Total
(h)

$372,505
398,330
361,005
372,005
364,005

(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 for 2015 is shown in the Summary Compensation Table on page 38 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 2015. See Note 12 of the consolidated financial statements in our Annual Report on Form 10-K for
the year ended December 31, 2015 regarding assumptions underlying the valuation of equity awards.

(3) At December 31, 2015, the aggregate number of restricted stock units (“RSUs”) outstanding for each non-

employee director was as follows:

Name

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

Total
(#)

8,000
8,700
8,000
8,000
8,000

(4) At December 31, 2015, the aggregate number of option awards outstanding for each non-employee director

was as follows:

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Name

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

Vested
(#)

23,125
98,125
98,125
73,125
23,125

Unvested
(#)

Total
(#)

1,875
1,875
1,875
1,875
1,875

25,000
100,000
100,000
75,000
25,000

(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 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

The 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 on November 9, 2015. 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 is responsible for reviewing and approving in advance any proposed related party
transactions as defined under Item 404 of Regulation S-K during 2015. 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 2015.

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.

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.

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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.
Vested and unvested stock options are not taken into account in determining a director’s beneficial ownership.
The Nominating and Governance Committee may extend in its discretion the deadline for attainment of such
stock ownership level. As of March 28, 2016, 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.

The Compensation Discussion and Analysis, beginning on page 24 of this Proxy Statement, describes the
Company’s executive compensation program and the decisions made by the Compensation Committee in 2015 in
more detail. Highlights of the program include:

• Pay for Performance. Our executive compensation program is designed to pay for performance. For

2015, 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 our stock price. 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 in accordance with ASC 718. No increases were made to
executives’ base salaries for 2015.

• Annual incentive compensation program is based entirely on objective, financial criteria—Our

executive annual performance-based incentive compensation program is intended to encourage our
named executive officers to focus on specific short-term goals that are important to our success, and
which correlate to the long-term goals and strategy of the Company. Our executives’ annual awards are
determined based on objective, financial performance criteria. The performance measures used to
determine the payment of awards were Company-wide revenue (as determined under generally
accepted accounting principles, or “GAAP”) and non-GAAP operating income. These measures were
chosen because they align with our annual operating plan and encourage our executives to make
decisions that are in the best long-term interests of the Company and our stockholders. The awards
payable under our annual incentive compensation program are subject to a maximum payout.

• Our incentive compensation program is denominated entirely in shares of our stock to further align
interests of executives with those of shareholders—Awards under the fiscal year 2015 incentive
compensation program consisted of two incentive compensation opportunities: one for achieving
targeted levels of performance (“Target” bonus opportunity) and another for achieving above-target
levels of performance (“accelerator” bonus opportunity). Both of these opportunities were granted in
the form of performance-based restricted stock unit awards that help further align named executive
officers’ interests with those of our stockholders.

•

Incentive compensation performance achievement was between threshold and target—Consistent
with our pay for performance philosophy, as described in more detail below, the Compensation
Committee determined that the Company’s performance during 2015 was between the threshold and
target levels for vesting of the RSUs tied to the Target bonus opportunity (although both our revenue
and non-GAAP operating income levels increased in 2015 compared with 2014 levels). Accordingly,
the Target RSUs vested as to 61.5% of the units subject to the awards, and no portion of the accelerator
RSUs vested.

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• Two-thirds of 2015 long-term incentive awards were performance based—Annual equity awards to
our named executive officers under our long-term equity incentive program in 2015 consisted of
restricted stock units (“RSUs”) with approximately two-thirds of the RSUs subject to both
performance-based and time-based vesting conditions (“performance-based RSUs”) and approximately
one-third of the RSUs subject to time-based vesting conditions (“time-based RSUs”). The
performance-based RSUs granted under our long-term equity program generally vest based on the
achievement of Company-wide revenue (as determined under GAAP) and non-GAAP operating
margin targets for three four-quarter periods prior to December 31, 2018, 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. The time-based RSUs provide an additional retention incentive for our executives as they are
subject to three-year vesting schedules. Because both the time-based RSUs and the performance-based
RSUs will generally remain outstanding for a period of years, they also help ensure that executives
always have significant value tied to delivering long-term stockholder value.

• Promotion grant for Mr. Olin was 75% performance-based— The Compensation Committee also
approved an equity grant to Mr. Olin in April 2015 in connection with his appointment as our Chief
Financial Officer that consisted 75% of performance-based RSUs and 25% of time-based RSUs. The
performance grant is tied to achievement of pre-established stock price targets within a specified time
period to further align Mr. Olin’s interests with those of our stockholders.

• The Company has no tax gross-up provisions in its agreements with its executive officers—The

Committee believes that it is not in the best interests of shareholders to provide tax gross-up benefits to
executives.

• We have a clawback policy—The policy provides that the Company may recover performance-based
compensation paid to executive officers in connection with a restatement of the Company’s financial
results.

• We maintain executive stock ownership guidelines—The guidelines 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
March 28, 2016, Mr. Gecht owned approximately 1.2% of the Company’s outstanding common stock,
which far exceeds his required ownership level, and 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.

Our current policy is to provide stockholders with an opportunity to approve the compensation of the
Company’s named executive officers each year at the annual meeting of stockholders. It is expected that the next
such vote will occur at the 2017 annual meeting.

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, 2016.
Stockholder ratification of the appointment of Deloitte as the Company’s independent registered public
accounting firm for the fiscal year ending December 31, 2016 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.

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During the fiscal years ended December 31, 2015 and 2014, Deloitte provided various audit, audit related,

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

Audit fees(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Audit-related fees(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax fees(c) including:

Tax compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax consulting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

All other fees(d)

2015

2014

$1,788
662

$1,386
287

707
745
2

570
1,067
88

Total

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

$3,904

$3,398

(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 and audit
procedures related to our acquisitions.

• Tax compliance consisting of fees billed for professional services for tax compliance, the preparation

of original and amended tax returns and refund claims, and tax planning.

• Tax consulting consists of tax advice and tax planning. These services include tax assistance regarding

mergers and acquisitions.

(d) All other fees consist of accounting research tools in 2015 and 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 in 2014.

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.

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.

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, 2016.
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 March 28, 2016 by: (1) each of the Company’s current directors; (2) each of
the named executive officers listed in the Summary Compensation Table for 2015 on page 38 of this Proxy
Statement (collectively, the Company’s “named executive officers”); (3) each person known to the Company to
be the beneficial owner of more than 5% of the outstanding shares of the Company’s common stock based upon
Schedules 13G, filed with the SEC; and (4) all of the Company’s directors and executive officers as a group. As
of March 28, 2016, there were 47,188,521 shares of common stock outstanding.

Shares of common stock subject to options or other rights that are currently exercisable or exercisable
within 60 days of March 28, 2016 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) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4,551,340

9.65

55 East 52nd Street
New York NY 10055

Cadian Capital Management, LP(3)

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

2,562,079

5.43

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535 Madison Avenue
36th Floor
New York NY 10022

FMR, LLC(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3,622,182

7.68

245 Summer Street
Boston MA 02110

Neuberger Berman Group LLC(5)

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

2,639,452

5.59

605 Third Avenue
New York, NY 10158
The Vanguard Group, Inc.(6)

100 Vanguard Blvd.
Malvern PA 19355

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

3,642,926

7.72

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

584,834
115,280
22,810
135,500
84,500
41,875
80,086

1.23
*
*
*
*
*
*

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

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

1,064,885

2.24%

* Less than one percent.

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

Schedules 13G and Forms 4 filed with the SEC as of March 28, 2016. 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 47,188,521 shares outstanding on March 28, 2016, adjusted as
required by rules promulgated by the SEC.

(2) Beneficial ownership information is based on information contained in Schedule 13G, as amended, filed
with the SEC on February 10, 2016, by BlackRock, Inc. BlackRock, Inc. has sole voting power as to
4,449,922 shares of common stock and sole dispositive power over 4,551,340 shares of common stock.
(3) Beneficial ownership information is based on information contained in Schedule 13G filed with the SEC on
February 12, 2016, by Cadian Capital Management, LP (“Cadian”). Cadian has voting and power as to
2,562,079 shares of common stock that is shared with Cadian Capital Management GP, LLC and Eric
Bannasch.

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

with the SEC on February 12, 2016, by FMR, LLC. Fidelity Management & Research Company (“FMRC”),
a wholly-owned subsidiary of FMR, LLC. As an investment adviser to various investment companies,
FMRC has sole voting power as to 1,162,018 shares of common stock and sole dispositive power over
3,622,182 shares of common stock owned directly by the various investment companies.

(5) Beneficial ownership information is based on information contained in Schedule 13G filed with the SEC on
February 9, 2016, by Neuberger Berman Group LLC (“NBG”) and Neuberger Berman Investment Advisers
LLC (“NBIA”), which share voting and dispositive power as to 2,639,452 shares of common stock. NBG
may be deemed to be the beneficial owner of the shares because certain affiliated persons have shared power
to retain, dispose of and vote the shares. In addition to the holdings of individual advisory clients, NBIA
serves as investment manager of NBG’s various registered mutual funds holding such shares.

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

with the SEC on February 11, 2016, by The Vanguard Group, Inc. (“VGI”). VGI, as the parent company of
Vanguard Fiduciary Trust Company (“VFTC”) and Vanguard Investments Australia, Ltd. (“VIA”) may be
deemed to beneficially own the shares held by VFTC and VIA. VFTC is the beneficial owner as to
100,717 shares of common stock as a result of serving as investment manager of collective trust accounts
and VIA is the beneficial owner as to 5,400 shares of common stock as a result of serving as investment
manager of Australian investment offerings. According to the Schedule 13G, as amended, VGI has sole
voting power over 103,617 shares of common stock to and sole dispositive power as to 3,539,709 shares of
common stock. VGI has shared voting power over 2,500 shares of common stock and shared dispositive
power as to 103,217 shares of common stock. VGI, together with VFTC and VIA, beneficially own
3,642,926 shares of common stock.
Includes 169,908 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
March 28, 2016.
Includes 78,727 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
March 28, 2016.

(7)

(8)

(9) Mr. Maydan does not hold any options, which are currently exercisable and/or exercisable within 60 days of

March 28, 2016.

(10) Includes 100,000 shares of common stock issuable upon the exercise of options granted to Mr. Georgens

under the 2009 equity incentive plan, which are currently exercisable and/or exercisable within 60 days of
March 28, 2016.

(11) Includes 75,000 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
March 28, 2016.

(12) Includes 4,375 shares of common stock issuable upon the exercise of options granted to Mr. Brown under
the 2009 equity incentive plan, which are currently exercisable and/or exercisable within 60 days of
March 28, 2016.

(13) Mr. Olin does not hold any options, which are currently exercisable and/or exercisable within 60 days of

March 28, 2016.

(14) Includes an aggregate of 428,010 shares of common stock issuable upon the exercise of options granted to
executive officers and directors collectively under the 2009 equity incentive plan, which are currently
exercisable and/or exercisable within 60 days of March 28, 2016.

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.

EXECUTIVE OFFICERS

The following table lists certain information regarding the Company’s executive officers as of March 28,

2016:

Name

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

Age

50
51

Position

Chief Executive Officer
Chief Financial Officer

Mr. Gecht was appointed Chief Executive Officer of the Company on January 1, 2000 and was also
appointed President of the Company on May 11, 2012, a position he previously held from July 1999 to January
2000. From January 1999 to July 1999, he was Vice President and General Manager of Fiery products of the
Company. From October 1995 through January 1999, he served as Director of Software Engineering. Prior to
joining the Company, Mr. Gecht was Director of Engineering at Interro Systems, a technology company, from
1993 to 1995. From 1991 to 1993, he served as Software Manager of ASP Computer Products, a networking
company, and from 1990 to 1991, he served as Manager of Networking Systems for Apple Israel, a technology
company. From 1985 to 1990, he served as an officer in the Israeli Defense Forces, managing an engineering
development team, and later was an acting manager of one of the IDF high-tech departments. Mr. Gecht
currently serves as a member of the board of directors, audit committee and compensation committee of Check
Point Software Technologies Ltd., a global information technology security company, listed on the NASDAQ
Global Select Market. Mr. Gecht holds a B.S. in Computer Science and Mathematics from Ben Gurion
University in Israel.

Mr. Olin was appointed Chief Financial Officer of the Company in April 2015. Previously he served as
Chief Operating Officer of the Company from January 2014 until April 2015. From January 2015 to April 2015,
Mr. Olin 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 2015, included Guy
Gecht, Chief Executive Officer and President, and Marc Olin, Chief Financial Officer. Under SEC rules, David
Reeder, who resigned as our Chief Financial Officer effective January 9, 2015, is also included in our “Summary
Compensation Table” below as a named executive officer. However, references to our “named executive
officers” in this Compensation Discussion and Analysis generally do not include Mr. Reeder unless otherwise
stated.

Executive Summary

The Compensation Committee oversees the executive compensation program and determines the

compensation for the 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

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 2015. Highlights of the program include:

• Pay for Performance. Our executive compensation program is designed to pay for performance. For

• Annual incentive compensation program is based entirely on objective, financial criteria—Our

• Our incentive compensation program is denominated entirely in shares of our stock to further align
interests of executives with those of shareholders—Awards under the fiscal year 2015 incentive
compensation program consisted of two incentive compensation opportunities: one for achieving
targeted levels of performance (“Target” bonus opportunity) and another for achieving above-target
levels of performance (“accelerator” bonus opportunity). Both of these incentive compensation
opportunities were granted in the form of performance-based restricted stock unit awards that help
further align named executive officers’ interests with those of our stockholders.

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•

• Promotion grant for Mr. Olin was 75% performance-based—The Compensation Committee also
approved an equity grant to Mr. Olin in April 2015 in connection with his appointment as our Chief
Financial Officer that consisted 75% of performance-based RSUs and 25% of time-based RSUs. The
performance grant is tied to achievement of pre-established stock price targets within a specified time
period to further align Mr. Olin’s interests with those of our stockholders.

• The Company has no tax gross-up provisions in its agreements with its executive officers—The

Committee believes that it is not in the best interests of shareholders to provide tax gross-up benefits to
executives.

• We maintain executive stock ownership guidelines—The guidelines 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
March 28, 2016, Mr. Gecht owned approximately 1.2% of the Company’s outstanding common stock,
which far exceeds his required ownership level and which the Company believes significantly aligns
his interests with the stockholders’ interests.

The Company believes the compensation program for the named executive officers is instrumental in
helping the Company achieve its financial performance. In 2015, the Company achieved record revenue, growing
to approximately $883 million, which represented an increase of approximately $92 million or 12% 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 incentive compensation program and performance-based long-term
incentive awards.

Compensation Objectives and Philosophy

The Company’s executive compensation programs are designed to achieve the following key objectives:

• Attract and retain individuals of superior ability and managerial talent;

• Align compensation with the Company’s corporate strategies, business and financial objectives and the

long-term interests of the Company’s stockholders;

• Create incentives to achieve key strategic and financial performance goals of the Company by linking

executive incentive award opportunities to the achievement of these goals; and

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

The Compensation Committee of the Board of Directors

The Compensation Committee 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’s named executive officers’ annual base salaries, incentive
compensation 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. In fulfilling
its responsibilities, the Compensation Committee may consider, among other things, industry and general
practices, benchmark data and marketplace developments.

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. Executive Management provides
recommendations and information to the Compensation Committee to consider, analyze and review in
connection with compensation proposals for the named executive officers. Executive Management does 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 2015, approximately 78% of the votes actually cast on the say-on-pay proposal at that meeting were
voted in favor of the proposal. Although the Company would like to see a greater level of support for its
executive compensation program, the Company believes that stockholders generally approve of the program, and
in recent years, the Company has adopted a number of features (such as granting its executives’ annual incentive
compensation opportunities entirely in the form of equity awards, strengthening its executive stock ownership
guidelines and adopting a clawback policy) that it believes have improved the program and are generally favored
by stockholders. The Company values the views expressed by its stockholders, and 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. For 2015,
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 45 of this Proxy Statement.

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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 $84,000 in fees in connection with the Compensation Committee’s determination of
a variety of components of executive and board of director compensation during fiscal year 2015. 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 2015, other Mercer business segments
received fees from the Company of approximately $49,000, which was primarily related to benefits and other
compensation consulting services. The decision to engage Mercer 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, 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
Compensation Committee 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 2015;

• The aggregate amount of fees paid or payable by the Company to MMC for 2015 represented (or are

reasonably certain to represent) less than 1% of MMC’s total revenue for 2015;

• 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 set compensation levels at any specific level or percentile against
the peer group (i.e., the Compensation Committee does not “benchmark” compensation at any particular levels
relative to these companies). 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.

Our 2015 peer group consisted of the following companies:

3D Systems Corporation
Cirrus Logic Inc.
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 2015, Aruba Networks Inc. was removed because of its acquisition during
the year. No other changes were made to the peer group that had been used for 2014. At the time the peer group
was selected, the Company ranked above the median in market capitalization and number of employees, and
slightly below the median in revenue.

New Employment Agreements

In April 2015, Mr. Olin, who had been serving as our Interim Chief Financial Officer, was appointed as our

Chief Financial Officer. In connection with this appointment, the Company entered into a new employment
agreement with Mr. Olin that set forth the terms of his new compensation arrangements, including new equity
grants. These compensation arrangements were negotiated with Mr. Olin and are described in detail below in the
applicable sections of this Compensation Discussion and Analysis. In approving the arrangements, the
Compensation Committee considered, in its judgment, the Company’s compensation philosophy, the competitive
market for talent and internal pay equity at the Company.

Executive Compensation Elements

For the 2015 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, individual performance during the year, potential to
enhance long-term stockholder value, compensation history and prior equity awards, as well as the Company’s
performance, executive compensation trends, and current compensation levels and types within the peer group.
Since there are no fixed policies regarding the amount and allocation for each element of executive
compensation, the determination and composition of total compensation is up to the discretion of the

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Compensation Committee and is decided in its judgment. However, the amounts paid out under our incentive-
based programs are determined based on the Company’s achievement of quantitative performance goals as
discussed 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 an individual’s 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, and performance. In addition, the Compensation
Committee considers Company performance and marketplace competitiveness for similarly situated named
executive officers. 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 January 2014, the Compensation Committee reviewed the base salary level for Mr. Gecht and Mr. Olin.

Mr. Gecht recommended, and the Compensation Committee approved, that the base salary for each named
executive officer for 2015 would remain at the same levels as 2014. Accordingly, Mr. Gecht’s base salary
remained at $620,000 (the same level as his salary has been each year since 2011), and Mr. Olin’s base salary
remained at $310,000 (the level established in January 2014 upon his appointment as Chief Operating Officer).
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. 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 annual 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 annual incentive compensation
opportunities provide an incentive that motivates and rewards executives to achieve specific financial objectives.

The target short-term incentive for each named executive officer is calculated as a percentage of his base

salary. The Compensation Committee sets these individual targets in its judgment based on its review of the
executive’s total compensation package, compensation levels at the peer group companies and emerging executive
compensation trends, as well as its assessment of the executive’s past and expected future contributions.

In February 2015, the Compensation Committee approved the 2015 performance-based equity incentive
compensation program (the “2015 Program”) for the named executive officers and established their target short-
term incentive opportunities under the program as set forth below. These target incentive compensation amounts
remained unchanged from the prior fiscal year.

Named Executive Officer

Target Annual Incentive
(Percentage of
Base Salary)

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

105%
70%

Under the 2015 Program, each of the named executive officers was eligible to receive incentive

compensation 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
executing the program, the Compensation Committee approved grants of performance-based RSU awards in
February 2015 to each of the named executive officers (referred to in this discussion as “Target RSUs”). Fifty
percent of each executive’s Target RSU award was eligible to vest based on the Company’s non-GAAP operating
income for 2015 relative to the performance target established by the Compensation Committee, and the
remaining fifty percent of the award was eligible to vest based on the Company’s revenue (as determined under
GAAP) relative to the performance target. However, in each case, the vesting of the Target RSU awards was also
contingent on the Company’s achieving a minimum threshold for non-GAAP operating income for 2015
determined by the Compensation Committee. The purpose of this operating income threshold was to ensure
sufficient profitability before providing for payouts based on revenue.

In addition to the Target RSU awards described above, each named executive officer was provided with an
opportunity to receive an “accelerator” bonus if both the Company’s revenue and non-GAAP operating income
for 2015 exceeded the performance targets established by the Compensation Committee for the Target RSU
awards. The accelerator bonus awards were also granted in February 2015 in the form of RSUs (referred to in
this discussion as “accelerator RSUs”) payable in shares of the Company’s common stock if the applicable
performance goals were achieved. As with the Target RSUs, vesting of the accelerator RSUs was based 50% on
the Company’s non-GAAP operating income for 2015 and 50% on the Company’s revenue (as determined under
GAAP) for 2015. The performance targets for the accelerator shares exceeded the corresponding performance
targets established for the Target RSUs.

For each named executive officer’s Target RSU awards, the number of RSUs subject to the award was

determined by dividing the executive’s target incentive amount (the target annual incentive percentage as set
forth in the table above multiplied by the executive’s annual base salary) by the Company’s closing stock price
on January 30, 2015. The number of RSUs subject to each named executive’s officer’s accelerator RSU award
was also determined by dividing the executive’s target incentive amount (the target annual incentive percentage
as set forth in the table above multiplied by the executive’s annual base salary) by the Company’s closing stock
price on January 30, 2015. Accordingly, the executive could vest in the number of Target RSUs (determined
based on 100% of his target annual incentive) for achievement of the targeted levels of performance, and up to
two times that amount (taking both the Target RSUs and accelerator RSUs into account) for performance at the
maximum levels. Vesting of each award was also subject to the executive’s continued employment with the
Company through the vesting date. The maximum number of RSUs that may vest under each time-based RSU
award and under each accelerator RSU award is 100% of the units subject to the award.

In determining that both the Target and the accelerator components of the 2015 Program would be
structured as awards of RSUs, the Compensation Committee intended to provide a further link between our
executives’ incentive compensation and the value created for our stockholders. The Compensation Committee
selected revenue and non-GAAP operating income as the performance measures for the 2015 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 intangibles, acquisition-related transaction costs,
contingent consideration, stock-based compensation expense, litigation settlement charges, restructuring-related
and other charges and gains, and foreign currency adjustments. 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 are appropriate for purposes of our incentive programs and produce a better measure of the executives’
impact on the ongoing operating performance of the Company over the corresponding year.

The performance targets selected by the Compensation Committee for the awards under the 2015 Program
were based on the Company’s operating plan, which was approved by the Board of Directors. For each metric,
the 2015 threshold performance level for the Target RSUs is significantly greater than the Company’s actual
performance level in 2014 as determined for purposes of our 2014 incentive compensation program awards, and
the target performance level for the Target RSUs (which is also the threshold performance level for the
accelerator RSUs) is significantly higher than these 2014 performance levels.

The threshold and target performance levels for each of the Target RSUs and the accelerator RSUs under the

2015 Program are set forth in the table below.

Metrics

Weighting Threshold

Target

Threshold

Target

Base Program

Accelerator

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

50% $790.0

$850.0

$900.0

—
50% $115.0
—

100%

$134.0

$145.0

100%

With respect to the Target RSUs the minimum threshold for non-GAAP operating income for 2015

established by the Compensation Committee was $115 million. None of the RSUs granted under the 2015
Program would vest if this minimum threshold for non-GAAP operating income was not achieved, and none of
the RSUs 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 Target RSUs
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 “Target RSU Threshold” level for non-GAAP operating income in the table above and with the
vesting increasing on a pro-rata basis up to 100% of the units vesting if the “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 Target RSUs related to revenue would vest with respect to
between 0% and 100% of the units, with 0% of the units vesting at the “Target RSU Threshold” level for revenue
in the table above and with the vesting increasing on a pro-rata basis up to 100% of the units vesting if the
“Target” level for revenue in the table above were met or exceeded. With respect to the accelerator RSUs, no
portion of the award would vest unless the Company met or exceeded the “Target” levels for both revenue and
non-GAAP operating income set forth above. If both of these “Target” levels were exceeded, between 0% and
100% of the accelerator RSUs allocated to each performance metric would vest, with the portion of the
accelerator RSUs allocated to a performance metric that vest being interpolated pro-rata on a straight-line basis
between 0% for achievement of the “Target” level and 100% for achievement of the “Accelerator RSU Target
(Maximum)” level.

In determining whether performance targets have been achieved, the Company’s performance results were
adjusted as follows: (a) bookings achieved in 2015 and revenue deferred from 2015 into a subsequent reporting
period were included in the calculation; and (b) revenue and operating income from each acquisition completed
during 2015 was also included in the calculation to the extent that such revenue and operating income were
generated through sales by Company sales channels existing prior to the completion of each such acquisition.
The Compensation Committee believed these adjustments were appropriate to more accurately reflect the
Company’s performance during the fiscal year. In February 2016, the Compensation Committee reviewed the
Company’s total 2015 fiscal year revenue and non-GAAP operating income and determined that although the
Company had achieved record GAAP revenue for 2015, the Company’s performance achievement was between
the Threshold and Target performance levels for both measures for the Target RSU awards as identified in the
above table. For purposes of the 2015 Program, the Company’s 2015 revenue was $829.0 million as compared to
approximately $883 million as determined under GAAP and the Company’s non-GAAP operating income was
$126.1 million as compared to non-GAAP operating income of approximately $128.2 million as [reflected] in the
Unaudited Non-GAAP Financial Information section of the Company’s Report on Form 10-K for the year ended
December 31, 2015.

Accordingly, the Compensation Committee determined that approximately 61.5% of the Target RSUs

granted to each of Messrs. Gecht and Olin under the 2015 Program (approximately 65% as to the revenue
component of these awards and approximately 58% as to the non-GAAP operating income component of the
awards) had vested and that no portion of the accelerator RSUs granted under the program had vested.

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. For 2015, as in prior years, approximately two-
thirds of each named executive officer’s annual equity award is in the form of performance-based RSUs that vest
based upon the Company’s achievement of pre-established financial goals. We believe these performance-based
RSUs 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 RSUs is subject to the executive’s continued employment through the time the applicable performance
goals are achieved. Time-based RSUs, which vest based on continued employment (typically over a three-year
vesting schedule), are included in the equity award mix to provide an enhanced retention incentive since these
awards are not subject to the risks of performance-based vesting conditions.

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 data provided by Mercer based on comparisons against similarly situated executives with the peer
companies, the number of shares remaining under the Company’s 2009 Equity Incentive Award Plan (the “2009
Equity Plan”), the dilutive impact of equity award grants and the Company’s philosophy that long-term equity
incentives should constitute a substantial portion of each executive’s total direct compensation.

2015 Awards

Annual Equity Grants.

In September 2015, the Compensation Committee approved the grant of

performance-based and time-based RSU awards to each of our named executive officers as set forth in the
following table:

Type of Security

Performance-Based
RSU (2/3 of total
annual equity award)

Vesting Schedule

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 2016, the Company
achieves revenue (as determined under GAAP) of at least $1 billion (with at least
5% growth in revenue from businesses acquired prior to the immediately
preceding four-quarter period) and non-GAAP operating margin of at least 15%.

• 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 2017, the Company
achieves revenue of at least $1.1 billion (with at least 5% growth in revenue from
businesses acquired prior to the immediately preceding four-quarter period) and
non-GAAP operating margin of at least 15%.

• 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 2018, the Company
achieves revenue of at least $1.2 billion (with at least 5% growth in revenue from
businesses acquired prior to the immediately preceding four-quarter period) and
non-GAAP operating margin of at least 15%.

• These revenue goals represent a significant increase over the Company’s fiscal

year 2014 GAAP revenue of $790 million.

Type of Security

Vesting Schedule

•

For purposes of these awards, “non-GAAP operating margin” is defined as gross
profit determined in accordance with GAAP and adjusted to remove the impact of
stock-based compensation expense, restructuring-related costs, and foreign
currency adjustments. 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 are appropriate for purposes
of our incentive programs and produce a better measure of the executives’ impact
on the ongoing operating performance of the Company over the corresponding
year.

• The vesting of each portion of the performance-based RSUs is also subject to the

executive’s continued employment through the vesting date.

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Time-Based RSU
(1/3 of total annual
equity award)

Vests in three equal annual installments commencing on the one-year anniversary of
the grant date, subject to the executive’s continued employment through the vesting
date.

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

2015 help to further align the interests of executives with those of our stockholders. The measures and vesting
mechanics for the performance-based RSUs were chosen 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 and provide an incentive to achieve the goals more quickly
since these RSUs vest as soon as the performance is achieved rather than at the end of a specified period of time.
We believe incentivizing rapid achievement of revenue growth, while maintaining an operating income margin that
is consistent with our overall business model, is aligned with our stockholders’ interests. 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
is generally contingent on the executive’s continued employment with the Company through the vesting date.

Promotion Grant.

In April 2015, the Compensation Committee approved time-based and performance-

based RSU awards for Mr. Olin in connection with his appointment as Chief Financial Officer. The grant to
Mr. Olin consisted of 17,964 performance-based RSUs and 5,988 time-based RSUs. The performance-based
RSUs 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 $50, $56, and $62, respectively. In each case, the vesting of the
performance-based RSUs is subject to Mr. Olin’s continued employment through the vesting date. The time-
based RSUs are scheduled to vest in three equal annual installments commencing on the first anniversary of the
grant date, in each case subject to Mr. Olin’s continued employment through the vesting date.

Vesting of Certain 2014 Performance Awards

As described in the Company’s 2015 proxy statement, the Company granted performance-based RSU
awards to Messrs. Gecht and Olin in May 2014. The vesting of each of these awards was 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, the award would vest if, for any period of four
consecutive fiscal quarters ending no later than the second quarter of fiscal year 2015, the Company achieved
revenue of at least $800 million and non-GAAP operating income of at least $110 million. In August 2015, the
Compensation Committee determined that, for the period from the third quarter of fiscal 2014 through the second
quarter of fiscal 2015, the Company’s revenue was $806.0 million and the Company’s non-GAAP operating
income was $121.6 million. Accordingly, the units subject to each of these awards (23,833 units for Mr. Gecht;
2,963 units for Mr. Olin) vested upon the Compensation Committee’s determination.

Vesting of 2013 Performance Awards

As described in the Company’s 2014 proxy statement, the Company granted performance-based RSU
awards to Messrs. Gecht and Olin in August 2013. 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. 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. 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.

The first tranche of one-third of the RSUs subject to each of the awards granted to Messrs. Gecht and Olin
vested in August 2014. In August 2015, the Compensation Committee determined that, for the period from the
third quarter of fiscal 2014 through the second quarter of fiscal 2015, the Company’s revenue was $806.0 million
and the Company’s non-GAAP operating income was $121.6 million. Accordingly, the second tranche
representing one-third of the units subject to each of these awards (29,600 units for Mr. Gecht; 5,250 units for
Mr. Olin) vested upon the Compensation Committee’s determination.

Vesting of Stock-Price Performance Award

As described in the Company’s 2015 proxy statement, the Company granted an award of performance-based
RSUs to Mr. Olin in connection with his promotion to Chief Operating Officer in January 2014 that is eligible to
vest if the Company’s stock price achieves specified targets. Specifically, one-third of the units subject to the
award will vest 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 December 2015, the Compensation
Committee determined that the $46 stock price target had been achieved and, accordingly, that one-third of the
award (representing 2,582 units) had vested.

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 43 through 45 of this Proxy Statement.

Other Elements of Compensation and Perquisites

We do not provide any material perquisites to our executive officers. Executives are eligible to participate in
the Company’s 401(k) savings plan on the same terms and conditions as other Company employees. In addition,
our 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.

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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. Accordingly, the
Compensation Committee retains discretion to approve compensation arrangements for executive officers that
are not fully deductible. Further, because of ambiguities and uncertainties as to the application and interpretation
of Section 162(m) and the regulations issued thereunder, no assurance can be given, notwithstanding the
Compensation Committee’s efforts, that compensation intended to satisfy the requirements for deductibility
under Section 162(m) does in fact do so.

Stock Ownership Policy

In 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.
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 RSU
awards subject to time-based vesting requirements held by the Chief Executive Officer, are considered to be
owned by the Chief Executive Officer. Unvested RSUs subject to performance-based vesting requirements and
vested or unvested stock options are not taken into account in determining the Chief Executive Officer’s
beneficial ownership. Mr. Gecht’s current equity holdings far exceed his required ownership level.

Clawback Policy

The Board of Directors has 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, whether in the form of cash or equity-based awards, 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 and such compensation was received during the last three
complete fiscal years and would not have been paid under the restated financial results.

2016 Compensation Decisions

In February 2016, the Compensation Committee approved the 2016 annual incentive program (the “2016

Program”) for Messrs. Gecht and Olin. As under the 2015 Program, each executive is eligible to receive

incentive compensation payable in shares of our common stock 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” award payable in shares of our common stock if the Company achieves
financial results above the Company’s 2016 operating plan approved by the Board of Directors. Each executive’s
Target bonus amount and target accelerator bonus amount is the same as under the 2015 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 RSUs in February 2016 to each executive, with the total
number of RSUs subject to each executive’s Target RSU award and accelerator RSU award determined by
dividing the executive’s target incentive compensation amount for each award by the closing price of the
Company’s common stock on February 8, 2016. We believe structuring the executives’ incentive compensation
opportunities as performance-based RSUs increases the alignment of the executives’ interests with those of
stockholders since the ultimate value realized by the executive depends on both our operating financial
performance and stock price performance over the course of the year.

As under the 2015 Program, the performance metrics under the 2016 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 Target RSUs and accelerator RSUs under the program, with the threshold level for the accelerator RSUs
being the same as the target level for the Target RSUs such that the accelerator RSUs recognize performance
exceeding this level. Under the 2016 Program, if the minimum non-GAAP operating income threshold is met, the
executive’s Target RSUs 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% vesting at the applicable target level. The accelerator
RSUs will vest only if both the revenue and non-GAAP target levels for the Target RSUs are met. If both Target
RSU target levels are met, the number of accelerator RSUs vesting will be determined on a pro-rata, straight-line
basis with 0% vesting at the target level up to 100% vesting at the maximum level.

In February 2016, the Compensation Committee also approved grants of performance-based restricted stock

units to each of Messrs. Gecht and Olin. These awards are eligible to vest based on the Company’s cash from
operations for 2016 as a specified percentage of the Company’s non-GAAP net income for the year relative to
performance targets established by the Compensation Committee. The purpose of the award is to align the
executives with a broader management initiative focused on driving near-term cash flow through operational
improvements, while simultaneously driving Company revenue and operating income growth.

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

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Compensation of Executive Officers

Summary Compensation for 2015

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

December 31, 2015, 2014, and 2013 is summarized as follows:

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

Non-equity
incentive
plan
compensation
(g)(1)(2)

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

Total
(j)

Name and principal
position
(a)

Guy Gecht,

Year
(b)

Salary
(c)(1)

Bonus
(d)(1)(2)

Stock
awards
(e)(3)(4)

Option
awards
(f)(3)(4)

Chief Executive
Officer . . . . . . . . . . 2015 $620,000 $ — $5,959,188 $ —
620,000 — 5,999,416 —
620,000 — 4,738,484 —

2014
2013

Marc Olin,

Chief Financial
Officer(6) . . . . . . .

David Reeder,

2015 $310,000 $ — $2,212,146 $ —
311,553 — 2,263,741 —
2014
901,786 —
293,332 —
2013

Chief Financial
Officer(6) . . . . . . .

2015 $
2014

8,077 $ — $

— $ —
335,417 — 6,358,283 —

$ —
—

$ —
266,114
583,619

$ —
88,705
55,433

$ —
—
—

$ —
—

$ 5,200
5,200
5,100

$ 2,583
2,350
29,358

$6,584,388
6,890,730
5,947,203

$2,524,729
2,666,349
1,279,909

162
3,500

8,239
6,697,200

(1) All cash compensation earned by each named executive officer in 2015, 2014, and 2013 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 2015, 2014, or 2013.

(2) The named executive officer bonuses that have been awarded under our executive bonus program each year include a
“Target” bonus opportunity and an “accelerator” bonus opportunity that is payable if the target performance levels are
exceeded. As described in the Compensation Discussion and Analysis above, both opportunities were granted in the form
of RSUs for 2015. For 2014, the Target bonus opportunity was granted as RSUs, and while the accelerator component
was originally structured as a cash opportunity, the executives requested and the Compensation Committee approved the
payment of the accelerator component in Company common stock. For 2013, the Target bonus opportunity was granted
as RSUs, and the accelerator component was structured as a cash award. The portion of each opportunity granted as
RSUs is reported in the “Stock Awards” column for each applicable year as described in footnotes (3) and (4) below
(excluding the accelerator components for 2014 and 2013 which were originally granted as cash awards). The accelerator
components for 2014 and 2013, which were originally granted as a cash incentive awards, are reflected in the “Non-
equity incentive plan compensation” column of the table above.

(3) 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, 2015 regarding assumptions
underlying the valuation of equity awards.

(4) The amounts reported in the “Stock awards” column of the table above include the aggregate grant date fair value of the

performance-based and market-based awards granted to the named executive officers in each of these years calculated
based on the probable outcome of the applicable performance conditions determined as of the grant date in accordance
with ASC 718. For each of these awards other than the 2015 accelerator RSU awards, the grant date fair value was
determined assuming that the highest performance level would be achieved. For the 2015 accelerator RSU awards, the
grant date fair value based on the probable outcome of the performance-based conditions applicable to the awards and
the grant date fair value of these awards assuming that the highest level of performance conditions would be achieved
were $162,694 and $325,387, respectively, for Mr. Gecht and $54,231 and $108,462, respectively for Mr. Olin.
(5) For fiscal year 2015, “All other compensation” consists of 401(k) employer matching contributions for each executive.
(6) Mr. Reeder resigned as our Chief Financial Officer in December 2014 effective as of January 9, 2015. Mr. Olin served as

our Interim Chief Financial Officer subsequent to Mr. Reeder’s resignation on January 9, 2015. Mr. Olin was appointed
Chief Financial Officer in April 2015.

2015 Grants of Plan-Based Awards

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

December 31, 2015 to each of the Company’s named executive officers were as 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)

y
x
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Performance-based RSUs
Performance-based RSUs
Performance-based RSUs
Performance-based RSUs
Performance-based RSUs
Restricted Stock Units

$ —
—
—
—
—
—

Performance-based RSUs
Performance-based RSUs
Performance-based RSUs
Performance-based RSUs
Performance-based RSUs
Restricted Stock Units
Performance-based RSUs
Restricted Stock Units

—
—
—
—
—
—
—
—

$ —
—
—
—
—
—

—
—
—
—
—
—
—
—

$ — $ — 8,421
— 8,421
— 8,421
— 8,421
26,421 79,262
—

—
—
—
—
—

—

—
—
—
—
—
—
—
—

— 2,807
— 2,807
— 2,807
— 2,807
5,988 17,964
—
4,529 13,587
—

—

8,421
8,421
8,421
8,421
79,262

—
—
—
—
—
— 37,300

2,807
2,807
2,807
2,807
17,964
—
13,587
—

—
—
—
—
—
5,988
—
6,394

—
—
—
—
—
—

—
—
—
—
—
—
—
—

— $ 325,387
— $ 325,387
— $ 162,694
— $ 162,694
— $3,388,451
— $1,594,575

— $ 108,462
— $ 108,462
54,231
— $
— $
54,231
— $ 774,428
— $ 258,143
— $ 580,844
— $ 273,344

Name and
Grant Date

Guy Gecht

2/4/2015(1)(3)
2/4/2015(1)(4)
2/4/2015(1)(5)
2/4/2015(1)(6)
9/4/2015(7)
9/4/2015(8)

Marc Olin

2/4/2015(1)(3)
2/4/2015(1)(4)
2/4/2015(1)(5)
2/4/2015(1)(6)
4/23/2015(9)
4/23/2015(8)
9/4/2015(7)
9/4/2015(8)

(1) “Threshold,” “Target,” and “Maximum” columns in the “Estimated Future Payouts Under Equity Incentive Plan Awards” columns for awards granted in
February 2015 represent amounts payable under our 2015 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 Awards represents the fair value of the applicable award based on, in the case of performance-based and market-based
awards, the probable outcome of the performance conditions applicable to the award determined as of the grant date 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, 2015 regarding assumptions
underlying the valuation of equity awards.

(3) These RSUs vest based on achievement of 2015 revenue targets with pro rata vesting between the threshold of $790 million (0% vesting) and the target of
$850 million (100% vesting). The Compensation Committee certified on February 10, 2016 that 65% of these RSUs would vest on that date based on
actual 2015 revenue for purposes of the bonus program of $829 million.

(4) These RSUs vest based on achievement of 2015 non-GAAP operating income targets with pro rata vesting between the threshold of $115 million (0%

vesting) and the target of $134 million (100% vesting). The Compensation Committee certified on February 10, 2016 that 58% of these RSUs would vest
on that date based on actual 2015 non-GAAP operating income for purposes of the bonus program of $126 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) These “accelerator” bonus RSUs vest based on achievement of 2015 revenue targets with pro rata vesting between the threshold of $850 million (0%
vesting) and the target of $900 million (100% vesting). The Compensation Committee certified on February 10, 2016 that the actual 2015 revenue for
purposes of the bonus program was $829 million, which is less than the threshold level.

(6) These “accelerator” bonus RSUs vest based on achievement of 2015 non-GAAP operating income targets with pro rata vesting between the threshold of

$134 million (0% vesting) and the target of $145 million (100% vesting). The Compensation Committee certified on February 10, 2016 that the actual
2015 non-GAAP operating income for purposes of the bonus program was $126 million, which is less than the threshold level.

(7) These RSUs will vest by one-third of the target number of RSUs subject to the award upon achievement of $1.0 billion in revenue during any four
consecutive quarters between the first quarter of 2015 and the fourth quarter of 2016. An additional one-third of the target RSUs will vest upon
achievement of $1.1 billion in revenue during any four consecutive quarters between the first quarter of 2015 and the fourth quarter of 2017. An
additional one-third of the target RSUs will vest upon achievement of $1.2 billion in revenue during any four consecutive quarters between the first
quarter of 2015 and the fourth quarter of 2018. Vesting during any of the aforementioned four consecutive quarter periods is contingent on also achieving
at least 5% revenue growth (excluding revenue related to acquisitions) compared to the preceding four consecutive quarters and at least 15% non-GAAP
operating margin during the four quarter peiod that the revenue goal is achieved.

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

equals or exceeds $50.00, $56.00, and $62.00, respectively.

Description of Plan-Based Awards

Equity Incentive Plan Awards. Each of the equity incentive awards reported in the above table was granted
under, and is subject to, the terms of the Company’s 2009 Equity Incentive Award Plan (the “2009 Plan”). The 2009
Plan is administered by the Compensation Committee. The Compensation Committee has authority to interpret the plan
provisions and make all required determinations under the 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.

Under the terms of the 2009 Plan, if there is a change in control of the Company and the Compensation
Committee does not provide for the substitution, assumption, exchange, or other continuation of the outstanding
awards, each named executive officer’s outstanding awards granted under the plan will generally become fully
vested and, in the case of options, exercisable. 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.

Time Based RSUs. Grants of time-based RSUs made in 2015 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 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 Incentive Compensation Program. As described above, the named executive
officers’ 2015 incentive compensation opportunities were granted in the form of RSU awards under our annual
incentive compensation program. These awards were granted in February 2015 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 “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 margin
targets. These awards were granted in September 2015 and are reported in the table above under the heading
“Estimated Future Payouts Under Equity Incentive Plan Awards.” In connection with his appointment as Chief
Financial Officer, Mr. Olin also received a performance RSU award in April 2015 that will vest if our stock price
achieves certain specified levels. The material terms of these awards are described in the Compensation
Discussion and Analysis section above under the heading “Long-Term Equity Incentive Program.”

Outstanding Equity Awards at 2015 Fiscal Year-End

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

executive officers as of December 31, 2015 is as follows:

Option Awards

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

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

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

Option
exercise
price
per
share
($)
(e)

Option
expiration
date
(f)

Name
(a)

Grant
Date

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

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

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

$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)
8/15/2013(4)
8/15/2013(1)
8/15/2014(7)
8/15/2014(8)
8/15/2014(1)
2/4/2015(5)
2/4/2015(6)
9/4/2015(9)
9/4/2015(1)
Marc Olin . . . . . . . 8/15/2013(4)
8/15/2013(1)
1/16/2014(10)
1/16/2014(7)
1/16/2014(1)
8/15/2014(8)
8/15/2014(1)
2/4/2015(5)
2/4/2015(6)
4/23/2015(11)
4/23/2015(1)
9/4/2015(9)
9/4/2015(1)

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

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

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

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

—

—
—
—

—
—
—
—
—
—
—
— 29,600 $1,383,504
—
— 14,800 $ 691,752
— 22,691
—
15,127
— 15,127 $ 707,052
—
— 22,690 $1,060,531
—
— 5,473 $ 255,808
—
— 4,884 $ 228,278
— 26,421
—
—
— 37,300 $1,743,402
—
— 5,250 $ 245,385
—
— 2,521 $ 117,832
—
—
2,582
— 12,909
—
—
— 5,163 $ 241,319
3,883
— 3,883 $ 181,476
—
— 3,882 $ 181,445
—
85,254
— 1,824 $
—
76,093
— 1,628 $
5,988
—
—
—
— 5,988 $ 279,879
4,529
—
—
—
— 6,394 $ 298,856

—
—

—

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

—
—
—
—
—
$1,060,577
$ 707,052
—
—
—
$1,234,902
—
—
—
$ 120,683
$ 603,367
—
$ 181,476
—
—
—
$ 279,895
—
$ 211,685
—

(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 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
performance goal requiring that non-GAAP return on equity exceed non-GAAP return on equity for the year ended December 31, 2008
by four percentage points was achieved on December 31, 2015, and certified by the Compensation Committee on February 10, 2016,
resulting in the vesting of an additional 3,885 shares. 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 six percentage points. These option awards expire in August 2016.

(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.

(4) These 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. The Compensation Committee certified on
February 10, 2016 that these RSUs vested based on actual 2015 revenue of $883 million and 2015 non-GAAP operating income of
$128 million.

(5) These RSUs vest based on achievement of 2015 revenue targets with pro rata vesting between the threshold of $790 million (0% vesting)
and the target of $850 million (100% vesting). The Compensation Committee certified on February 10, 2016 that 65% of these RSUs

would vest on that date based on actual 2015 revenue for purposes of the bonus program of $829 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 2015 non-GAAP operating income targets with pro rata vesting between the threshold of $115
million (0% vesting) and the target of $134 million (100% vesting). The Compensation Committee certified on February 10, 2016 that
58% of these RSUs would vest on that date based on actual 2015 non-GAAP operating income for purposes of the bonus program of
$126 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 $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.

(8) These RSUs vest based on 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. The Compensation Committee certified on
February 10, 2016 that these RSUs vested based on actual 2015 revenue of $883 million and 2015 non-GAAP operating income of
$128 million.

(9) These RSUs will vest based on achievement of $1.0 billion in revenue during any four consecutive quarters between the first quarter of
2015 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 during any four consecutive quarters between the first quarter of 2015 and the fourth quarter of 2017. An
additional number of RSUs equal to this number of RSUs will vest upon achievement of $1.2 billion in revenue during any four
consecutive quarters between the first quarter of 2015 and the fourth quarter of 2018. Vesting during any of the aforementioned four
consecutive quarter periods is contingent on also achieving at least 5% revenue growth (excluding revenue related to acquisitions)
compared to the preceding four consecutive quarters and at least 15% non-GAAP operating margin during the four consecutive quarters
that the revenue goal is achieved.

(10) These RSUs will vest when the average closing stock price during 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) These RSUs will vest when the average closing stock price during 90 consecutive trading days equals or exceeds $50.00. 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 $56.00. 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 $62.00.

Option Exercises and Stock Vested in 2015

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

December 31, 2015 were as follows:

Name
(a)

Option Awards

Stock Awards

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

Value
realized
on exercise
($)(c)

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

Value
realized
on vesting
($)(e)(1)

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

—
—

124,913
32,325

$5,503,344
1,390,843

(1) 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 currently

employed with the Company. Mr. Gecht’s 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. As noted in the Compensation Discussion and Analysis above, Mr. Olin entered into
a new employment agreement with the Company in April 2015 in connection with his appointment as Chief
Financial Officer. Mr. Olin’s agreement has a three-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.
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.

y
x
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Each employment agreement provides, among other things, that:

•

the named executive officer shall be provided with a base salary and will be eligible for incentive
compensation under the annual management incentive compensation 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 cash severance for a specified number
of months of base salary, pro-rata incentive compensation, (or, if the termination is in connection with
a change in control, a bonus assuming all performance goals are met in full), employer subsidized
health benefit continuation under COBRA, and outplacement services, in each case as described below;

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, in certain circumstances, and the post-exercise period for stock options shall be extended, in
each case as described below; and

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

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

severance tables and related footnotes in the section below.

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.

The amounts presented below are estimates determined assuming that the termination of employment and/or

change in control triggering payment of these benefits occurred on the last business day of 2015, with benefits
being valued using the closing sales price of the Company’s common stock on such date ($46.74) and determined
based on each executive’s employment agreement in effect on December 31, 2015. 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 a change of control 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.

The table below sets forth potential payments to the Company’s named executive officers as of

December 31, 2015 upon termination without cause by the Company or upon termination for good reason by the
named executive officer, in either case other than during the period of 24 months following a change of control
as follows:

Lump sum
severance
payment
($)(1)

Outplacement
benefits
($)(2)

Continued
health
care
coverage
benefits
($)(3)

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

Total
($)

Name

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

$1,724,086
471,346

$35,000
35,000

$34,295
15,093

$3,684,552
955,198

$5,477,933
1,476,637

(1) The amounts shown are the lump sum severance payments that consist of 24 months of base salary for

Mr. Gecht and 12 months of base salary for Mr. Olin, plus an amount equal to the value of the incentive
compensation (including the vesting of any equity awards granted under the incentive compensation
program) that the named executive officer would have earned for 2015 based upon the level of performance
targets applicable to the incentive compensation that was actually attained for 2015. If the named executive
officer’s employment is terminated during the year by the Company without cause or by the executive for
good reason, the incentive compensation is prorated for the portion of the year that the named executive
officer was with the Company.

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

under COBRA for Mr. Gecht for up to 18 months and for Mr. Olin for up to 12 months.

(4) Other than RSU awards related to the 2015 executive incentive compensation 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. Performance awards that vest on any other basis will
remain outstanding until the end of the applicable performance period and will vest based on the Company’s
actual performance for that period on a prorated basis (with the executive being given credit for up to six
additional months of service for purposes of the pro-ration). The value of the accelerated options and RSUs
is calculated based on the Company’s closing stock price at December 31, 2015 of $46.74 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, 2015, were as follows:

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

Name

Stock
Options
(#)

3,885
—

Restricted
Stock
Units
(#)

75,841
20,436

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

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

Lump sum
severance
payment
($)(1)

Outplacement
benefits
($)(2)

Continued
health
care
coverage
benefits
($)(3)

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

Total
($)

Name

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

$3,434,390
834,797

$35,000
35,000

$34,295
22,639

$11,765,627
4,228,521

$15,269,311
5,120,957

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

under COBRA for up to 18 months.

(4) Messrs. Gecht and Olin would be entitled to accelerated vesting of 100% of all unvested options and RSUs
as of their termination date with, in the case of performance awards, the applicable performance conditions
being deemed met at maximum performance levels, excluding equity awards granted under the annual
incentive compensation program, which would be treated as described above in Note 1. The value of the
accelerated options and RSUs is calculated based on the Company’s closing stock price at December 31,
2015 of $46.74 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, 2015,
assuming such termination was within 24 months after a change of control are as follows:

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

Name

Stock
Options
(#)

15,540
—

Restricted
Stock
Units
(#)

251,725
90,469

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 2015, 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 2015 to determine whether any portion of the
program encouraged excessive risk taking. Following that review, the Compensation Committee does not believe
that the Company’s compensation programs and practices applicable to employees create risks that are
reasonably likely to have a material adverse effect on the Company.

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

• Compensation is allocated among base salaries and short and long-term compensation. Base salaries

are fixed to provide executives with a stable cash income, which allows them to focus on the
Company’s issues and objectives as a whole. Short and long-term compensation are designed to both

reward the named executive officers for the Company’s overall performance and align interests with
those of our stockholders;

• Our annual incentive compensation 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
incentive compensation 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 incentive compensation 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 under
our annual incentive compensation program are subject to maximum payout levels;

• Awards to our named executive officers under our annual incentive compensation program for fiscal
year 2015 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 vesting and 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 2015

consisted of approximately 66% 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 incentive
compensation 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 March 28, 2016, Mr. Gecht owns approximately 1.2% 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, 2015, included in the Company’s Annual Report on
Form 10-K for that year.

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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, 2015 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

Dated: April 1, 2016

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, 2015
‘ 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

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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, 2015 was $2,013,149,130 *

The number of shares outstanding of the registrant’s common stock, $.01 par value per share, as of January 27, 2016 was 47,137,557.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement to be delivered to stockholders in connection with the 2016 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, 2015, the last business day of the
registrant’s second quarter of the 2015 fiscal year.

TABLE OF CONTENTS

PART I

Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 1
ITEM 1A Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 1B Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 2
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 3
ITEM 4 Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART II

ITEM 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 6
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . .
ITEM 7A Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 8
ITEM 9
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . .
ITEM 9A Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 9B Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART III

ITEM 10 Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 11 Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder

Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 13 Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . .
ITEM 14 Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1
18
34
34
35
36

36
39
40
76
79
143
143
145

146
146

146
147
147

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

147
152

PART IV

Exhibit index
EXHIBIT 10.20
EXHIBIT 10.21
EXHIBIT 10.24
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,”
“consider,” “continue,” “develop,” “estimate,” “expect,” “goal,” “intend,” “look,” “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.

PART I

References to “EFI,” the “Company,” “we,” “us,” and “our” mean Electronics For Imaging, Inc. and its
subsidiaries, unless the context indicates otherwise.

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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, ceramic tile decoration, and textile industries from the use of traditional analog based
printing to digital on-demand printing.

Our products include industrial super-wide and wide format, label and packaging, textile, and ceramic tile
decoration digital inkjet printers that utilize our digital ink, industrial 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 ink
includes digital ultra-violet (“UV”), light emitting diode (“LED”), ceramic, and thermoforming ink, as well as a
variety of textile ink including dye sublimation, pigmented, reactive dye, acid dye, and water-based dispersed
printing 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 super-wide, wide format, digital inkjet products (“Industrial Inkjet”)
including VUTEk and Matan super-wide and wide format, Reggiani textile, Jetrion label and packaging, and
Cretaprint digital ceramic tile decoration industrial digital inkjet printers; 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 and
packaging 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 and Matan super-wide and wide format, Reggiani textile, Jetrion label and packaging, and Cretaprint
ceramic tile decoration industrial digital inkjet printers; UV, LED, ceramic, and thermoforming ink, as well as a
variety of textile ink including dye sublimation, pigmented, reactive dye, acid dye, and water-based dispersed
printing 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 and Matan super-wide format UV, LED, 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 banners, signage, building wraps, flags, point of
purchase and exhibition signage, backlit displays, fleet graphics, photo-quality graphics, art exhibits, customized
architectural elements, billboards, thermoplastic decoration, and other large graphic displays. We sell EFI hybrid
and roll-to-roll flatbed UV wide format graphics printers and ink to the entry-level and mid-range industrial
digital inkjet printer market. We sell Reggiani textile digital inkjet printers and textile ink to the textile soft
signage market and contract printers serving major textile brand owners and fashion designers, as well as the
global printed textile industry. We sell Jetrion label and packaging digital inkjet printing systems, custom high-
performance integration solutions, and specialty ink 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 VUTEk and Matan super-wide, wide format, and Jetrion label and packaging industrial digital inkjet printers
incorporate “cool cure” LED printing technology. LED technology is a green technology that reduces customer
costs 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 and HS series
of high-speed, high-resolution super-wide format industrial digital inkjet printers in 2015, 2014, and 2013.

Our HS series of printers are alternatives to analog presses based on pin & cure printing technology. We
introduced the HS125 Pro digital inkjet printer in 2015, which is a 3.2 meter hybrid flatbed/roll-fed printer that
prints on rigid and flexible materials up to two inches thick utilizing UltraFX Technology that enhances the
visual impact of the printed image and reduces the appearance of unwanted visual artifacts. We launched the
HS100 Pro UV inkjet press in 2013, which utilizes an upgraded operating system platform. Pin & cure
technology delivers precise ink lay down for better image quality and high production speeds, gloss control,
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 2015, 2014, and 2013. The LX
models incorporate LED technology. We launched the LX3 Pro digital inkjet printer in 2015, which is a 3.2
meter hybrid flatbed/roll-fed printer that prints on rigid and flexible materials up to two inches thick utilizing
UltraFX 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. 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.

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
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.

Matan super-wide format industrial digital inkjet roll-to-roll printers include advanced material handling features
such as in-line cutting and slitting. The Quantum super-wide format LED UV-curing industrial digital inkjet
printer provides resolution up to 1,200 dpi. The Q Series of super-wide format industrial digital inkjet printers are
well suited for high volume requirements and feature print speeds up to 3,800 square feet per hour. The Flex
series of super-wide format industrial digital inkjet printers serve the fleet graphics market with flexible UV ink
and protective coating for high-definition, closely-viewed truck side curtains, car wraps, and floor graphics.

Wide Format. Our EFI hybrid flatbed/roll-to-roll and dedicated roll-to-roll entry level, overflow, and specialty
production UV wide format digital inkjet printers are developed, manufactured, and marketed to the entry-level
and mid-range industrial digital inkjet printer market. In 2015, we launched our wide format H1625 SD hybrid
roll / flatbed printer. The H1625 SD utilizes thermoforming ink, which enables sign makers and printing
companies to print directly onto thermoplastic sheet materials, which can then be formed into deep draw, high
elongation parts while retaining hue and opacity. 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.

Textile. Reggiani industrial digital inkjet textile printers address the full scope of advanced textile printing with
versatile printers suitable for pigmented, reactive dye, acid dye, and water-based dispersed printing ink. Reggiani
is at the forefront of the emergence of digital printing as an alternative to either analog printing or single color
(dyed) garments. The adoption of digital textile printing is due to the growth of “fast fashion,” which is a term
used by fashion retailers to express the need for designs to move quickly from the catwalk to the retailer to
capture current fashion trends. Reggiani provides an overall solution for the entire textile printing process from
yarn treatment to fabric printing and finishing for a wide variety of substrates and applications (fashion, home
textile, sportswear, signage, flooring, automotive, and outdoor).

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Reggiani industrial digital inkjet textile printing systems use water-based inks and advanced streamlined
automation that provide a total solution for textile businesses. The TOP digital inkjet textile printer is a fast
throughput machine that can be used with reactive, acid, disperse, dye sublimation, and pigmented inks. The
Essetex 2m wide washing box is the ideal system for knitted and light fabrics, particularly where print washing is
beneficial for delicate textiles and for post-dyeing of printed cloth. The newly launched ReNOIR NEXT printer
prints on fabrics and paper using the same ink set with a 1.8m beltless digital printing system and offers
simplified material handling, a compact footprint, and a lower acquisition cost, making it an ideal entry-level
textile printing production device.

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 industrial digital inkjet label and packaging
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. The 4950LX printer features digital printing
and inline finishing in one machine.

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 launched the Cretaprint C4, which is our next generation ceramic
tile decoration digital inkjet printer 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.

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 worldwide 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.

Ink. 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, wide format, and label and packaging digital inkjet printing systems. We sell a
variety of third party branded textile ink to users of our textile digital inkjet printers, including dye sublimation,
pigmented, reactive dye, acid dye, and water-based dispersed printing ink. 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 ink that addresses important
curing, adhesion, density, and durability issues that are encountered when printing on challenging substrates. We
use the technology to enhance capabilities for thermoforming and other high-elongation applications. 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 H/QS
Series printers
EFI and 3M(R)
co-branded ink
UltraTex dye
sublimation and
thermoforming UV ink

Matan super-
wide format

Quantum, Q series, and
Flex series printers
Quantum LED
curable ink
Matan UV curable ink
MatanFlex stretchable ink

EFI wide
format

R family roll-to-roll
H family hybrid printers
EFI H1625 LED
3M™ ink

Reggiani
textile

Reggiani textile printers
Dye sublimation, pig-
mented, reactive dye, acid
dye, and water-based
dispersed printing ink

Jetrion label &
packaging

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

Cretaprint
ceramic tile
decoration

Cretaprint C4
Cretaprint C3
Cretaplotter
Cretaprint ink

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.

Fleet graphics, traffic signage,
labels, tags, decals, membranes,
license plates, and sign printing

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

Contract printers serving
major textile brand owners and
fashion designers Textile soft
signage market Global printed
textile industry

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

Ceramic tile industry
Construction industry

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

Speeds up to 353 square meters
per hour Printing widths of 3.5
to 5 meters; up to two inch
thickness; 4, 7, and 8 colors,
plus white and greyscale; up to
1200 dpi; flexible and rigid
substrates; UV curable and
LED “cool cure” ink.

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” ink.

Speeds up to 320 square
meters per hour Substrates
from ultra-light to heavy, up to
2400 dpi; dye sublimation,
pigmented, reactive dye, acid
dye, and water-based dispersed
printing ink

Print resolutions greater than
720 dpi; 4 colors plus white,
printing width up to 13 inches,
UV curable, and LED “cool
cure.” The 4900 platform
enables digital printing and
finishing in a single end-to-end
system.

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

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Productivity Software

To provide our customers with solutions to manage and streamline their printing operations, we have developed
technology that enhances printing workflow and makes printing operations more powerful, productive, 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 consists of a complete software suite that enables efficient and
automated end-to-end business and production workflows for the print and packaging industry. This Productivity
Suite also provides tools to enable revenue growth, efficient scheduling, and optimization of processes,
equipment, and personnel. Customers are provided the financial and technical flexibility to deploy locally within
their business or to be hosted in the cloud. The Productivity Suite addresses all segments of the print industry and
consists of the: (i) Packaging Suite, with Radius at its core, for tag & label, cartons, and flexible packaging
businesses; (ii) Corrugated Packaging Suite, with CTI at its core, for corrugated packaging businesses;
(iii) Enterprise Commercial Print Suite with Monarch at its core, for enterprise print businesses; (iv) Publication
Print Suite, with Monarch or Technique at its core, for publication print businesses; (v) Mid-market Print Suite,
with Pace at its core, for medium size print businesses; (vi) Quick Print Suite, with PrintSmith at its core, for
small printers and in-plant sites; and (vii) Value Add Products, available with the suite and standalone, such as
web-to-print, e-commerce, cross media marketing, warehousing, fulfillment, shop floor data collection, and
shipping to reduce costs, increase profits, and offer new products and services to their existing and future
customers.

Customer Base. We sell the Packaging Suite to the label and packaging industry; the Corrugated Packaging
Suite to the corrugated packaging industry; the Commercial Print Suite to large commercial and digital print
businesses; the Publication Print Suite to publication and direct mail print businesses; the Mid-market Print Suite
to medium size commercial print businesses, display graphics providers, and government printing operations; the
Quick Print Suite to small printers and in-plant printing operations; and Digital StoreFront and DirectSmile 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. Integration among our software offerings was accelerated in
2015 through the end-to-end automation including certified workflows and synchronized releases across multiple
products afforded by our Productivity Suite consisting of the Packaging Suite, Corrugated Packaging Suite,
Enterprise Commercial Print Suite, Publication Print Suite, Mid-market Print Suite, Quick Print Suite, and Value
Add Products. Integration of our software product offerings provides:

•

Out-of-the-box, end-to-end optimized workflows,

Certified integration and automation,

Global visibility that makes effective and proactive decision making possible;

Solid modular flexible software foundation supporting product and customer profit evolution.

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, DirectSmile, and Metrics IQuote software were
released in 2015, 2014, and 2013.

Our primary software offerings include:

Product Name

Description

User

Business process automation software:
Monarch, PSI, Logic, PrintSmith,
PrintFlow, Radius, CTI, SmartLinc,
Graphisoft, PC Topp, DiMS!, PrintStream,
Prism, IQuote, Technique, Shuttleworth,
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 esti-
mating, 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, PrinterSite, and
PrintSmith Site

Procurement applications for
print buyers, print producers,
and marketing professionals to
facilitate cloud-based collabo-
ration 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.

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Fiery

Our Fiery brand consists of DFEs that transform digital copiers and printers into high performance networked
printing devices for the office, commercial, and industrial 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 products. 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 and Command WorkStation,
(iv) Fiery Self Serve, 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 FS200 Pro DFE was released in 2015 incorporating higher speed processing, expanded
color offerings, shop automation, and connectivity. 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.

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 7.0 was released in 2015 and processes complex vector data up to
seven times faster than its predecessor. 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 and wide format, Fiery proServer is compatible with 540 super-
wide, wide format, and ceramic 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, new user interface, advanced tools for printing
multi-bank and bleed-edge tabbed documents, and an integrated analytics tool, Fiery Dashboard.

Fiery Workflow Suite 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.
The M500 is a flexible and scalable system, which addresses demands for printing from any mobile device as
well as from popular cloud storage services, and accepts credit cards, campus cards, and cash cards at the device,
thereby eliminating the need for coin-operated machines.

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.

PrintMe. PrintMe Connect enables direct printing from Apple®, iPad®, iPhone®, 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 DFE platforms, primary printer manufacturer customers, and end user environments are as follows:

Platform

Printer Manufacturers or Customers

User Environments

Fiery external DFEs

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

Fiery embedded DFEs and
design-licensed solutions

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

Fiery Central, MicroPress
Fiery Workflow Suite

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

Fiery Self Serve

Canon, FedEx Office, Konica Minolta,
Ricoh, Staples

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

Office, print for pay, and quick
turnaround printers

Corporate reprographic departments,
commercial printers, and production
workflow solutions

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

PrintMe

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

Mobile printing from any mobile
device to any network printer

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

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

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

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, textile
printing, 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.

Textile digital printing is an alternative to either analog printing or single color (dyed) garments. Widespread
adoption of digital textile printing depends on the willingness and ability of businesses in the printed textile
industry to replace their existing analog printing systems and single color (dyed) garments with digital printing
systems. The adoption of digital textile printing is dependent to some extent on the growth of “fast fashion,”
which is a term used by fashion retailers to express the need for designs to move quickly from the catwalk to the
retailer to capture current fashion trends. A key element of our inkjet textile printing growth strategy is to market
digital inkjet printing systems to contract printers that serve major textile brand owners and fashion designers.

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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 operate a Cretaprint sales and support center in
Foshan, Guangdong, China, in addition to our facilities in Spain. 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. There were approximately 1,200 attendees from 25 countries at our
2015 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.

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, Seiko
Epson, Fuji Xerox, Kodak, 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, Konica Minolta, Staples,
Ricoh, 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, textile, label and packaging, and ceramic tile decoration industrial 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, packaging, 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.

The development of our Productivity Suite also provides tools to facilitate customer revenue growth, efficient
scheduling, and optimization of processes, equipment, and personnel. Customers are provided the financial and
technical flexibility to deploy locally within their business or to be hosted in the cloud.

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, expansion
into emerging markets in China, India, and Latin America, and expansion into emerging markets in Asia Pacific
(“APAC”).

Expanding the Addressable Market. We are expanding our addressable market by extending into new markets
within each of our operating segments such as textile digital inkjet printing, ceramic tile decoration,
thermoplastic pre-decoration, 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.

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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. Our Productivity Suite has taken this
integration further through end-to-end automation including certified workflows and synchronized releases
across multiple products consisting of our Packaging Suite, Corrugated Packaging Suite, Enterprise Commercial
Print Suite, Publication Print Suite, Mid-market Print Suite, Quick Print Suite, and Value Add Products.

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. Our DFE was 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 2015,
2014, and 2013 is summarized as follows:

Year

2015

Acquired Business

Acquired Product Line or Customer Base

Reggiani Macchine SpA (“Reggiani”)

Textile digital inkjet printers

Matan Digital Printers (“Matan”)

Super-wide format digital inkjet printers

Corrugated Technologies, Inc. (“CTI”)

Corrugated packaging software

Shuttleworth Business Systems Limited and
CDM Solutions Limited (collectively,
“Shuttleworth”)

European customer base

2014

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

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 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 2015 were Canon, Seiko Epson, Fuji Xerox,
Konica Minolta, Kyocera Document Solutions, Landa, OKI Data, Ricoh, Sharp, Toshiba, and Xerox. Sales to
Xerox accounted for 12% of our 2015 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 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.

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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
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, 2015, we employed 3,136 full time employees. Approximately 892 were in sales and
marketing (including 360 in customer service), 392 were in general and administrative, 656 were in
manufacturing, and 1,196 were in research and development. Of the total number of employees, 1,562 employees
were located in the Americas (primarily the U.S. and Brazil) and 1,574 were located outside of the Americas.

Research and Development

Research and development expense was $141.4, $134.7, and $128.1 million for the years ended December 31,
2015, 2014, and 2013, respectively. As of December 31, 2015, 1,196 of our 3,136 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 accelerates its transition from analog to digital technology, from solvent-
based printing to UV curable ink printing, and adopts digital textile printing due to the growth of “fast fashion.”
We are developing new software applications designed to maximize workflow efficiencies and meet the needs of
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 15 U.S. locations, as well as in India, Europe, Israel, the United Kingdom (“U.K.”), Brazil,
Canada, New Zealand, China, Australia, and Japan. Substantial additional expense is required to complete and
bring to market products that are 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 textile ink to third party
branded suppliers.

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 Matan super-wide
format industrial digital inkjet printers are primarily manufactured in a single location in our Rosh Ha’Ayin,
Israel facility. Our Reggiani textile industrial digital inkjet printers are primarily manufactured in a single
location in our Bergamo, Italy 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.
Most components used to manufacture our printers and ink are available from multiple suppliers, except for
inkjet print heads, branded textile ink, and certain key ingredients (primarily pigments and photoinitiators) for
our digital UV 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 branded textile ink or the pigments required for our digital
UV ink, we would have to qualify other sources, if possible, or reformulate and test the new ink formulations. In
our Industrial Inkjet facilities, we use hazardous materials to formulate digital UV and ceramic digital ink, as
well as store internally formulated and third party 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
Controls for Automation
Third party branded

(DuPont, Huntsman, Sensient)

Ink pigment suppliers
Columbia Tech
Schneider Electric
Roberts
SEI, S.p.A
Phoseon
Shenzen Runtianzhi Tech
Seiko
Toshiba Tek
Xaar
Ricoh
Kyocera Mita
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)
Inkjet RFID (radio frequency identification)
Textile ink

UV ink pigments and photoinitiators
Inkjet sub-assemblies
Inkjet electrical sub-assemblies
Contract manufacturing (digital inkjet printers)
Laser finishing and winders
LED lamps
Inkjet sub-assemblies
Inkjet print heads
Inkjet print heads
Inkjet print heads
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. We believe the principal competitive factor affecting our markets is the market acceptance rates for
new printing technology.

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 Reggiani industrial digital inkjet textile printers compete with Dover, Durst, Mimaki, Roland, Epson, Konica
Minolta, Robustelli, Atexco, Shenzhen Homer Textile, and Digital Graphics. Competitive digital inkjet textile
printers are manufactured in Italy, Japan, China, and smaller emerging markets such as Indonesia. Key
competitors driving digitalization of the textile printer market include MS Printing Solutions, Kornit, and Brother
Industries. Reggiani also competes with other digital inkjet textile printing technologies including pre-washing
and post-washing printing techniques.

Our Cretaprint ceramic tile decoration digital inkjet printer competes with ceramic tile decoration printers
manufactured in Spain (KERAjet), Austria (Durst), Italy (Technoferrari, Projecta, Intesa, and System), China
(Flora, Hope, Meijia, and Teckwin), and smaller emerging competition in other markets such as Indonesia. The
ceramic tile industry is 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 digital inkjet printers and European manufacturers that are reducing prices to gain market share. In
addition to our facility in Spain, we operate a Cretaprint sales and support center in Foshan, Guangdong, China,
which is home to the largest concentration of ceramic 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.

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.

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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.

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 industrial digital inkjet 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.

Reggiani industrial digital inkjet textile printers address the full scope of advanced textile printing with versatile
printers suitable for water-based dispersed, acid, pigment, and reactive dye printing inks. Our Reggiani textile
printers compete with Dover, Durst, Mimaki, Roland, Epson, Konica Minolta, Robustelli, Atexco, Shenzhen
Homer Textile, and Digital Graphics. Competitive textile digital inkjet printers are manufactured in Italy, Japan,
China, and smaller emerging markets such as Indonesia. Reggiani also competes with other digital inkjet textile
printing technologies including pre-washing and post-washing printing techniques.

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, Austria, Italy, Brazil, China, and smaller emerging competitors in other markets such as
Indonesia. The ceramic tile industry is 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 digital inkjet printers and European manufacturers that are reducing prices to gain market
share. In addition to our facility in Spain, we operate a Cretaprint sales and support center in Foshan, Guangdong,
China, which is home to the largest concentration of ceramic tile manufacturers in China.

Most ceramic tile decoration digital inkjet printer manufacturers have a background in analog equipment for
ceramic tile plants and tile manufacturing facilities, while Durst and Flora entered the ceramic tile decoration
market from the digital graphic arts business. Our ceramic tile decoration 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.

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We face strong competition for printing supplies such as ink.

We compete with independent manufacturers in the ink market consisting of smaller vendors, as well as larger
vendors such as DuPont Digital Imaging.

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.

We sell third party branded textile ink to users of our textile digital inkjet printer. We offer a strong value
proposition with our third party branded inks, but cannot guarantee that we will be the primary supplier of textile
digital ink to the users of our printers.

Our solvent-based ceramic digital ink is sold to users of our ceramic tile decoration digital inkjet printers. We
formulate our solvent-based ceramic digital ink in our facility in Ypsilanti, Michigan. 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.

If the market for digital textile printing does not develop as we anticipate, we may not be able to grow our
inkjet textile printing business.

If the global printed textile industry does not broadly accept digital printing as an alternative to either analog
printing or single color (dyed) garments, our revenue from this acquisition may not grow as quickly as expected.
Widespread adoption of digital textile printing depends on the willingness and ability of businesses in the printed
textile industry to replace their existing analog printing systems and single color (dyed) garments with digital
printing systems. The adoption of digital textile printing is dependent to some extent on the growth of “fast
fashion,” which is a term used by fashion retailers to express the need for designs to move quickly from the
catwalk to the retailer to capture current fashion trends.

A key element of our digital inkjet textile printing growth strategy is to market digital inkjet printing systems to
contract printers that serve major textile brand owners and fashion designers. If leading textile brand owners and
fashion designers are not convinced of the benefits of digital inkjet textile printing or if there is a significant
reduction in the popularity of printed textiles, especially those that are customized or personalized, among the
consumers to whom such brand owners and fashion designers cater, or if these businesses decide that digital
inkjet printing processes are less reliable, less cost-effective, lower quality, or otherwise less suitable for their
commercial needs than analog printing processes and single color (dyed) garments, then the market for digital
textile printing may not develop as we anticipate and we may not be able to realize the benefits from our
acquisition and grow our inkjet textile printing business.

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. There can be no assurance that
we will continue to advance our technology and products or compete effectively against other companies’
product offerings.

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 12% of our revenue for the year ended December 31, 2015. 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, textile digital 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.

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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.

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 corporate debt investments consist of non-sovereign corporate debt securities of $41.7 million, which
represents 21% of our corporate debt instruments (12% of our short-term investments) at December 31, 2015.
European corporate debt investments of $35.0 million are with corporations domiciled in the northern and central
European countries of Sweden, Netherlands, Luxembourg, Norway, France, and the U.K. Short-term investments
of $6.7 million are with corporations domiciled 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
corporate debt investments in Europe, although we do have some exposure due to the interdependencies among
the European Union countries.

Since Europe is composed of varied countries and regional economies, our European risk profile is somewhat
more diversified due to the varying economic conditions among the countries. Approximately 31% of our
receivables are with European customers as of December 31, 2015. Of this amount, 30% of our European
receivables (9% 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.

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 $408.9 (46%),
$352.0 (45%), and $315.6 (43%) million of revenue for the years ended December 31, 2015, 2014, and 2013,
respectively, shipped to locations outside the Americas, primarily to Europe, Middle East, and Africa (“EMEA”)
and APAC. We expect that sales outside of the U.S. will continue to represent a significant portion of our total
revenue. We maintain significant operations and acquire or manufacture many of our products and/or their
components outside the U.S. Our future revenue, 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 revenue, 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 China and other developing economies have negatively impacted, and may continue to
negatively impact, our results of operations.

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, British pound
sterling, Brazilian real, Chinese renminbi, Israeli shekel, Australian dollar, and New Zealand dollar). We have a
substantial number of international employees, resulting in material operating expenses denominated in foreign
currencies. We have exposure from non-U.S. dollar-denominated operating expenses in foreign countries
(primarily the Euro, British pound sterling, Chinese renminbi, Israeli shekel, Japanese yen, Indian rupee,
Brazilian real, and Australian dollar).

We can benefit from or be adversely affected by either a weaker or stronger U.S. dollar relative to major
currencies worldwide with respect to our consolidated financial statements. Accordingly, we can benefit from a
stronger U.S. dollar due to the corresponding reduction in our foreign operating expenses translated in U.S.
dollars and at the same time we can be adversely affected by a stronger U.S. dollar due to the corresponding
reduction in foreign revenue translated in U.S. dollars. We hedge our operating expense exposure in Indian
rupees. The notional amount of our Indian rupee cash flow hedge was $3.2 million at December 31, 2015.

Forward contracts not designated as hedging instruments consist of hedges of Brazilian real, British pound
sterling, Israeli shekel, Chinese renminbi, Japanese yen, Australian dollar, and Euro-denominated intercompany
balances with notional amounts of $63.7 million; Brazilian real, British pound sterling, Australian dollar,
Canadian dollar, and Euro-denominated trade receivables with notional amounts of $49.1 million; and Indian
rupee net monetary assets with a notional amount of $2.6 million at December 31, 2015.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, 2015, 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.

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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,

security concerns, such as armed conflict and civil or military unrest, crime, political instability, and
terrorist activity;

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 Matan super-wide format industrial digital inkjet printers are
primarily manufactured in a single location in our Rosh Ha’Ayin, Israel facility. Our Reggiani industrial digital
inkjet textile printers are primarily manufactured in a single location in our Bergamo, Italy 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.

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, textile, label and packaging, and ceramic tile decoration
industrial digital inkjet printers; branded textile ink; and certain key ingredients (primarily pigments and
photoinitiators) for our digital UV ink. We generally do not maintain long-term agreements with our component
suppliers and conduct business with such suppliers solely on a purchase order basis. If we are unable to continue
to procure these sole or limited sourced components from our current suppliers in the required quantities, we will
have to qualify other sources, if possible, or redesign our products. If we were unable to obtain the branded
textile ink or the pigments required for our digital UV ink, we would have to qualify other sources, if possible, or
reformulate and test the new ink formulations. 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.

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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 textile ink with third party branded suppliers. 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 and wide format, textile, 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.

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, chemical engineers, and other technical professionals with specialized skills. We are headquartered in
the Silicon Valley and have research and development facilities in 15 U.S. locations. We have research and
development facilities in India, Europe, Israel, the U.K., Brazil, Canada, New Zealand, 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;

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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

equity securities issued in connection with acquisitions (e.g., Reggiani and CTI) will be dilutive to our
existing stockholders unless mitigating actions are taken such as treasury stock purchases;
alternatively, acquisitions made entirely or partially for cash 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,
2015 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 2016 or prior to that, if an interim triggering event were to occur. 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, 2015.

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.

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 digital 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, China, 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.

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

Our business operations involve the use of certain hazardous materials at seven locations. We formulate UV and
ceramic ink at three locations and store UV, ceramic, solvent, and thermoforming ink, as well as a variety of
textile ink including dye sublimation, pigmented, reactive dye, acid dye, and water-based dispersed printing ink
at seven locations. We launched internal formulation and marketing of ceramic solvent-based ink during 2014 at
our facility in Ypsilanti, Michigan. The solvents used in ceramic digital ink formulation have low volatility by
design. As a result, ceramic digital ink poses less environmental risk compared with true solvent ink. Our textile
ink is supplied by a limited group of third party branded suppliers.

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 worldwide, including Europe,
China, Israel, the U.K., 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 $9.6 million at December 31, 2015, 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.

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, 2015, the price of our common stock as reported on The NASDAQ Global Select Market
ranged from a low of $35.45 to a high of $49.82. 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.

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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.

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 $1.3 million as of December 31, 2015, which is not discounted, based upon examination of historical
trends, historical actuarial analysis, our claims experience, total plan enrollment (including employee
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 differ 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. On November 9, 2015, the board of directors cancelled $54.9 million, effective December 31, 2015,
remaining for repurchase under the 2013 authorization and approved a new authorization to repurchase $150
million of outstanding common stock commencing January 1, 2016. This authorization expires December 31,
2018.

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, new
information discovered during the preparation of our tax returns, and enactment of 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. The Organisation for Economic
Co-operation and Development, or OECD, issued a series of reports on October 5, 2015 recommending changes
to numerous well-established tax principles. These recommendations, if adopted by various OECD countries in
which we do business, could adversely affect our effective tax rate.

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 when the Notes are to be repurchased, 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 the 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.

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

Item 1B: Unresolved Staff Comments
None.

Item 2: Properties
As of December 31, 2015, we owned or leased a total of approximately 1.4 million square feet worldwide. The
following table sets forth the location, size, and use of our principal facilities (square footage in thousands):

Location

Square
Footage

Leased or
Owned

Operating Segment

Principal Uses

Corporate offices, design engineering, product
testing, sales, marketing, customer service
Administrative offices, design engineering, product
testing
Manufacturing (Reggiani textile printers), design
engineering, sales, customer service
Manufacturing (Industrial Inkjet printers), design
engineering, sales, customer service
Administrative, design engineering, customer service,
software engineering
Manufacturing, (Cretaprint), administrative, design
engineering, sales, customer service
Manufacturing (digital UV & ceramic ink), design
engineering, sales, customer service
Warehouse
Administrative, design engineering, customer service,
software engineering
Sales, Industrial Inkjet demonstration center

customer service
Warehouse
Manufacturing, (Fiery), distribution, customer service

Design engineering, sales, customer service, quality
assurance, and software engineering
Software engineering, sales, customer service

Productivity Software Design engineering, software engineering, sales,

Fremont, California . . . . . . . . . . . .

119

Owned*

Corporate & Fiery

(6750 Dumbarton Circle)

Fremont, California . . . . . . . . . . . .

Leased**

Fiery

(6700 Dumbarton Circle)

Bergamo, Italy . . . . . . . . . . . . . . . .

168

Leased

Industrial Inkjet

Meredith, New Hampshire . . . . . . .

163

Owned

Industrial Inkjet

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

107

Leased

All

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

107

Leased***

Industrial Inkjet

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

106

Leased

Industrial Inkjet

Industrial Inkjet
Fiery & Productivity
Software
Industrial Inkjet

Industrial Inkjet
Fiery & Productivity
Software
Fiery & Productivity
Software
Fiery & Productivity
Software
Industrial Inkjet

Ossippee, New Hampshire . . . . . . .
Egan, Minnesota . . . . . . . . . . . . . . .

Brussels, Belgium . . . . . . . . . . . . . .
Lichtenvoorde, Netherlands . . . . . .

Laconia, New Hampshire . . . . . . . .
Tempe, Arizona . . . . . . . . . . . . . . .

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

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

Ha’Ayin, Israel . . . . . . . . . . . . . . . .

Schiphol-Rijk, The Netherlands . . .
Pittsburgh, Pennsylvania . . . . . . . .
Shanghai, China . . . . . . . . . . . . . . .

Sao Paolo, Brazil

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

San Diego, California . . . . . . . . . . .
Richmond Hill, Ontario, Canada . .

53
44

39
38

34
32

19
18
16

12
10

Leased
Owned

Leased
Leased

Leased

Leased
Leased
Leased

Manufacturing (Industrial Inkjet printers), design
engineering, sales, customer service
EMEA corporate offices, sales, support services
Productivity Software EPS corporate offices, design engineering, sales

Industrial Inkjet

APAC corporate offices, Industrial Inkjet
demonstration center

Leased

Productivity Software Design engineering, software engineering, sales,

customer service

Leased
Leased

Productivity Software 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 2016.

In addition to the facilities listed above, we leased 34 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, 2015, we are subject to the matters 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 (“District Court”) 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 (“Court of Appeals”). On October 16, 2015, 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 liability in this matter.

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Matan Digital Printing (“MDG”) Matter

EFI acquired Matan in 2015 from sellers (the “2015 Sellers”) that acquired Matan Digital Printing Ltd. from
other sellers in 2001 (the “2001 Sellers”). The 2001 Sellers have asserted a claim against the 2015 Sellers and
Matan asserting that they are entitled to a portion of the 2015 Sellers’ proceeds from EFI’s acquisition. The 2015
Sellers dispute any such claim and have fully indemnified EFI against the 2001 Sellers’ claim.

Although we are fully indemnified and we do not believe that it is probable that we will incur a loss, it is
reasonably possible that our financial statements could be materially affected by the unfavorable resolution of
this matter. Accordingly, it is reasonably possible that we could incur a material loss in this matter. We estimate
the range of loss to be between one Euro and € 9.6 million ($10.5 million). If we incur a loss in this matter, it will
be offset by an indemnification receivable of an equal amount representing a claim against the escrow account.

Other Matters

As of December 31, 2015, we were subject to various other 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.

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 2015 and 2014.

2015

2014

High . . .
Low . . .

$43.03
$35.45

$46.20
$40.90

$48.36
$41.33

$49.82
$42.20

$47.75
$37.86

$45.46
$36.62

$47.42
$42.75

$46.50
$39.09

As of January 26, 2016, there were 115 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 2015 or 2014. 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, 2015 were as follows (in thousands except
per share amounts):

Total number
of shares
purchased (2)

Average price
paid per share

Total number
of shares
purchased as
part of publicly
announced plans

Approximate
dollar value of
shares that may yet
be purchased
under the plans (1)

Fiscal month

January 2015 . . . . . . .
February 2015 . . . . . .
March 2015 . . . . . . . .
April 2015 . . . . . . . . .
May 2015 . . . . . . . . . .
June 2015 . . . . . . . . . .
July 2015 . . . . . . . . . .
August 2015 . . . . . . . .
September 2015 . . . . .
October 2015 . . . . . . .
November 2015 . . . . .
December 2015 . . . . .

66
131
146
114
191
1
159
276
112
192
176
176

Total . . . . . . . . . .

1,740

$39.20
38.79
40.44
41.87
42.74
43.44
43.79
44.88
44.87
45.00
47.90
47.83

$43.92

62
69
145
114
146
—
159
144
112
192
172
177

1,492

$118,207
115,526
109,648
104,874
98,648
98,648
91,679
85,289
80,263
71,622
63,384
54,942

$ 54,942

(1)

(2)

In November 2013, our board of directors authorized $200 million for the repurchase of our outstanding
common stock. Under this publicly announced plan, we repurchased 1.5 and 1.8 million shares for an
aggregate purchase price of $65.7 and $76.8 million during the years ended December 31, 2015 and 2014,
respectively. On November 9, 2015, the board of directors cancelled $54.9 million, effective December 31,
2015, remaining for repurchase under the 2013 authorization and approved a new authorization to
repurchase $150 million of outstanding common stock commencing January 1, 2016. This authorization
expires December 31, 2018.
Includes 0.2 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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Sales of Unregistered Securities

On October 6, 2015, we issued 0.2 million shares of common stock to the shareholders of CTI in connection with
the acquisition of CTI. The shares of common stock were offered and sold in accordance with the terms and
subject to the conditions set forth in the purchase agreement for the acquisition in reliance on the private offering
exemption of Section 4(a)(2) of the Securities Act of 1933, as amended.

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, 2015. 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

$350

$300

$250

$200

$150

$100

$50

12/10

12/11

12/12

12/13

12/14

12/15

Electronics For Imaging, Inc.

NASDAQ Composite

NASDAQ Computer Manufacturers

*$100 invested on 12/31/10 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, 2015. 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.”

(in thousands, except per share amounts)

2015

2014

2013

2012

2011

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

$ 882,513

$ 790,427

$ 727,693

$ 652,137

$591,556

For the years ended December 31,

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

459,384

429,737

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

Net income (2)(3) . . . . . . . . . . . . . . . . . . . . . . . . .

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 . .

56,643

33,540

0.71

0.70

47,217

48,150

53,439

395,166

174,648

33,714

$ 109,107

0.72

0.70

46,866

48,406

2.34

2.26

46,643

48,359

December 31,

354,821

330,983

33,886

27,333

83,269

$ 27,465

1.79

1.74

0.59

0.58

46,453

46,234

47,734

47,579

(in thousands)

2015

2014

2013

2012

2011

Financial Position
Cash, cash equivalents, and short-term

investments . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
Working capital (4)
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . .
Convertible senior notes, net (5)
Stockholders’ equity . . . . . . . . . . . . . . . . . . . . .

$ 497,367
588,151
1,455,902
296,485
824,194

$ 616,732
667,785
1,304,570
284,818
788,689

$ 355,041
378,763
1,026,384

$ 364,962
209,017
1,074,971

—
767,450

—
650,793

$219,158
236,842
739,734

—
564,783

(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, 2015, 2014, and 2013.

(2)

Income (loss) from operations includes the following:

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December 31,

(in thousands)

2015

2014

2013

2012

2011

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) . . . .

$26,510
34,071
5,731
584

$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
—

(2,135)
5,494
—

(3,810)
1,501
—

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

(1,360)
2,200
—

1,476
2,327
—

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

$70,255

$61,900

$ (74,563) $45,214

$41,679

(3) Net income includes the following:

•

Tax benefit from the release of previously unrecognized tax benefits of $5.5, $2.6, $5.8, $11.8, and
$2.6 million for the years ended December 31, 2015, 2014, 2013, 2012, and 2011, respectively,
resulting from the release of previously unrecognized tax benefits due to 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 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) We have elected to apply the guidance in FASB Accounting Standards Update (“ASU”) 2015-17, Balance
Sheet Classification of Deferred Taxes, issued in November 2015, retrospectively to all prior periods to
maintain the comparability of presentation between periods. We have elected to early adopt this standard in
the current period, which has retroactively reduced working capital by $17.1, $20.9, $53.8, and $8.0 million
as of December 31, 2014, 2013, 2012, and 2011, respectively. Please refer to Note 1—The Company and its
Significant Accounting Policies for an explanation of the new guidance.

(5)

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,” “consider,” “continue,” “develop,” “estimate,” “expect,” “goal,” “intend,” “may,”
“look,” “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

Key financial results for the year ended December 31, 2015 were as follows:

•

Our results of operations for the year ended December 31, 2015 compared with the prior year reflect
revenue growth, gross profit impacted by Reggiani, decreased operating expenses as a percentage of
revenue, and interest expense related to our Notes. We completed our acquisitions of Reggiani, Matan,
CTI, and Shuttleworth in 2015. Post-acquisition revenue was $88.4 million in 2015 related to these
four acquisitions. We completed our acquisitions of DIMS, DirectSmile, Rhapso, and SmartLinc in
2014. Their results are included in our results of operations commencing on their respective acquisition
dates.

Our consolidated revenue increased by 12%, or $92.1 million, from $790.4 million for the year ended
December 31, 2014 to $882.5 million for the year ended December 31, 2015. Industrial Inkjet,
Productivity Software, and Fiery revenue increased by $68.5, $4.6, and $18.9 million, respectively, in
2015 compared with 2014. Recurring ink and maintenance revenue increased by 15% during the year
ended December 31, 2015 compared with the same period in the prior year and represented 29% of
consolidated revenue.

Our gross profit percentage decreased from 54% during the year ended December 31, 2014 to 52%
during the year ended December 31, 2015, primarily due to the lower Reggiani gross profit percentage.
The decrease in the Industrial Inkjet gross profit percentage of 3.8 points during the year ended
December 31, 2015, was partially offset by an increase in the Productivity Software and Fiery gross
margin percentages during the same period.

Operating expenses increased by $26.4 million, from $376.3 million during the year ended
December 31, 2014 to $402.7 million during the year ended December 31, 2015, but decreased as a
percentage of revenue from 48% during the year ended December 31, 2014 to 46% during the year
ended December 31, 2015. The increase in operating expenses was primarily due to head count
increases related to our business acquisitions, prototype and non-recurring engineering expenses related
to future product launches, trade show and marketing program expenses, transaction expenses related
to our business acquisitions, amortization of intangible assets, and increased reserves for litigation and
uncollectible accounts, partially offset by reduced legal fees.

Interest expense increased by $11.5 million, from $5.9 million for the year ended December 31, 2014
to $17.4 million for the year ended December 31, 2015 primarily related to our Notes, which were
issued in September 2014.

Interest income and other income (expense), net, decreased from a loss of $5.5 million during the year
ended December 31, 2014, to a loss of $1.8 million during the year ended December 31, 2015,
primarily because the foreign exchange loss decreased by $2.6 million resulting primarily from
revaluation of foreign currency denominated net assets (mainly denominated in Euros, British pounds
sterling, Chinese renminbi, and Brazilian reais), and investment income increased due to increased
investment balances.

• We recorded a tax provision of $4.0 million in 2015 on pre-tax income of $37.5 million compared to a
tax provision of $8.4 million in 2014 on pre-tax income of $42.1 million. We recognized $5.5 million
of previously unrecognized tax benefits in 2015 as compared to $2.6 million in 2014. We recognized a
tax benefit of $3.1 million in 2014 resulting from the increased valuation of intangible assets for
Brazilian tax reporting.

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Results of Operations

The following table presents items in our consolidated statements of operations as a percentage of total revenue
for 2015, 2014, and 2013. These operating results are not necessarily indicative of results for any future period.

For the years ended December 31,
2013
2014
2015

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

100%

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

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

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

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

Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . .

16
18
8
3
1

—

6
(2)

—

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

17
19
8
3
1

—

6
(1)

—

5
(1)

17
19
6
3
1
(16)

—
—

24
(9)

15%

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 and Matan super-wide and wide format, Reggiani textile, Jetrion
label and packaging, and Cretaprint ceramic tile decoration industrial digital inkjet printers; digital UV, LED,
ceramic, and thermoforming ink, as well as a variety of textile ink including dye sublimation, pigmented, reactive
dye, acid dye, and water-based dispersed printing 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 consists of a complete software suite that enables efficient and automated end-to-
end business and production workflows for the print and packaging industry. This Productivity Suite also
provides tools to enable revenue growth, efficient scheduling, and optimization of processes, equipment, and
personnel. Customers are provided the financial and technical flexibility to deploy locally within their business or
to be hosted in the cloud. The Productivity Suite addresses all segments of the print industry and consists of the:
(i) Packaging Suite, with Radius at its core, for tag & label, cartons, and flexible packaging businesses;
(ii) Corrugated Packaging Suite, with CTI at its core, for corrugated packaging businesses; (iii) Enterprise
Commercial Print Suite with Monarch at its core, for enterprise print businesses; (iv) Publication Print Suite,
with Monarch or Technique at its core, for publication print businesses; (v) Mid-market Print Suite, with Pace at
its core, for medium size print businesses; (vi) Quick Print Suite, with PrintSmith at its core, for small printers
and in-plant sites; and (vii) Value Add Products, available with the suite and standalone, such as web-to-print, e-
commerce, cross media marketing, warehousing, fulfillment, shop floor data collection, and shipping to reduce
costs, increase profits, and offer new products and services to their existing and future customers.

Fiery, which consists of DFEs that transform digital copiers and printers into high performance networked
printing devices for the office, industrial, and commercial printing markets. 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 and Command WorkStation, (iv) Fiery Self Serve, 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.

Ex-Currency. To better understand trends in our business, we believe it is helpful to adjust our statement of
operations to exclude the impact of year-over-year changes in the translation of foreign currencies into U.S.
dollars. This is a non-GAAP measure that is calculated by adjusting revenue, gross profit, and operating expenses
by using historical exchange rates in effect during the comparable prior year period and by removing the balance
sheet currency remeasurement impact from interest income and other income (expense), net, including removal
of any hedging gains and losses. We refer to these adjustments as “ex-currency.” Management believes the ex-
currency measures provide investors with an additional perspective on year-over-year financial trends and
enables investors to analyze our operating results in the same way management does. The year-over-year
currency impact can be determined as the difference between year-over-year actual growth rates and year-over-
year ex-currency growth rates.

Please refer to the section entitled “Unaudited Non-GAAP Financial Information” for these non-GAAP measures
a reconciliation of these measures to the most comparable GAAP measures.

Revenue by Operating Segment

Our revenue by operating segment for the years ended December 31, 2015, 2014, and 2013 was as follows (in
thousands):

For the years ended December 31,

2015

2014

2013

% change

2015
over
2014

2014
over
2013

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

$447,705
135,350
299,458

51% $379,170
130,743
15
280,514
34

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

49% 18% 7%
4
16
7
35

10
10

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

$882,513

100% $790,427

100% $727,693

100% 12% 9%

Overview

Revenue was $882.5, $790.4, and $727.7, million for the years ended December 31, 2015, 2014, and 2013,
respectively, resulting in a 12% increase (17% ex-currency) in 2015 compared with 2014 and a 9% increase in
2014 compared with 2013. The $92.1 million increase in 2015 compared with 2014 consisted of increased
Industrial Inkjet, Productivity Software, and Fiery revenue of $68.5, $4.6, and $18.9 million, respectively. 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.

Our revenue growth was primarily driven by the post-acquisition performance of Reggiani and Matan in our
Industrial Inkjet operating segment, our acquisition strategy in the Productivity Software operating segment, and
product launches by the leading printer manufacturers in the Fiery operating segment.

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Industrial Inkjet Revenue

Industrial Inkjet revenue increased by $68.5 million, or 18% in 2015 compared with 2014 (27% ex-currency).
Industrial Inkjet revenue in the super-wide and wide format product lines is benefiting from the ongoing analog
to digital technology and solvent to UV ink migration primarily due to:

•

the complementary impact of the Reggiani and Matan business acquisitions,

increased UV and LED ink revenue as a result of the high utilization that our UV printers are
experiencing in the field, partially offset by decreased solvent printer installed base demand measured
by solvent ink usage,

strong demand for our newly launched products incorporating LED technology such as the LX3 Pro
digital inkjet printer, which is a 3.2 meter hybrid flatbed/roll-fed printer that prints on rigid and flexible
materials up to two inches thick,

the HS 100 digital UV inkjet press representing an alternative to analog presses utilizing pin & cure
technology,

the H1625 digital UV inkjet wide format printer, and

the launch of the C4, our next generation ceramic tile decoration digital inkjet printer.

Industrial Inkjet revenue increased by $24.6 million, or 7%, in 2014 compared with 2013. The Industrial Inkjet
revenue increase was primarily due to:

•

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:

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

printers and

O the newly launched H1625 digital UV inkjet wide format printer,

the HS100 digital UV inkjet press,

other super-wide and wide format digital inkjet printers, and

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

Productivity Software Revenue

Productivity Software revenue increased by $4.6 million, or 4%, in 2015 compared with 2014 (9% ex-currency),
primarily due to increased license revenue from our 2015 acquisitions of CTI and Shuttleworth and professional
services and recurring maintenance revenue primarily resulting from our 2014 acquisition of DIMS and
DirectSmile. We also implemented annual price increases, which marginally increased 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.

Fiery Revenue

Fiery revenue increased by $18.9 million, or 7%, in 2015 compared with 2014 (also 7% ex-currency). Although
end customer and reseller preference for Fiery products drives demand, most Fiery revenue relies on printer
manufacturers to design, develop, and integrate Fiery technology into their print engines. Fiery revenue increased
primarily due to:

•

consistent 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,

the release of the Fiery FS200 Pro DFE incorporating higher speed processing, expanded color
offerings, shop automation, and connectivity, and

integration of Fiery DFEs with certain Productivity Software products.

Fiery revenue increased by $25.8 million, or 10%, in 2014 compared with 2013. 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.

Revenue by Geographic Area

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.

Our revenue by geographic region for the years ended December 31, 2015, 2014, and 2013 was as follows (in
thousands):

For the years ended December 31,

2015

2014

2013

% change

2015
over
2014

2014
over
2013

Americas . . . . . . . . . . . . . . . . . . . . . . . . . .
EMEA . . . . . . . . . . . . . . . . . . . . . . . . . . . .
APAC . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$473,599
291,103
117,811

54% $438,421
244,545
33
107,461
13

55% $412,127
207,665
31
107,901
14

56% 8% 6%
19
29
18
10 —
15

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

$882,513

100% $790,427

100% $727,693

100% 12% 9%

Overview

Our consolidated revenue increase of $92.1 million, or 12% in 2015 compared with 2014 (17% ex-currency),
resulted from increased revenue in the Americas, EMEA, and APAC. Our consolidated revenue increase of $62.7
million, or 9% in 2014 compared with 2013, resulted from increased revenue in the Americas and EMEA.

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Americas Revenue

Americas revenue increased by $35.2 million, or 8%, in 2015 compared with 2014 (9% ex-currency) resulting
from increased revenue in all three of our operating segments resulting from increased UV and LED ink revenue,
incremental revenue from Reggiani industrial digital inkjet textile printers and Matan industrial digital inkjet
super-wide format printers, Fiery revenue, professional services revenue resulting from progress on major
development projects, and increased license revenue from our 2015 acquisition of CTI.

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.

EMEA Revenue

EMEA revenue increased by $46.6 million, or 19%, in 2015 compared with 2014 (32% ex-currency) primarily
due to increased Fiery and Industrial Inkjet revenue. The increase in Industrial Inkjet revenue is primarily due to
sales of Reggiani industrial digital inkjet textile printers, Matan industrial digital inkjet super-wide format
printers, and increased Fiery 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.

APAC Revenue

APAC revenue increased by $10.4 million, or 10%, in 2015 compared with 2014 (15% ex-currency) primarily
due to increased Industrial Inkjet revenue. We achieved revenue increases in each of our industrial inkjet printers
in this region, including super-wide and wide format, label & packaging, textile, and ceramic tile decoration
digital inkjet printers.

APAC revenue in 2014 was comparable to 2013 primarily due to double digit percentage growth in super-wide
and wide format industrial digital inkjet printer revenue and increased Fiery revenue in Japan offset by decreased
ceramic tile decoration digital inkjet printer revenue primarily due to the slowdown in the global construction
industry, especially in China.

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 12%, 11%, and 12% of our revenue for the years
ended December 31, 2015, 2014, and 2013.

Our reliance on revenue from the leading printer manufacturers was 32% during 2015 and 33% during 2014 and
2013. 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, 2015,
2014, and 2013 was as follows (in thousands):

2015

2014

2013

Industrial Inkjet

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

$447,705
152,918

$379,170
143,981

$354,614
140,095

34.2%

38.0%

39.5%

Productivity Software

$135,350
99,278

$130,743
94,733

$118,409
85,246

73.3%

72.5%

72.0%

Fiery

$299,458
210,140

$280,514
193,585

$254,670
171,642

70.2%

69.0%

67.4%

A reconciliation of operating segment gross profit to the consolidated statements of operations for the years
ended December 31, 2015, 2014, and 2013 is as follows (in thousands):

Segment gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . . . . .
Other items excluded from segment profit . . . . . . . . . .

$462,336
(2,837)
(115)

$432,299
(2,562)
—

$396,983
(1,817)
—

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

$459,384

$429,737

$395,166

2015

2014

2013

Overview

Our gross profit percentage, excluding stock-based compensation, decreased to 52% (52% ex-currency) during
the year ended December 31, 2015, compared to 54% during the years ended December 31, 2014 and 2013,
primarily due to the lower Reggiani gross profit percentage. The decrease in the Industrial Inkjet gross profit
percentage of 3.8 points was partially offset by the increase in the Productivity Software and Fiery gross profit
percentages.

Industrial Inkjet Gross Profit

The Industrial Inkjet gross profit percentage decreased from 38.0% in 2014 to 34.2% in 2015 (35.8% ex-
currency) primarily due to lower gross margin percentages realized from Reggiani and the foreign currency
impact of international sales of super-wide and wide format industrial digital inkjet printers for which the cost
was denominated in U.S. dollars, partially offset by increased gross margin percentages realized from the next
generation C4 ceramic tile decoration digital inkjet printer, which has experienced improving margins subsequent
to product launch.

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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.

Productivity Software Gross Profit

The Productivity Software gross profit percentage increased from 72.5% in 2014 to 73.3% in 2015 (73.2% ex-
currency) primarily due to increased professional services revenue at a higher margin, achievement of certain
post-acquisition cost synergies, and price increases on annual maintenance renewal contracts.

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.

Fiery Gross Profit

The Fiery gross profit percentage increased from 69.0% in 2014 to 70.2% in 2015 (also 70.2% ex-currency)
primarily due to higher margin professional services revenue and reduced costs related to DFEs and other
products required for newly launched printers by the leading printer manufacturers.

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.

Operating Expenses

Operating expenses for the years ended December 31, 2015, 2014, and 2013 were as follows (in thousands):

For the years ended December 31,

% change

2015

2014

2013

2015
over
2014

2014
over
2013

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

$141,364
156,339
72,797
26,510
5,731
—

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

$ 128,124
137,583
47,755
19,438
4,834

5% 5%
6
9
28
(13)

7
40
6
36
(117,216) — 100

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

$402,741

$376,298

$ 220,518

7% 71%

Operating expenses, net of gain on sale of building and land, increased by $26.4 million, or 7%, in 2015 (12%
ex-currency) as compared with 2014, and increased by $155.8 million, or 71%, in 2014 as compared with 2013.

Operating expenses increased by $26.4 million, from $376.3 million during the year ended December 31, 2014 to
$402.7 million during the year ended December 31, 2015, but decreased as a percentage of revenue from 48%
during the year ended December 31, 2014 to 46% during the year ended December 31, 2015. The increase in
operating expenses was primarily due to head count increases related to our business acquisitions, prototype and
non-recurring engineering expenses related to future product launches, trade show and marketing program
expenses, transaction expenses related to our business acquisitions, amortization of intangible assets, and
increased reserves for litigation and uncollectible accounts, partially offset by reduced legal fees.

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.

Research and Development

Research and development expenses include personnel, consulting, travel, research and development facilities,
prototype materials, and non-recurring engineering expenses. Research and development expenses for the years
ended December 31, 2015, 2014, and 2013 were $141.4 million, or 16% of revenue, $134.7 million, or 17% of
revenue, and $128.1 million, or 17% of revenue, respectively.

Research and development expenses increased by $6.6 million, or 5%, in 2015 as compared with 2014 (8% ex-
currency). Personnel-related expenses increased by $3.4 million primarily due to head count increases related to
our business acquisitions and increased variable compensation due to improved profitability. Prototypes and non-
recurring engineering, consulting, contractor, freight, and related travel expenses increased by $2.8 million
primarily due to product development efforts in advance of product launches. Stock-based compensation expense
increased by $0.6 million primarily due to bonus program vesting and increased Employee Stock Purchase Plan
(“ESPP”) expense, which is due to our appreciating stock price and increased employee participation compared
to the prior year.

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 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 head count was 1,196, 1,067, and 1,011 as of December 31, 2015, 2014, and 2013,
respectively.

We expect that if the U.S. dollar remains volatile against the Indian rupee, Euro, British pound sterling, Israeli
shekel, Canadian dollar 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 worldwide sales office expenses.

Sales and marketing expenses for the years ended December 31, 2015, 2014, and 2013 were $156.3 million, or
18% of revenue, $147.4 million, or 19% of revenue, and $137.6 million, or 19% of revenue, respectively.

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Sales and marketing expenses increased by $9.0 million, or 6%, in 2015 as compared with 2014 (13% ex-
currency). Personnel-related expenses increased by $4.1 million primarily due to head count increases related to
our business acquisitions, partially offset by reduced commissions and variable compensation. Trade show and
marketing program spending, including consulting, contractor, travel, and freight, has increased by $3.6 million.
Stock-based compensation expense increased by $0.5 million primarily due to bonus program vesting and
increased ESPP expense, which is due to our appreciating stock price and increased employee participation
compared to the prior year. The remaining increase of $0.8 million is primarily due to facility and information
technology expenses related to our sales and marketing activities.

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 head count was 892, 762, and 721 as of December 31, 2015, 2014, and 2013, respectively,
including 360, 304, and 276 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 services and products. We expect that
if the U.S. dollar remains volatile against the Euro, British pound sterling, Brazilian real, Israeli shekel,
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, 2015, 2014, and 2013 were $72.8 million, or 8%
of revenue, $66.9 million, or 8% of revenue, and $47.8 million, or 6% of revenue, respectively.

General and administrative expenses increased by $5.9 million, or 9%, in 2015 as compared with 2014 (14% ex-
currency). Personnel-related expenses increased by $0.8 million primarily due to head count increases related to
our business acquisitions. Acquisition costs increased by $4.0 million primarily related to the acquisitions of
Reggiani, Matan, Shuttleworth, and CTI. Reserves for litigation and uncollectible accounts increased by $1.4
million. Legal expenses decreased by $1.9 million due to a decrease in significant litigation and settlement
activity from the prior year. Stock-based compensation expense decreased by $3.4 million primarily due to
forfeitures resulting from the resignation of our chief financial officer in January 2015 and decreased bonus
program vesting, partially offset by increased ESPP expense due to our appreciating stock price, increased
employee participation compared to the prior year, and the post-acquisition settlement of pre-acquisition stock
options issued by an acquired business. The remaining increase of $3.3 million is primarily due to facilities and
information technology expenses.

The estimated probability or actual achievement of several earnout performance targets was reduced during the
year ended December 31, 2015, net of earnout interest accretion, resulting in a reduction of the associated
liability and a credit to general and administrative expense of $2.1 million. A similar change in the estimated
probability or actual achievement of several earnout performance targets during the year ended December 31,
2014, net of earnout interest accretion, resulted in a reduction of the associated liability and a credit to general
and administrative expense of $3.8 million.

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.

We expect that if the U.S. dollar remains volatile against the Euro, British pound sterling, Indian rupee, Israeli
shekel, 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, 2015, 2014, and 2013 were $34.1 million,
or 4% of revenue, $36.1 million, or 5% of revenue, and $25.8 million, or 4% of revenue, respectively.

We account for stock-based payment awards in accordance with ASC 718, Stock Compensation, which requires
stock-based compensation expense to be recognized based on the fair value of such awards on the date of grant.
We amortize compensation cost on a graded vesting basis over the vesting period, after assessing the probability
of achieving requisite performance criteria with respect to performance-based awards. Stock-based compensation
cost is recognized over the requisite service period for each separately vesting tranche of the award as though the
award were, in substance, multiple awards. This has the impact of greater stock-based compensation expense
during the initial years of the vesting period.

Stock-based compensation expense decreased by $2.0 million, or 6% in 2015 as compared with 2014 primarily
due to forfeitures resulting from the resignation of our chief financial officer in January 2015 and decreased
bonus program vesting, partially offset by increased ESPP expense due to our appreciating stock price, increased
employee participation compared to the prior year, and the post-acquisition settlement of pre-acquisition stock
options issued by an acquired business.

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.

Amortization of Identified Intangibles

Amortization of identified intangibles for the years ended December 31, 2015, 2014, and 2013 were $26.5
million, or 3% of revenue, $20.7 million, or 3% of revenue, and $19.4 million, or 3% of revenue, respectively.

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Amortization of identified intangibles increased by $5.8 million, or 28% in 2015 as compared with 2014
primarily due to intangible amortization of identified intangibles resulting from the Reggiani, Matan, CTI, and
Shuttleworth acquisitions, partially offset by decreased amortization due to certain Radius and Raster intangible
assets becoming fully amortized during 2015.

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 certain Pace, Entrac, Streamline, and Raster
intangible assets becoming fully amortized during 2014.

Restructuring and Other

During the years ended December 31, 2015, 2014, and 2013, 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.

Restructuring and other costs for the years ended December 31, 2015, 2014, and 2013 were $5.7, $6.6, and $4.8
million, respectively. Restructuring and other charges include severance costs of $3.0, $3.2, and $2.2 million
related to head count reductions of 99, 130, and 106 for the years ended December 31, 2015, 2014, and 2013,
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, 2015, 2014, and 2013 were $0.9,
$2.0, and $0.3 million, respectively. Facilities restructuring and other costs are primarily related to the relocation
of certain manufacturing and administrative locations to accommodate additional space requirements in 2015, the
consolidation of our German operations in 2014, and relocation of our corporate headquarters, as well as certain
manufacturing and administrative facilities, in 2013. Integration expenses for the years ended December 31,
2015, 2014, and 2013 of $1.8, $1.4, and $1.4 million, respectively, were required to integrate our business
acquisitions. Acquisition-related executive retention expense of $0.9 million was recognized during the year
ended December 31, 2013, 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 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.

Interest Expense

Interest expense for the years ended December 31, 2015, 2014, and 2013 was $17.4, $5.9, and $2.3 million,
respectively.

Interest expense increased by $11.5 million in 2015 compared with 2014 primarily due to interest expense and
amortization of debt issuance costs related to our Notes, which were issued in September 2014. Please refer to
Note 7—Convertible Senior Notes, Note Hedges, and Warrants of the Notes to Consolidated Financial
Statements for the terms and conditions of our Notes.

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 Income and Other Income (Expense), Net

Interest income and other income (expense), net, includes interest and investment 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, 2015, 2014, and 2013 were
$(1.8), $(5.5), and $0.8 million, respectively.

Interest income and other income (expense), net, decreased by $3.7 million from a loss of $5.5 million in 2014 to
a loss of $1.8 million in 2015 primarily because the foreign exchange loss decreased by $2.6 million resulting
from revaluation of foreign currency denominated net assets (mainly denominated in Euros, British pounds
sterling, Chinese renminbi, and Brazilian reais), partially offset by hedging gains. Investment income increased
by $1.1 million from $1.4 million in 2014 to $2.5 million in 2015 primarily resulting from increased investments
throughout 2015, which were made possible by the proceeds from the Notes.

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 late in 2014, which were made possible by the proceeds from the Notes.

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.

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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, 2015 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 $942, $232,
and $643 million, respectively, or 272%, 148%, and 731%, 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 10% results in an increase or
decrease in Industrial Inkjet, Productivity Software, and Fiery fair values of 5.0%. Likewise, the impact of a
change in the discount rate of one percentage point results in an increase in the Industrial Inkjet, Productivity
Software, and Fiery fair values of 12.4%, 10.2%, and 8.0%, respectively, or a decrease of 8.3%, 7.3%, and 5.9%,
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, 2015, 2014, and 2013 were as follows (in
thousands):

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

$ 9,311
28,211

$15,090
26,997

$127,232
45,906

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

$37,522

$42,087

$173,138

2015

2014

2013

For the year ended December 31, 2015, pretax net income of $37.5 million consisted of U.S. and foreign pretax
net income of $9.3 and $28.2 million, respectively. The pretax net income attributable to U.S. operations
included amortization of identified intangibles of $7.8 million, stock-based compensation of $34.1 million,
restructuring and other costs of $2.4 million, acquisition-related costs of $1.0 million, litigation settlement
expense of $0.6 million, and interest expense and amortization of debt issuance costs related to our Notes of
$15.7 million, partially offset by the change in fair value of contingent consideration of $0.2 million. The pretax
net income attributable to foreign operations included amortization of identified intangibles of $18.7 million,
restructuring and other costs of $3.3 million, acquisition-related costs of $4.5 million, and earnout interest
accretion of $1.4 million, partially offset by the change in fair value of contingent consideration of $3.3 million.
The exclusion of these items from net income would result in a U.S. and foreign pretax net income of $70.7 and
$52.8 million, respectively, for the year ended December 31, 2015.

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.

Provision for Income Taxes

We recorded a tax provision of $4.0 million in 2015 on pre-tax income of $37.5 million, $8.4 million in 2014 on
pre-tax income of $42.1 million, and a tax provision of $64.0 million in 2013 on pre-tax income of $173.1
million.

The provisions for income taxes before discrete items were $10.3, $14.7, and $11.5 million for the years ended
December 31, 2015, 2014, and 2013, respectively. Primary differences between our recorded tax provision 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 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, 2015, 2014, and 2013 (in millions):

2015

2014

2013

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$10.3
Provision for income taxes before discrete items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.3
Interest related to unrecognized tax benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefit related to the 2012 U.S. federal research and development tax credit
. . . . . . . . . . —
Benefit related to increased value of intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Tax deductions related to ESPP dispositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 tax positions . . . . . . . . . . .
Benefit related to net adjustments due to foreign audit settlements . . . . . . . . . . . . . . . . . . —
Provision related to valuation allowance for California deferred tax assets . . . . . . . . . . . . —
Provision related to gain on sale of building and land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
Other discrete items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

(5.5)
(0.6)

(0.5)

$11.5
0.4
(3.2)

$14.7
0.4
—
(3.1) —
(0.6)
—
(2.6)
(0.2)
—
—
—
(0.2)

(0.6)
(0.1)
(5.8)
(0.5)
(1.6)
19.4
45.4
(0.9)

Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 4.0

$ 8.4

$64.0

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.

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.

In 2012, we recognized taxable income of approximately $117.2 million, as a result of the sale of our Foster City
corporate headquarters facility and related land, 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.

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 2012. 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 year ended December 31, 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 2015, we realigned the
ownership of certain Productivity Software intellectual property to parallel our worldwide intellectual property
ownership. 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. 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 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, 2015, we
have permanently reinvested $141.2 million of unremitted foreign earnings. Should these earnings be remitted to
the U.S., the tax on these earnings would be $26.7 million.

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,
2015. 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.

As of December 31, 2015, 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. 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.

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.

Ex-Currency. To better understand trends in our business, we believe it is helpful to adjust our statement of
operations to exclude the impact of year-over-year changes in the translation of foreign currencies into U.S.
dollars. This is a non-GAAP measure that is calculated by adjusting revenue, gross profit, and operating expenses
by using historical exchange rates in effect during the comparable prior year period and removing the balance
sheet currency remeasurement impact from interest income and other income (expense), net, including removal
of any hedging gains and losses. We refer to these adjustments as “ex-currency.” Management believes the ex-
currency measures provides investors with an additional perspective on year-over-year financial trends and
enables investors to analyze our operating results in the same way management does. The year-over-year
currency impact can be determined as the difference between year-over-year actual growth rates and year-over-
year ex-currency growth rates.

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These excluded items are described below:

•

Intangible assets acquired to date are being amortized on a straight-line basis.

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

Non-cash settlement of vacation liabilities through the issuance of RSUs, which is not included in the
GAAP presentation of our stock-based compensation expense.

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.

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 year ended December 31, 2013, 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 Creta Print S.L. (“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 2015, 2014,
and 2013 in aggregate amounts of $0.6, $0.9, and $0.2 million, respectively.

•

Tax effects of non-GAAP adjustments are as follows:

O 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. 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:

–

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 $5.8 million for the years ended December 31, 2013, resulting from the release
of previously unrecognized tax benefits. These tax benefits primarily resulted from the
release of previously unrecognized tax benefits resulting from the expiration of U.S. federal
statutes of limitations.

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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 year ended
December 31, 2013.

Usefulness of Non-GAAP Financial Information to Investors

These non-GAAP measures, including ex-currency, are not in accordance with or an alternative to GAAP and
may be materially different from other non-GAAP measures, including similarly titled non-GAAP measures,
used by other companies. The presentation of this additional information should not be considered in isolation
from, as a substitute for, or superior to, net income or earnings per diluted share prepared in accordance with
GAAP. Non-GAAP financial measures have limitations in that they do not reflect certain items that may have a
material impact upon our reported financial results. We expect to continue to incur expenses of a nature similar
to the non-GAAP adjustments described above, and exclusion of these items from our non-GAAP net income
and non-GAAP earnings per diluted share should not be construed as an inference that these costs are unusual,
infrequent, or non-recurring.

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

(in millions, except per share data)

For the years ended December 31,

Ex-Currency

2015

2014

2013

2015

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

$ 33.5

$ 33.7

$ 109.1

$ 33.5

Amortization of identified intangible assets . . . . . . . . . . . . . . . . . . . . . .
Ex-currency adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash settlement of vacation liabilities by issuing RSUs . . . . . . . . . .
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:

26.5
—
34.1
1.3
5.7
—

5.5
(2.1)
0.6
—
—

20.7
—
36.1
—
6.6
—

1.5
(3.8)
0.9
—
—

Interest expense related to deferred property transaction . . . . . . . .
Non-cash interest expense related to our Notes . . . . . . . . . . . . . . . .
Balance sheet currency remeasurement impact . . . . . . . . . . . . . . . .
Tax effect of non-GAAP net income . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—
11.8
—
(19.0)

—
3.5
—
(12.1)

19.4
—
25.8
—
4.8
(117.2)

1.4
(5.7)
(3.1)
(3.1)
1.4

1.9
—
—
41.9

26.5
7.0
34.1
1.3
5.7
—

5.5
(2.1)
0.6
—
—

—
11.8
4.2
(21.1)

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

$ 97.9

$ 87.1

$ 76.6

$107.0

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

$ 2.03

$ 1.80

$ 1.58

$ 2.22

Shares for purposes of computing diluted non-GAAP net income per

share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

48.2

48.4

48.2

Critical Accounting Policies

The preparation of 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 revenue 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 $193.1 million, net of
allowance for doubtful accounts and revenue reserves of $22.0 million, as of December 31, 2015. 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 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 to
15-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 $9.6 million as of December 31, 2015.

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.

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The material assumptions used by management to estimate the required litigation accrual include:

•

communication with our external attorneys regarding the expected duration of the lawsuit, the potential
outcome of the lawsuit, and the likelihood of settlement;

likelihood of assertion of unasserted claims and assessments;

our strategy regarding the lawsuit;

deductible amounts under our insurance policies; and

past experiences with similar lawsuits.

Litigation is inherently unpredictable, and while we believe that we have valid defenses with respect to legal
matters pending against us, our financial statements could be materially affected in any particular period by the
unfavorable resolution of one or more of these contingencies or because of the diversion of management’s
attention and the incurrence of significant expenses.

Restructuring reserves. We have engaged, and may continue to engage, in restructuring actions, which require
management to utilize significant estimates related to the timing and the expense for severance and other
employee separation costs, realizable values of assets made obsolete, lease cancellation, facility downsizing, and
other exit costs. If actual amounts differ from our estimates, the amount of the restructuring charges could be
materially impacted.

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.

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,
2015. 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.

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Deferred tax assets, net of deferred tax liabilities, as of December 31, 2015 were $22.0 million, net of our
valuation allowance of $37.7 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 $46.6 million as of December 31, 2015. 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, 2015, we have permanently reinvested $141.2 million of unremitted foreign earnings.
Should these earnings be remitted to the U.S., the tax on these earnings would be $26.7 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 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 each of our reporting units to fair value fluctuations,

•

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

five-year financial forecast,

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, 2015 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 2016 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, which requires 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 (i.e., not included in purchase accounting), 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 $5.5, $1.5, and $1.4 million were expensed during the years ended December 31,
2015, 2014, and 2013, respectively, associated with businesses acquired during the periods reported and
anticipated transactions. The significant increase in acquisition costs incurred during the year ended
December 31, 2015 is primarily due to the Reggiani and Matan acquisitions, which closed on July 1, 2015.

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 51% of our net revenue, approximately
42% of our total assets, and approximately 56% of our total liabilities as of December 31, 2015.

In preparing our consolidated financial statements, for subsidiaries that operate in a U.S. dollar functional
currency environment, we must remeasure balance sheet monetary items 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, liabilities, and capital accounts, which are remeasured at
historical exchange rates. Revenue and expenses are recorded 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 functional currency 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 decreased by $119.3 million to $497.4 million as of
December 31, 2015 from $616.7 million as of December 31, 2014. The decrease was primarily due to cash
consideration for the acquisitions of Reggiani, Matan, CTI, and Shuttleworth, net of cash acquired, of $74.8
million, repayment of debt assumed through business acquisitions of $22.5 million, treasury stock purchases of
$65.7 million, settlement of shares for employee common stock related tax liabilities and the stock option
exercise price of certain stock options of $10.7 million, cash payments for property and equipment of $18.5
million, acquisition-related contingent consideration payments of $4.1 million, partially offset by cash flows
provided by operating activities of $65.1 million and proceeds from ESPP purchases and stock option exercises
of $11.5 million.

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.

(in thousands)

2015

2014

2013

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

$ 164,091
333,276

$ 298,133
318,599

$ 177,084
177,957

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

$ 497,367

$ 616,732

$ 355,041

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

$ 65,102
(110,618)
(88,427)
(99)

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

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

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

$(134,042) $ 121,049

$(106,912)

As of December 31, 2015, we have approximately $141.2 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
$106.0 and $124.1 million as of December 31, 2015 and 2014, respectively. Cash, cash equivalents, and short
term investments hed outside of the U.S will be used to fund local operations and finance international
acquisitions. 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, 2015, cash, cash equivalents, and short-term investments
available were $497.4 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 $65.1, $82.3, and $89.3 million for the years ended December 31,
2015, 2014, and 2013, respectively.

Net cash provided by operating activities in 2015 consists primarily of net income of $33.5 million and non-cash
charges and credits of $98.1 million, partially offset by the net change in operating asset and liabilities of $66.5
million. Non-cash charges and credits of $98.1 million consist primarily of $40.1 million of depreciation and
amortization, $33.7 million of stock-based compensation, net of cash settlements, provision for inventory
obsolescence of $5.2 million, provision for bad debts and sales-related allowances of $7.5 million, non-cash
accretion of interest expense related to our Notes and imputed build-to-suit financing obligation of $13.0 million,
and $6.0 million of other non-cash charges and credits, partially offset by $7.4 million of deferred tax credits.
The net change in operating assets and liabilities of $66.5 million consists primarily of increased accounts
receivable of $34.3 million, increased gross inventories of $6.7 million, increased other current assets of $14.9
million, decreased accounts payable and accrued liabilities of $6.4 million, and decreased net income taxes
payable of $4.2 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 69, 68, and 61 days at December 31, 2015, 2014, and 2013, 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, 2015, compared with December 31, 2014, primarily due to
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.

We have facilities in the U.S. and Italy 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. We also
have facilities in Spain and Italy 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.

Trade receivables sold cumulatively under these facilities were $23.2 and $3.7 million throughout 2015 on a
recourse and nonrecourse 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 $34.3 million from $72.1 million at December 31, 2014 to $106.4 million at
December 31, 2015 due to inventories acquired in business acquisitions in the Industrial Inkjet operating
segment. Inventory turnover was 4.7 during the quarter ended December 31, 2015 compared with 5.3 turns
during the quarter ended December 31, 2014. We calculate inventory turnover by dividing annualized current
quarter cost of revenue by ending inventories.

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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
decreased our cash flows provided by operating activities by $10.6 million in 2015. 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 and $7.2 million in 2014 and 2013, respectively. Our working capital, defined as
current assets minus current liabilities, was $588.2 and $667.8 million at December 31, 2014 and 2013,
respectively.

Investing Activities

Net cash used for investing activities was $110.6, $180.7, and $161.9 million for the years ended December 31,
2015, 2014, and 2013, respectively.

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

2015

2014

2013

$(328,911)

$(281,962)

$(145,088)

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

311,508

139,185

47,375

Purchases, net of proceeds from sales, of property and

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

(18,449)

(15,900)

(49,815)

Businesses and technology purchased, net of cash

acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(74,766)

(21,980)

(14,688)

Proceeds from notes receivable of acquired businesses and

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

—

354

Net cash used for investing activities . . . . . . . . . . . . . . . . . . . .

$(110,618)

$(180,657)

$(161,862)

Acquisitions

On July 1, 2015, we acquired Matan for approximately $38.9 million in cash, net of cash acquired, and Reggiani
for approximately $26.6 million in cash, net of cash acquired, $26.9 million in shares of EFI stock, plus an
additional future potential cash earnout contingent on achieving certain performance targets.

We acquired privately-held CTI and Shuttleworth during the fourth quarter of 2015, which have been included in
our Productivity Software operating segment, for aggregate cash consideration of $9.3 million, net of cash
acquired, $9.7 million in shares of EFI stock, plus a potential future cash earnout, which is contingent on
achieving certain performance targets.

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, Online Print Marketing Ltd. and DataCreation Pty. Ltd.
together doing business as Online Print Solutions (“OPS”), and Technique, Inc. and Technique Business Systems
Limited (collectively, “Technique”) acquisitions in 2013.

Property and Equipment

Net purchases of property and equipment were $18.5, $15.9, and $49.8 million in 2015, 2014, and 2013,
respectively, including the purchase of ceramic digital ink formulation equipment and 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 $17.4, $142.8, and $97.7
million in 2015, 2014, and 2013, respectively. We have classified our investment portfolio as “available for
sale.” Our investments are made with a policy of capital preservation and liquidity as primary objectives. We
may hold investments in fixed income debt securities to maturity; however, we may sell an investment at any
time if the quality rating of the investment declines, the yield on the investment is no longer attractive, or we
have better uses for the cash. Since we invest primarily in investment securities that are highly liquid with a
ready market, we believe the purchase, maturity, or sale of our investments has no material impact on our overall
liquidity.

Financing Activities

Net cash provided by (used for) financing activities was $(88.4), $220.8, and $(33.4) million for the years ended
December 31, 2015, 2014, and 2013, respectively.

In September 2014, we completed a private placement of $345 million principal amount of Notes. The net
proceeds from this offering were $336.3 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).

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 $2.0, $7.7, and $5.2 million and employee purchases of
ESPP shares of $9.5, $8.6, and $7.1 million in 2015, 2014, and 2013, 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 2015, 2014, and 2013 was $76.4, $101.1, and $35.7 million,
respectively, of cash used to repurchase outstanding shares of our common stock. Such purchases included $10.7,
$24.3, and $13.9 million of 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.

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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 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 of $200 million of outstanding common stock. Under this publicly announced plan, we repurchased
1.5, 1.8, and 0.1 million shares for an aggregate purchase price of $65.7, $76.8, and $2.6 million during the years
ended December 31, 2015, 2014, and 2013, respectively.

On November 9, 2015, the board of directors cancelled $54.9 million, effective December 31, 2015, remaining
for repurchase under the 2013 authorization and approved a new authorization to repurchase $150 million of
outstanding common stock commencing January 1, 2016. This authorization expires December 31, 2018.

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, 2015 of $2.0, $1.1, $0.6, and $0.3 million are primarily
related to the previously accrued Technique, GamSys, Metrix, and SmartLinc contingent consideration liabilities,
respectively. 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 Sistemas de Informação, Serviços e Comércio Ltda. and
Metrics Sistemas de Informação e Serviço Ltda. (collectively, “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. 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.

We also paid approximately $22.5 million of indebtedness, which was assumed in the Reggiani acquisition.

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, various textile printing inks, and other components are required to
support our internal manufacturing operations. Label and packaging digital inkjet printers, solvent ink
formulation, branded textile ink, and certain sub-assemblies are purchased from third party contract
manufacturers and branded third party ink 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.

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, 2015 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, 2015, 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

$ 57,213
54,796
30,480
355,293
46,622

Less than 1
year

Between
1-3 years

Between
3-5 years

More than
5 years

$ 8,252
4,545
30,480
2,530
—

$15,255
50,251
—
5,175
—

$ 13,413
—
—
347,588
—

$20,293
—
—
—
—

Total (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$544,404

$45,807

$70,681

$361,001

$20,293

(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
remaining interest payments for our Notes, assuming no early retirement of debt obligations, are $10.4
million through 2019.

(4) As of December 31, 2015, our liability for unrecognized tax benefits, including interest and penalties, is
reflected in our Consolidated Balance Sheet as $11.3 million of “noncurrent income taxes payable” and
$35.3 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
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.

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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 $3.2 million at
December 31, 2015. We hedge balance sheet remeasurement exposures using forward contracts not designated as
hedging instruments with notional amounts of $115.4 million at December 31, 2015 consisting of hedges of
Brazilian real, British pound sterling, Israeli shekel, Australian dollar, Japanese yen, Chinese renminbi, and Euro-
denominated intercompany balances with notional amounts of $63.7 million, hedges of Brazilian real, British
pound sterling, Australian dollar, Canadian dollar, and Euro-denominated trade receivables with notional
amounts of $49.1 million, and a hedge of Indian rupee net monetary assets with a notional amount of $2.6
million.

Since Europe represents a significant portion of our revenue and cash flow, SEC 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 31% of our receivables are with
European customers as of December 31, 2015. Of this amount, 30% of our European receivables (9% of
consolidated net receivables) are in the higher risk southern European countries (mostly Italy, Spain, and
Portugal), which are adequately reserved.

Marketable Securities

We maintain an investment portfolio of short-term fixed income debt securities of various holdings, types, and
maturities. These short-term investments are generally classified as available-for-sale and, consequently, are
recorded on our Consolidated Balance Sheets at fair value with unrealized gains and losses reported as a separate
component of OCI. We attempt to limit our exposure to interest rate risk by investing in securities with maturities
of less than three years; however, we may be unable to successfully limit our risk to interest rate fluctuations. At
any time, a sharp rise in interest rates could have a material adverse impact on the fair value of our investment
portfolio. Conversely, declines in interest rates could have a material 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, 2015 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

$ 350,086

No change in
interest rates

$ 347,266

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

$ 344,267

The SEC encourages the discussion of exposure to the uncertainty in the European economy. Specifically,
European debt by counterparty (i.e., sovereign and non-sovereign) and by country should be addressed. We have
no European sovereign debt investments. Our European debt investments consist of non-sovereign corporate debt
securities of $41.7 million, which represents 21% of our corporate debt instruments (12% of our short-term
investments) at December 31, 2015. European debt investments of $35.0 million are with corporations domiciled
in the northern and central European countries of Sweden, Netherlands, Luxembourg, Norway, France, and the
U.K. Short-term investments of $6.7 million are with corporations domiciled 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, 2015, 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. Although
the fair value of these instruments fluctuates when interest rates change, a substantial portion of the market value
of our Notes in excess of the outstanding principal amount relates to the conversion premium. Please refer to
Note 6—Investments and Fair Value Measurements and Note 7—Convertible Senior Notes, Note Hedges, and
Warrants of the Notes to Consolidated Financial Statements.

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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, Israeli shekel, New Zealand dollar, 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, Brazilian real, Chinese renminbi, Israeli shekel, Australian dollar, and Canadian
dollar) and operating expenses (primarily the Euro, British pound sterling, Chinese renminbi, Israeli shekel,
Japanese yen, Indian rupee, Brazilian real, and Australian dollar) in foreign countries. We can benefit from or be
adversely affected by either a weaker or stronger U.S. dollar relative to major currencies worldwide with respect
to our consolidated financial statements. Accordingly, we can benefit from a stronger U.S. dollar due to the
corresponding reduction in our foreign operating expenses translated in U.S. dollars and at the same time we can
be adversely affected by a stronger U.S. dollar due to the corresponding reduction in foreign revenue translated in
U.S. dollars.

We hedge our operating expense exposure in Indian rupees. The notional amount of our Indian rupee cash flow
hedge was $3.2 million at December 31, 2015. We hedge balance sheet remeasurement exposures using forward
contracts not designated as hedging instruments with notional amounts of $115.4 million at December 31, 2015
consisting of hedges of Brazilian real, British pound sterling, Israeli shekel, Australian dollar, Japanese yen,
Chinese renminbi, and Euro-denominated intercompany balances with notional amounts of $63.7 million, hedges
of Brazilian real, British pound sterling, Australian dollar, Canadian dollar, and Euro-denominated trade
receivables with notional amounts of $49.1 million, and a hedge of Indian rupee net monetary assets with a
notional amount of $2.6 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 year ended December 31, 2015 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 . . . . . . . . . . . . . . . . . . .

Income from operations . . . . . .

$884,737

$ 57,122

$882,513

$ 56,643

$880,289

$ 56,164

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, 2015 and 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations for the Years Ended December 31, 2015, 2014, and 2013 . . . . . . . .
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2015, 2014, and

2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2015, 2014, and

2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows for the Years Ended December 31, 2015, 2014, and 2013 . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unaudited Quarterly Consolidated Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

80
82
83

85
86
87
143

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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 sheets of Electronics For Imaging, Inc. and subsidiaries
(collectively, the “Company”) as of December 31, 2015 and 2014 and the related consolidated statements of
operations, comprehensive income, cash flows, and stockholders’ equity for each of the two years in the period
ended December 31, 2015. Our audits also included the financial statement schedule (2015 and 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 these consolidated
financial statements and financial statement schedule based on our audit.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the 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 audits provide 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, 2015 and 2014 and the results of
their operations and their cash flows for each of the two years in the period ended December 31, 2015, in
conformity with accounting principles generally accepted in the United States of America. Also, in our opinion,
such financial statement schedule (2015 and 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, 2015, 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 18, 2016, expressed an unqualified
opinion on the Company’s internal control over financial reporting.

/S/ DELOITTE & TOUCHE LLP
San Jose, California
February 18, 2016

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

In our opinion, the consolidated statements of operations, comprehensive income, stockholders’ equity, and cash
flows for the year ended December 31, 2013 present fairly, in all material respects, the results of operations and
cash flows of Electronics For Imaging, Inc. and its subsidiaries for the year 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 the year 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 audit. We conducted our audit 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 audit provides 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,

2015

2014

(in thousands)

Assets
Current assets:

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term investments, available for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, net of allowances of $22.0 and $17.5 million, respectively . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 164,091
333,276
193,121
106,378
473
31,139

$ 298,133
318,599
155,421
72,132
1,460
15,804

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

828,478
97,779
338,793
135,552
41,043
14,257

861,549
86,197
245,443
62,571
39,230
9,580

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

$1,455,902

$1,304,570

Liabilities and Stockholders’ Equity
Current liabilities:

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

$ 113,541
74,425
48,767
3,594

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Convertible senior notes, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Imputed financing obligation related to build-to-suit lease . . . . . . . . . . . . . . . . . . . . . .
Noncurrent contingent and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncurrent income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

240,327
296,485
13,480
51,101
19,003
11,312

631,708

86,940
63,183
41,927
1,714

193,764
284,818
12,472
5,440
3,875
15,512

515,881

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; 51,808 and 49,671

shares issued, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital
Treasury stock, at cost; 4,476 and 2,736 shares, respectively . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

518
657,354
(190,439)
(17,424)
374,185

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

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

824,194

788,689

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

$1,455,902

$1,304,570

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,

2015

2014

2013

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

$882,513
423,129

$790,427
360,690

$ 727,693
332,527

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

459,384

429,737

395,166

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

141,364
156,339
72,797
26,510
5,731
—

134,732
147,383
66,932
20,673
6,578
—

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

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

402,741

376,298

220,518

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

Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

56,643
(17,364)
(1,757)

37,522
(3,982)

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

42,087
(8,373)

174,648
(2,306)
796

173,138
(64,031)

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

$ 33,540

$ 33,714

$ 109,107

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

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

0.71

0.70

0.72

0.70

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

47,217

46,866

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

48,150

48,406

2.34

2.26

46,643

48,359

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(1)

Includes stock-based compensation expense as follows:

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

2,837
9,406
7,602
14,226

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

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

2015

2014

2013

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 benefits of $0.1 and $0.2 million
for the years ended December 31, 2015 and 2014, respectively, and tax
provision of less than $0.1M for the year ended December 31, 2013 . . . . . .

Reclassification adjustments included in net income, net of tax benefits of
less than $0.1 million for the years ended December 31, 2015, 2014, and
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

Currency translation adjustments, net of no tax provision for the year ended

December 31, 2015 and tax provisions of less than $0.1 and $0.1 million for
the years ended December 31, 2014, and 2013, respectively . . . . . . . . . . . . . .
Unrealized gains (losses) on cash flow hedges . . . . . . . . . . . . . . . . . . . . . . . . . . .

For the years ended December 31,

2015

2014

2013

$33,540

$33,714

$109,107

(169)

(344)

(66)

(235)

(24)

(368)

(23)

(9,872)
40

(5,576)
(25)

(1,733)
33

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

$23,473

$27,745

$107,450

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, net of cash settlements . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contingent consideration payments related to businesses acquired . . . . . . . . . . . . . . .
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net cash provided by operating activities

Cash flows from investing activities:

For the years ended December 31,

2015

2014

2013

$ 33,540

$ 33,714

$ 109,107

40,124
(7,384)
5,368
(3,256)
7,536
5,193
33,741
—
—

12,957
3,844

(34,355)
(6,759)
(14,863)
(6,371)
(4,213)

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)
(118,492)

271
(4,355)

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

65,102

82,341

89,339

Purchases of short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales and maturities of short-term investments . . . . . . . . . . . . . . . . . . .
Purchases, net of proceeds from sales, of property and equipment
. . . . . . . . . . . . . . .
Businesses and technology purchased, net of cash acquired . . . . . . . . . . . . . . . . . . . .
Proceeds from notes receivable of acquired businesses and other investments . . . . . .

(328,911)
311,508
(18,449)
(74,766)
—

(281,962)
139,185
(15,900)
(21,980)
—

(145,088)
47,375
(49,815)
(14,688)
354

Net cash used for investing activities

Cash flows from financing activities:

(110,618)

(180,657)

(161,862)

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

(58)
—
—
11,450
(76,447)
(22,534)
(4,093)
3,255

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

Net cash provided by (used for) financing activities

(88,427)

220,825

(33,390)

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

(99)

(1,460)

(999)

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

(134,042)
298,133

121,049
177,084

(106,912)
283,996

Cash and cash equivalents at end of year

$ 164,091

$ 298,133

$ 177,084

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

Our products include industrial super-wide and wide format, label and packaging, textile, and ceramic tile
decoration digital inkjet printers that utilize our digital ink, industrial 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 ink includes digital UV, LED,
ceramic, and thermoforming ink, as well as a variety of textile ink including dye sublimation, pigmented, reactive
dye, acid dye, and water-based dispersed printing 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 digital inkjet products (“Industrial Inkjet”) including VUTEk and Matan
super-wide and wide format, Reggiani textile, Jetrion label and packaging, and Cretaprint digital ceramic tile
decoration industrial digital inkjet printers; 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 and packaging 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, fair value of financial instruments, stock-based compensation, income taxes, valuation of
goodwill and intangible assets, business combinations, build-to-suit lease accounting, functional currency
determination, 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, 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 our 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, 2015, 2014, and 2013. We have determined that gross unrealized losses on
short-term investments at December 31, 2015 and 2014 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, and derivative instruments, are
disclosed in Note 6—Investments and Fair Value Measurements of the Notes to Consolidated Financial
Statements.

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

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.

We recognize revenue on the sale of DFEs, printers, and ink in accordance with the provisions of SEC Staff
Accounting Bulletin (“SAB”) 104, Revenue Recognition, and when applicable, ASC 605-25. 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 the leading printer manufacturers are generally 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.

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. Software revenue consists of licensing, post-contract
customer support, and professional consulting. We apply the provisions of ASC 985-605, Software—Revenue
Recognition, and if applicable, SAB 104 and ASC 605-25, to all transactions involving the sale of software
products and hardware transactions where the software is not incidental.

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

We enter into contracts to sell our products and services and, while the majority of our sales agreements contain
standard terms and conditions, there are agreements that contain multiple elements or non-standard terms and
conditions. As a result, significant contract interpretation is sometimes required to determine the appropriate
accounting, including whether the deliverables specified in a multiple element arrangement should be treated as
separate units of accounting for revenue recognition purposes, and, if so, how the price should be allocated
among the elements and when to recognize revenue for each element. We recognize revenue for delivered
elements only when the delivered elements have stand-alone value, uncertainties regarding customer acceptance
are resolved, and there are no customer-negotiated refund or return rights for the delivered elements. If the
arrangement includes a customer-negotiated refund or right of return relative to the delivered item and the
delivery and performance of the undelivered item is considered probable and substantially in our control, the
delivered element constitutes a separate unit of accounting. We limit revenue recognition for delivered elements
to the amount that is not contingent on the future delivery of products or services, future performance
obligations, or subject to customer-specified return or refund privileges. Changes in the allocation of the sales
price between elements may impact the timing of revenue recognition, but will not change the total revenue
recognized on the contract.

Multiple-Deliverable Arrangements

We 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 ASC 605-25. 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. 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, 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.

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

We have insignificant transactions where tangible and software products are sold together in a bundled
arrangement. Accounting Standards Update (“ASU”) 2009-14, Certain Revenue Arrangements that Include
Software Elements, 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 tangible products 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.

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.

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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.

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.

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

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.

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 $8.7 and $2.0 million as of December 31, 2015 and 2014,
respectively, and is included in other current assets in our Consolidated Balance Sheets.

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.

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.

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

Financing Receivables

ASC 310, Receivables, requires disclosures regarding the credit quality of our financing receivables and
allowance for credit losses including disclosure of credit quality indicators, past due information, and
modifications of our financing receivables. Our financing receivables were $14.8 and $2.6 million consisting of
$10.2 and $1.3 million of sales-type lease receivables, included within other current assets and other assets, and
$4.6 and $1.3 million of trade receivables having a contractual maturity in excess of one year at December 31,
2015 and 2014, respectively. The credit quality of financing receivables are evaluated on the same basis as trade
receivables. We do not have material past due financing receivables.

Concentration of Risk

We are exposed to credit risk in the event of default by any of our customers to the extent of amounts recorded in
the Consolidated Balance Sheet. We perform ongoing evaluations of the collectibility of accounts receivable
balances for our customers and maintain allowances for estimated credit losses. Actual losses have not
historically been significant, but have risen over the past several years as our customer base has grown through
acquisitions.

Our Fiery products, which constitute approximately 34% of revenue for the year ended December 31, 2015, 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, including textile ink, and a few key
contract manufacturers to manufacture our Fiery DFEs, 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 and Italy 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 $3.7 and $6.2 million during the years ended December 31, 2015 and 2014,
respectively, which approximates the cash received.

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

We have facilities in the U.S. and Italy 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 $23.2 and $20.8 million during the years ended December 31, 2015
and 2014, 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, 2015
and 2014.

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

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,
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 (greater of three
years or the lease term); 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 and improvements 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 $12.2, $9.9, and $9.4 million for the years ended December 31, 2015, 2014, and 2013,
respectively. Repairs and maintenance expenditures are expensed as incurred, unless they are considered to be
improvements and extend the useful life of the property and equipment.

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

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 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.

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, 2015, 2014, and 2013.

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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 2015, 2014, or 2013. Intangible
amortization expense was $26.5, $20.7, and $19.4 million for the years ended December 31, 2015, 2014, or 2013,
respectively.

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

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, 2015, 2014, or 2013.

Warranty Reserves

Our Industrial Inkjet printer and Fiery DFE products are generally accompanied by a 12 to 15-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 revenue 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 $9.6 and $9.7 million as of December 31, 2015 and 2014, respectively.

Litigation Accruals

Restructuring Reserves

Restructuring liabilities are established when the costs have been incurred. Severance and other employee
separation costs are incurred when management commits to a plan of termination identifying the number of
employees impacted, their termination dates, and the terms of their severance arrangements. The liability is
accrued at the employee notification date unless service is required beyond the greater of 60 days or the legal
notification period, in which case the liability is recognized ratably over the service period. Facility downsizing
and closure costs are accrued at the earlier of the lessor notification date, if the lease agreement allows for early
termination, or the cease use date. Relocation costs are incurred when the related relocation services are
performed. Costs related to contracts without future benefit are incurred at the earlier of the cease use date or the
contract cancellation date.

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

Research and Development

Research and development costs were $141.4, $134.7, and $128.1 million for the years ended December 31,
2015, 2014, and 2013, 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.

Advertising

Advertising costs are expensed as incurred. Total advertising and promotional expenses were $4.3, $4.3, and $4.1
million for the years ended December 31, 2015, 2014, and 2013, 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.

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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.

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

Business Combinations

We allocate the purchase price of acquired companies to the tangible and intangible assets acquired, including
IPR&D, and liabilities assumed based on their estimated fair values. Such a valuation requires management to
make significant estimates and assumptions, especially with respect to intangible assets. The results of operations
for each acquisition are included in our financial statements from the date of acquisition.

Our acquisitions are 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 recognize measurement period adjustments in the reporting period in which
the adjustment amounts are determined as required by ASU 2015-16, Simplifying the Accounting for
Measurement Period Adjustments; 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.

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.

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

Foreign Currency Translation

In preparing our consolidated financial statements, for subsidiaries that operate in a U.S. dollar functional
currency environment, we remeasure balance sheet monetary items 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, liabilities, 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 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 $4.2, $6.8, and $0.3 million for the years ended December 31, 2015, 2014, and 2013, respectively.

For subsidiaries that operate in a local functional currency 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, 2015 and 2014 was an unrealized loss of $17.0 and
$7.2 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 and Alphagraph, for which we consider the Euro to be the
subsidiaries’ functional currency; our Italian subsidiary, Reggiani, for which we consider the Euro to be the
functional currency; our Spanish subsidiary, Cretaprint, for which we consider the Euro to be the subsidiary’s
functional currency; our U.K. subsidiaries, Electronics For Imaging United Kingdom Limited and Shuttleworth,
for which we consider the British pound sterling to be the subsidiaries’ functional currency; our Israeli
subsidiary, Matan, for which we consider the shekel to be the 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 Group Holdings Limited (“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 and our Industrial Inkjet demonstration 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, shares to be purchased under our ESPP having
a dilutive effect, the assumed issuance of shares to be issued from escrow related to the acquisitions of Reggiani
and CTI, 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 of the Notes. Any potential
shares that are anti-dilutive as defined in ASC 260, Earnings Per Share, are excluded from the effect of dilutive
securities.

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

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
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, Australian dollar, Canadian dollar,
Chinese renminbi, and Euro-denominated intercompany balances, British pound sterling and Euro-denominated
trade receivables, and Indian rupee net monetary assets. These derivative instruments 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 and 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 or 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.

100

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

Recent Accounting Pronouncements

Deferred Taxes. ASU 2015-17, Balance Sheet Classification of Deferred Taxes, issued in November 2015 and
effective in the first quarter of 2016, removes the requirement to classify the current and noncurrent amounts of
deferred income tax assets and liabilities and requires noncurrent classification. Under existing guidance, the
current and noncurrent classification of deferred income tax assets and liabilities is generally determined by
reference to the classification of the related asset or liability unless there is no associated asset or liability that
will cause the temporary timing difference to reverse. In that situation, the expected reversal date of the timing
difference is used for classification purposes.

This guidance may be implemented either retrospectively or prospectively. We have elected to apply this
guidance retrospectively to all prior periods to maintain the comparability of presentation between periods. Early
adoption is permitted, so we have elected to early adopt this standard in the current period, which has resulted in
the reclassification of deferred tax assets and liabilities of $17.2 and $0.1 million, respectively, from current to
noncurrent as of December 31, 2014.

Measurement Period Adjustments. The FASB issued ASU 2015-16, Simplifying the Accounting for
Measurement Period Adjustments, in September 2015. The acquirer of a business is required to retrospectively
adjust provisional amounts recognized at the acquisition date with a corresponding adjustment to goodwill.
Those adjustments are required when new information is obtained about facts and circumstances that existed as
of the acquisition date and, if known, would have affected the measurement of the amounts initially recognized
or would have resulted in the recognition of additional assets or liabilities. Under current guidance, the acquirer
also must revise comparative prior period information, including depreciation, amortization, or other income
affects as a result of changes made to provisional amounts. To simplify the accounting for measurement period
adjustments, ASU 2015-16 eliminates the requirement to retrospectively account for those adjustments. The
impact on our financial statements will be determined in the future if measurement period adjustments are
identified.

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Debt Issuance Costs. In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt
Issuance Costs, which is effective in the first quarter of 2016. ASU 2015-03 requires that debt issuance costs
related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying
amount of that debt, which is consistent with the presentation of debt discounts and premiums. Accordingly,
approximately $5.8 million of debt issuance costs will be reclassified from other current assets and other assets to
a direct reduction of convertible senior notes, net, during the first quarter of 2016. Retrospective application is
required, which will result in the restatement of comparative consolidated balance sheets.

Inventory Valuation. In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory,
which is effective in the first quarter of 2017. ASU 2015-11 requires that inventory be valued at the lower of cost
or net realizable value, which is defined as the estimated selling price in the ordinary course of business, less
reasonably predictable costs of completion, disposal, and transportation. We currently value inventory at the
lower of cost or net realizable value less a reasonable profit margin as allowed by the current inventory valuation
guidance. We are evaluating the impact of ASU 2015-11 on our inventory valuation and results of operations.

Revenue Recognition. ASU 2014-09, Revenue from Contracts with Customers, issued in May 2014, enhances
the comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets.
The principles-based guidance provides a framework for addressing revenue recognition issues comprehensively.
The standard requires 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.

101

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 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 2018. We are evaluating its impact on our revenue and
results of operations.

Supplemental Disclosure of Cash Flow Information

(in thousands)

For the years ended December 31,

2015

2014

2013

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

$ 8,512

$ 6,157

$ 7,883

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

$ 2,945

128

210

Acquisitions of businesses and technology:
Cash paid for acquisitions, excluding contingent consideration . . . .
Cash acquired in acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$82,446
(7,680)

$23,888
(1,908)

$15,541
(853)

Net cash paid for acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$74,766

$21,980

$14,688

Common stock issued in connection with business acquisitions . . . .

$36,567

$ —

Non-cash investing and financing activities:
Acquisition of property under a build-to-suit lease . . . . . . . . . . . . . .
Non-cash settlement of vacation liabilities by issuing RSUs . . . . . . .
Property and equipment received, but not paid . . . . . . . . . . . . . . . . .

$ —
1,353
1,684

$ —
—
2,275

$11,230
—
7,210

$ 3,037

$ 2,275

$18,440

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, shares to be purchased under our ESPP having
a dilutive effect, the assumed issuance of shares to be issued from escrow related to the acquisitions of Reggiani
and CTI, 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 of the Notes. Any potential
shares that are anti-dilutive as defined in ASC 260 are excluded from the effect of dilutive securities.

102

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

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, 2015, 2014, and 2013 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, 2015 and 2013 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.

Basic and diluted earnings per share for the years ended December 31, 2015, 2014, and 2013 are reconciled as
follows (in thousands, except for per share amounts):

2015

2014

2013

Basic net income per share:
Net income available to common shareholders . . . . . . . . . . . . . . . .

$33,540

$33,714

$109,107

Weighted average common shares outstanding . . . . . . . . . . . . . . . .
Basic net income per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

47,217
0.71

46,866
0.72

46,643
2.34

Dilutive net income per share:
Net income available to common shareholders . . . . . . . . . . . . . . . .

Weighted average common shares outstanding . . . . . . . . . . . . . . . .
Dilutive stock options, restricted stock, and ESPP purchase

$33,540

$33,714

$109,107

47,217

46,866

46,643

rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

933

1,540

1,716

Weighted average common shares outstanding for purposes of

computing diluted net income per share . . . . . . . . . . . . . . . . . . .

48,150

48,406

48,359

Dilutive net income per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0.70

2.26

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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 ESPP purchase rights having an anti-
dilutive effect of less than 0.1 million shares for the years ended December 31, 2015 and 2014, and 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.

The weighted-average number of common shares outstanding does not include the effect of the potential
common shares from conversion of our Notes and exercise of our 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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Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Note 3: Business Acquisitions

We acquired Reggiani and Matan during 2015, which has been included in our Industrial Inkjet operating
segment, and two business process automation businesses, which have been included in our Productivity
Software operating segment. Post-acquisition revenue was $88.4 million in 2015 related to these four
acquisitions. We acquired four business process automation businesses during 2014, which have been included in
our Productivity Software operating segment. We acquired three business process automation businesses and an
imposition solution business during 2013, which have been included in our Productivity Software operating
segment. Acquisition-related transaction costs were $5.5, $1.5, and $1.4 million during the years ended
December 31, 2015, 2014, and 2013, respectively.

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
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 expand our
presence in the digital inkjet textile printing market through the Reggiani acquisition, 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 2015 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 during the respective measurement
periods, which end at various dates in 2016. Measurement period adjustments will be recognized in the reporting
period in which the adjustment amounts are determined.

2015 Acquisitions

Industrial Inkjet Operating Segment

On July 1, 2015, we acquired privately-held Reggiani, a societa per azioni headquartered in Bergamo, Italy, and
privately-held Matan, an Israeli company headquartered in Rosh Ha’Ayin, Israel, which has been included in the
Industrial Inkjet operating segment.

We purchased Matan for cash consideration of approximately $38.9 million, net of cash acquired. Matan super-
wide format digital inkjet roll-to-roll printers, including advanced material handling features such as in-line
cutting and slitting, expand our offerings in this market. The consideration is subject to change based on purchase
price adjustment provisions.

We purchased Reggiani for cash consideration of approximately $26.6 million, net of cash acquired, the issuance
of 0.6 million shares of EFI common stock valued at $26.9 million, plus a potential future cash earnout, which is
contingent on achieving certain revenue and EBIT performance targets over consecutive 18 and 12-month
periods. Reggiani industrial digital inkjet textile printers address the full scope of advanced textile printing with
versatile printers suitable for pigmented, reactive dye, acid dye, and water-based dispersed printing ink. This
acquisition expands our presence in the digital inkjet textile printing market.

104

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

The fair value of the earnout related to the Reggiani acquisition is currently estimated to be $43.4 million by
applying the income approach in accordance with ASC 805-30-25-5. Key assumptions include a risk-free
discount rate of 4.98%, a probability-adjusted revenue level, and probability-adjusted EBIT. Probability-adjusted
revenue and EBIT are significant inputs that are not observable in the market, which ASC 820-10-35, refers to as
Level 3 inputs. This contingent liability is reflected in the Consolidated Balance Sheet as of December 31, 2015,
as a noncurrent liability. 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.

Productivity Software Operating Segment

We acquired privately-held CTI and Shuttleworth, which have been included in our Productivity Software
operating segment, for aggregate cash consideration of $9.3 million, net of cash acquired, the issuance of
0.2 million shares of EFI common stock valued at $9.7 million, plus a potential future cash earnout, which is
contingent on achieving certain performance targets.

CTI, a California limited liability company headquartered in San Diego, California, was acquired on October 6,
2015 and provides manufacturing execution software for the corrugated packaging industry, including business
and management capabilities, with a customer base including sheet feeders, sheet plants, and full corrugated box
plants.

Shuttleworth, a private limited liability company incorporated in England and Wales and headquartered in
Kettering, U.K., was acquired on November 4, 2015, and provides business process automation solutions to the
signage and packaging digital print industries. Support and operations of Shuttleworth were included in the
Productivity Software operating segment, which provides Pace, Monarch, and Radius products to the
Shuttleworth customer base, while continuing to support existing Shuttleworth customers.

The fair value of the CTI and Shuttleworth earnouts are currently estimated to be $7.4 million, by applying the
income approach in accordance with ASC 805-30-25-5. Key assumptions include risk-free discount rates of 0.6%
to 1.3% and probability-adjusted revenue levels. Probability-adjusted revenue is a significant input that is not
observable in the market, which ASC 820-10-35, refers to as a Level 3 input. This contingent liability is reflected
in the Consolidated Balance Sheet as of December 31, 2015, as current and noncurrent liabilities of $3.2 and $4.3
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.

2014 Acquisitions

Productivity Software Operating Segment

We acquired privately-held SmartLinc, Rhapso, DirectSmile, and DIMS, which have been included in 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 $3.6 million, which is
net of earnout payments of $0.3 million in 2015. Key assumptions include discount rates between 4.7% and 5.2%
and probability-adjusted revenue levels. Probability-adjusted revenue levels. These contingent liabilities are
reflected in the Consolidated Balance Sheet as of December 31, 2015, as current and noncurrent liabilities of $1.2
and $2.4 million, respectively.

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.

105

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

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.

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.

2013 Acquisitions

Productivity Software Operating Segment

We acquired privately-held PrintLeader, GamSys, Metrix, and Lector, which have been included in 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, and additional future cash earnouts
contingent on achieving certain performance targets.

The fair value of the earnouts related to the 2013 acquisitions are currently estimated to be $0.4 million, which is
net of earnout payments of $1.8 and $1.2 million in 2015 and 2014, respectively. 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, 2015, as current and noncurrent liabilities of $0.2
and $0.2 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 included in the Productivity Software operating segment,
which also provide PrintSmith products to the PrintLeader customer base, while continuing to support existing
PrintLeader customers.

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 included in 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 allowed us
to extend our portfolio offerings to bridge the gap between our business process automation software and
prepress. Metrix has been included in 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 included in 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.

106

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

Valuation Methodologies

Intangible assets acquired in 2015, 2014, and 2013 consist of customer relationships, trade names, existing
technology, backlog, and IPR&D. Each intangible asset valuation methodology for each acquisition assumes
discount rates between 16% 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.

Backlog represents unfulfilled customer purchase orders at the acquisition date that will provide a relatively
secure revenue stream, subject only to potential customer cancellation.

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.

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, 2015 . . .
Acquisition-date valuation (in thousands) . . . . . . . .

16%
33%
51%

21% 18%
70% 75%
100% 75%

20%
17%
17%

20%
17%
76% 50 - 53%
100%
90%

$3,190

$10,879

$150

$555

$389

$150

Matan

Reggiani

CTI

Shuttleworth DIMS

GamSys

IPR&D is subject to amortization after product completion over the product life or otherwise subject to
impairment in accordance with acquisition accounting guidance. Additional costs incurred to complete IPR&D
after the acquisition are expensed.

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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

Industrial Inkjet

Productivity Software

Acquired Business

Matan

Reggiani

CTI and Shuttleworth

SmartLinc, Rhapso,
DirectSmile, DIMS

PrintLeader, GamSys,
Metrix, Lector

2015 Acquisitions

2014 Acquisitions

2013 Acquisitions

Customer relationships . . . . .
Existing technology . . . . . . .
Trade names . . . . . . . . . . . . .
IPR&D . . . . . . . . . . . . . . . . .
Backlog . . . . . . . . . . . . . . . . .

Goodwill . . . . . . . . . . . . . . . .

Net tangible liabilities . . . . . .

Total purchase price . . . . . . .

Weighted
average
useful life

6 years
5 years
5 years
—
less than
one year

Weighted
average
useful life

5 years
4 years
5 years
—
less than
one year

Purchase
Price
Allocation

$ 6,630
8,790
2,570
3,190

70
26,609

47,859
(4,945)

$42,914

Weighted
average
useful life

3-4 years
5 years
4 years
—
less than
one year

Purchase
Price
Allocation

$ 12,187
33,118
11,964
10,879

704
61,341

130,193
(32,571)

$ 97,622

Weighted
average
useful life

5 years
4 years
4 years
—

—

Purchase
Price
Allocation

$ 5,001
5,634
1,357
705

132
17,790

30,619
(3,611)

$27,008

Purchase
Price
Allocation

$ 8,569
4,890
1,231
389

—
21,078

36,157
(3,758)

$32,399

Weighted
average
useful life

5-6 years
3-4 years
3-4 years
—

—

Purchase
Price
Allocation

$ 5,540
2,060
670
150

—
13,365

21,785
(3,441)

$18,344

The initial preliminary purchase price allocations were adjusted by $3.8, $0.2, and $1.1 million during 2015,
2014, and 2013, respectively, primarily related to deferred tax liabilities.

Goodwill, which represents the excess of the purchase price over the net tangible and intangible assets acquired,
that was generated by our acquisitions of Reggiani, CTI, and Shuttleworth is not deductible for tax purposes.

Matan, Reggiani, and Shuttleworth generate revenue and incur operating expenses primarily in shekels, Euros,
and British pounds sterling, respectively. Upon consideration of the salient economic indicators discussed in
ASC 830-10-55-5, we consider the shekel, Euro, and British pound sterling to be the functional currencies for
Matan, Reggiani, and Shuttleworth, respectively.

Unaudited Pro forma Information

The unaudited pro forma information set forth below presents revenue, net income, and earnings per share as if
Reggiani, Matan, CTI, and Shuttleworth were acquired as of the beginning of the periods presented and includes
certain pro forma adjustments, including increased amortization of identified intangibles, reduced interest income
to reflect net cash used for the acquisitions, the related tax effects of these adjustments, and increased share count
to give effect to shares issued in the Reggiani and CTI purchase transactions. All acquisitions are included in our
financial statements from the date of acquisition. The pro forma information is not intended to represent or be
indicative of the consolidated results of operations that would have been reported had the acquisitions been
completed as of the beginning of the periods presented and should not be taken as representative of the future
consolidated results of operations.

Unaudited pro forma revenue, net income, and earnings per share for the years ended December 31, 2015, 2014,
and 2013 is as follows (in thousands, except for per share amounts):

2015

2014

2013

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

$946,591

$932,156

$846,127

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

$ 83,904

$ 25,880

$102,596

Earnings per basic common share . . . . . . . . . . . . . . . .

Earnings per diluted common share . . . . . . . . . . . . . . .

1.76

1.73

0.53

0.52

2.16

2.09

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, 2015 and 2014 are as follows (in thousands):

Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 53,783
6,646
45,949

$33,903
2,308
35,921

2015

2014

$106,378

$72,132

Property and Equipment, Net

Property and equipment, net, as of December 31, 2015 and 2014 are as follows (in thousands):

Land, buildings, and improvements (including build-to-suit

lease) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment and purchased software . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture and leasehold improvements . . . . . . . . . . . . . . . . . . . . . . .

$ 72,373
69,748
17,449

$ 71,522
54,766
14,425

2015

2014

Less accumulated depreciation and amortization . . . . . . . . . . . . . . .

159,570
(61,791)

140,713
(54,516)

$ 97,779

$ 86,197

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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 $10.6 and $10.9 million as of December 31, 2015 and 2014, respectively, 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, 2015 and 2014 are as follows (in thousands):

2015

2014

Accrued compensation and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warranty provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued royalty payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contingent liabilities—current
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$31,949
9,635
5,305
4,545
4,469
3,367
15,155

$28,632
9,682
5,017
8,254
—
1,426
10,172

$74,425

$63,183

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, 2015 and
2014 are as follows (in thousands):

Net unrealized investment losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Currency translation losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized gains (losses) on cash flow hedges . . . . . . . . . . . . . . .

(376)
(17,049)
1

$ (141)
(7,177)
(39)

2015

2014

$(17,424)

$(7,357)

Amounts reclassified out of OCI were less than $0.1 million, net of tax, for the years ended December 31, 2015,
2014, and 2013 million, net of tax, and consisted of unrealized gains and losses 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, 2015 and 2014 are as follows (in thousands, except for weighted average useful life):

December 31, 2015

December 31, 2014

Weighted
average
useful life
(years)

Gross
carrying
amount

Accumulated
amortization

Weighted
remaining
average
useful life
(years)

Goodwill

. . . . . . . . . . . . . . . . . . . . . . . . . — $338,793 $

—

Customer relationships and other
. . . . . .
4.4
Existing technology . . . . . . . . . . . . . . . . .
4.3
11.4
Trademarks and trade names . . . . . . . . . .
IPR&D . . . . . . . . . . . . . . . . . . . . . . . . . . . —

$ 75,145 $ (36,625)
(114,018)
161,441
(30,949)
65,395
—
15,163

Amortizable intangible assets . . . . . . . . .

5.8

$317,144 $(181,592)

—

2.6
4.0
6.7
—

4.6

Net carrying
amount

Gross carrying
amount

Accumulated
amortization

Net carrying
amount

$338,793

$245,443

— $245,443

$ 38,520
47,423
34,446
15,163

$ 54,205
114,951
50,375
389

$ (21,979)
(110,189)
(25,181)
—

$ 32,226
4,762
25,194
389

$135,552

$219,920

$(157,349)

$ 62,571

Acquired customer relationships and other; existing technology; and trademarks and trade names; are amortized
over their estimated useful lives of three to sixteen 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 $26.5, $20.7, and $19.4 million for the years ended December 31, 2015, 2014, and 2013,
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, 2015, 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,

2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Future
amortization
expense

$ 31,597
28,210
23,823
20,072
11,071
5,616

$120,389

Goodwill Rollforward

The goodwill rollforward for the years ended December 31, 2015 and 2014 as required by ASC 805 is as follows
(in thousands):

Industrial
Inkjet

Productivity
Software

Fiery

Total

Ending Balance, December 31, 2013 . . . . . . . . . . . . . . . . . . . . .

$ 61,704

$106,697

$64,802

$ 233,203

Additions (SmartLinc, Rhapso, DirectSmile, and DIMS

acquisitions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Opening balance sheet adjustments . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . .

— $ 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

Additions (Reggiani, Matan, CTI, and Shuttleworth

acquisitions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Opening balance sheet adjustment . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 91,776
(3,826)
(4,891)

$ 17,790
(13)
(6,135)

$ — $ 109,566
(3,839)
(12,377)

—
(1,351)

Ending Balance, December 31, 2015 . . . . . . . . . . . . . . . . . . . . .

$ 142,183

$133,128

$63,482

$ 338,793

Accumulated Impairment as of December 31, 2015,

recognized in 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(103,991) $ — $ — (103,991)

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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 2015 and 2014 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)

A two-step impairment test of goodwill is required by ASC 350-20-35. 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. Six 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 18% in 2015 exceeded historical normalized growth rates for the
Industrial Inkjet operating segment due to the Reggiani and Matan acquisitions.

Productivity Software revenue growth of 4% in 2015 was less than historical normalized growth rates.
We expect this operating segment will achieve historical normalized growth rates during the forecast
horizon due to the favorable impact of our acquisition strategy and the benefits of this operating
segment on our customers’ profitability in an uncertain economy.

Fiery revenue growth of 7% in 2015 significantly exceeded historical normalized growth rates in the
Fiery operating segment.

112

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

• Despite ongoing economic uncertainty, our reporting units’ revenue is assumed to grow at historical

normalized rates between 2016 and 2020 for the following primary reasons:

O Our Industrial Inkjet revenue is positioned to outpace the slow economy 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 acquisitions of Reggiani and Matan will enable us to continue to achieve historical

normalized revenue growth rates through the forecast horizon.

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.

O Long-term industry growth after 2021.

O Gross profit percentages will approximate historical average levels in the Productivity Software
and Fiery reporting units. Industrial Inkjet gross profit will be 35 percent, which is less than the
levels achieved in 2015, 2014, and 2013 primarily due to lower gross margin percentages realized
from Reggiani, partially offset by increased gross margin percentages realized from the next
generation C4 ceramic tile decoration digital inkjet printer, which has experienced improving
margins subsequent to product launch.

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 14% which equates to a
consolidated compound annual growth rate of 7%. The upper end of the range exceeds our historical normalized
growth rates due to the addition of the Reggiani textile business to our portfolio. Future cash flows were
discounted to present value using a mid-year convention and a consolidated discount rate of 9%. Terminal values
were calculated using the Gordon growth methodology with a consolidated long-term growth rate of 4%, 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 15.5%,
we examined the most similar transactions in relevant industries and determined the average premium indicated
by the transactions deemed to be most similar to a hypothetical transaction involving our reporting units. We
examined the weighted average and median control premiums offered in relevant industries, industry specific
control premiums, and specific transaction control premiums to conclude that our estimated control premium is
reasonable.

We assess the impairment of identifiable intangibles and long-lived assets whenever events or changes in
circumstances indicate the carrying value may not be recoverable or the life of the asset may need to be revised.
Factors considered important that could trigger an impairment review include:

•

significant negative industry or economic trends,

significant decline in our stock price for a sustained period,

our market capitalization relative to net book value,

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

•

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

significant changes in the strategy for our overall business, and

our assessment of growth and profitability in each reporting unit over the coming years.

Long-Lived Assets

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, 2015, 2014, or 2013.

Note 6: Investments and Fair Value Measurements

114

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

Our available-for-sale short-term investments as of December 31, 2015 and 2014 are as follows (in thousands):

Amortized cost

Gross unrealized
gains

Gross
unrealized losses

Fair value

December 31, 2015
U.S. Government and sponsored entities . . . . . . . . . .
Corporate debt securities . . . . . . . . . . . . . . . . . . . . . .
Asset-backed securities . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . .
Mortgage-backed securities—residential

$ 98,411
198,498
35,276
1,689

Total short-term investments . . . . . . . . . . . . . . . . . . .

$333,874

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

$ 12
20
195
2

$229

$ 34
74
1
270
13

$392

$(137)
(510)
(174)
(6)

$(827)

$(112)
(433)
—
(65)
(3)

$(613)

$ 98,286
198,008
35,297
1,685

$333,276

$ 75,915
218,134
2,376
19,266
2,908

$318,599

The fair value and duration that investments, including cash equivalents, have been in a gross unrealized loss
position as of December 31, 2015 and 2014 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, 2015
U.S. Government and sponsored entities . . . $ 82,366
136,274
Corporate debt securities . . . . . . . . . . . . . . . .
27,928
Asset-backed securities . . . . . . . . . . . . . . . . .
764
Mortgage-backed securities—residential . . .

$(137)
(448)
(103)
(2)

$ —
16,940
7,131
269

$ —

(62)
(71)
(4)

$ 82,366
153,214
35,059
1,033

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $247,332

$(690)

$24,340

$(137)

$271,672

December 31, 2014
U.S. Government and sponsored entities . . . $120,433
147,141
Corporate debt securities . . . . . . . . . . . . . . . .
14,261
Asset-backed securities . . . . . . . . . . . . . . . . .
640
Mortgage-backed securities—residential . . .

$(112)
(433)
(65)
(2)

$ —
—
120
—

$ —
—

(1)

—

$120,433
147,141
14,381
640

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $282,475

$(612)

120

(1)

$282,595

$(137)
(510)
(174)
(6)

$(827)

$(112)
(433)
(66)
(2)

$(613)

For fixed income securities that have unrealized losses as of December 31, 2015, 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, 2015 were temporary in nature.

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115

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

Amortized cost and estimated fair value of investments at December 31, 2015 is summarized by maturity date as
follows (in thousands):

Mature in less than one year . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mature in one to three years . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$180,836
153,038

$180,687
152,589

Total short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$333,874

$333,276

Amortized cost

Fair value

For the year ended December 31, 2015, net realized gains of $0.1 million were recognized, which were
comprised of $0.2 million in realized gains from sale of investments, partially offset by $0.1 million in realized
losses. 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, offset by $0.2 million in realized losses. As of
December 31, 2015 and 2014, net unrealized losses of $0.6 and $0.2 million, respectively, were included in OCI
in the accompanying Consolidated Balance Sheets.

Fair Value Measurements

ASC 820 identifies fair value as the exchange price, or exit price, representing the amount that would be received
to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a basis for
considering market participant assumptions in fair value measurements, ASC 820 establishes a three-tier fair
value hierarchy as follows:

Level 1: Inputs that are quoted prices in active markets for identical assets or liabilities that the reporting
entity has the ability to access at the measurement date;

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, 2015 and 2014 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, 2015
Assets:
Money market funds . . . . . . . . . . . . . . . . . . . .
U.S. Government and sponsored entities . . . .
Corporate debt securities . . . . . . . . . . . . . . . .
Asset-backed securities . . . . . . . . . . . . . . . . .
Mortgage-backed securities—residential . . . .

Liabilities:
Contingent consideration, current and

noncurrent . . . . . . . . . . . . . . . . . . . . . . . . . .
Self-insurance . . . . . . . . . . . . . . . . . . . . . . . . .

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

Total

$ 13,221
98,286
198,778
35,297
1,684

$347,265

$13,221
34,712
—
—
—

$47,933

$ —
63,574
198,778
35,113
1,684

$299,149

$ 54,796
1,268

$ 56,064

$ —
—

$ —

$ —
—

$ —

$ 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

$ —
—

$ —

$ —
—

$ —

$ —
—
—
184
—

184

$54,796
1,268

$56,064

$ —
—
—
—
254
—

254

$12,277
1,369

$13,646

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Money market funds consist of $13.2 and $25.8 million, which have been classified as cash equivalents as of
December 31, 2015 and 2014, respectively. U.S. government and sponsored entities securities include $63.3
million, which have been classified as cash equivalents at December 31, 2014. Corporate debt securities include
$0.7 and $15.6 million, which have been classified as cash equivalents at December 31, 2015 and 2014,
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
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, 2015 and 2014.

117

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

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.

Liabilities for Contingent Consideration

Acquisition-related liabilities for contingent consideration (i.e., earnouts) are related to the purchase business
combinations of Shuttleworth, CTI, and Reggiani in 2015; DIMS, DirectSmile, and SmartLinc in 2014; Metrix,
GamSys, and PrintLeader in 2013; and Technique, OPS, Metrics, FX Colors, and Cretaprint in 2012.

The fair value of these earnouts is estimated to be $54.8 and $12.3 million as of December 31, 2015 and 2014,
respectively, by applying the income approach in accordance with ASC 805-30-25-5. Key assumptions include
risk-free discount rates between 0.6% and 4.98% (Monte Carlo valuation method) and discount rates between
4.2% and 6.4% (probability-adjusted method), as well as probability-adjusted revenue and EBIT levels.
Probability-adjusted revenue and EBIT are significant inputs that are not observable in the market, which ASC
820-10-35 refers to as Level 3 inputs. These contingent liabilities have been reflected in the Consolidated
Balance Sheet as of December 31, 2015 as current and noncurrent liabilities of $4.5 and $50.3 million,
respectively.

The DIMS, DirectSmile, GamSys, Metrix, and SmartLinc earnout performance probability percentages were
reduced or not achieved in 2015. 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. Consequently, the decrease in the fair value of contingent
consideration was $3.5 and $4.5 million, partially offset by $1.4 and $0.7 million of earnout interest accretion
related to all acquisitions, during the years ended December 31, 2015 and 2014, 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.

118

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

Changes in the contingent liability for contingent consideration during the years ended December 31, 2015 and
2014 are summarized as follows:

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

Fair value of contingent consideration at December 31, 2014 . . . . . . . . . . . . . . . .
Fair value of Reggiani contingent consideration at July 1, 2015 . . . . . . . . . . . . . .
Fair value of CTI contingent consideration at October 6, 2015 . . . . . . . . . . . . . . .
Fair value of Shuttleworth contingent consideration at November 4, 2015 . . . . . .
Changes in valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency adjustment

$ 21,052
1,546
4,162
4,456
(3,813)
(14,047)
(1,079)

$ 12,277
43,170
2,551
5,077
(3,575)
(4,093)
(611)

Fair value of contingent consideration at December 31, 2015 . . . . . . . . . . . . . . . .

$ 54,796

A narrative description of the sensitivity of recurring fair value measurements to changes in unobservable inputs
is required 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 a change in the fair value of
contingent consideration of $2.2 million resulting in a corresponding adjustment to general and administrative
expense. A change in the discount rate of one percentage point results in a change in the fair value of contingent
consideration of $0.7 million. 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 $12.8 million as of December 31, 2015.

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Fair Value of Derivative Instruments

We utilize the income approach to measure the fair value of our derivative assets and liabilities. The income
approach uses pricing models that rely on market observable inputs such as yield curves, currency exchange
rates, and forward prices, and are therefore classified as Level 2 measurements. The notional amount of our
derivative assets and liabilities was $118.6 and $89.5 million as of December 31, 2015 and 2014, respectively.
The fair value of our derivative assets and liabilities that were designated for cash flow hedge accounting
treatment having notional amounts of $3.2 and $2.9 million as of December 31, 2015 and 2014, respectively, was
not material.

119

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

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, 2015 was
approximately $366 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.

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 $336.3 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 purchase the Note Hedges
described below, net of 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, 2015, 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:

•

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.

120

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

We separated the Notes into liability and equity components. 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 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, 2015 (in thousands):

Liability component . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: debt discount, net of amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$345,000
48,515

Net carrying amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$296,485

Equity component
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: debt issuance costs allocated to equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 63,643
(1,582)

Net carrying amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 62,061

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Interest expense recognized related to the Notes during the years ended December 31, 2015 and 2014 was as
follows (in thousands):

0.75% coupon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of debt discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 2,595
1,396
11,667

$ 798
419
3,461

2015

2014

$15,658

$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.

121

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

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
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.

Note 8: Commitments and Contingencies

Contingent Consideration

We are required to make payments to the former stockholders of acquired companies based on the achievement
of specified performance targets as more fully explained in Note 6—Investments and Fair Value Measurements.

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.

Lease Commitments

As of December 31, 2015, we lease 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, 2015 are as
follows (in thousands):

Fiscal Year

2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total

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

Future Minimum
Lease Payments

Future Minimum
Sublease Receipts

$ 8,252
8,165
7,090
6,423
4,990
20,293

$55,213

$249
158
93
33
—
—

$533

Rent expense was approximately $8.0, $6.1, and $6.1 million for the years ended December 31, 2015, 2014, and
2013, respectively. Sublease rental income was approximately $3.1 million for the year ended December 31,
2013. 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. Please refer to Note 13—Gain on Sale of Building
and Land.

122

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

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 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, 2015, we have
capitalized $10.6 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
commencement. As of December 31, 2015, the imputed financing obligation in connection with the facility was
$13.5 million, including accrued interest, which was classified as a noncurrent 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.

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Guarantees and Product Warranties

Guarantees must be disclosed upon issuance and a liability recognized for the fair value of obligations we assume
under such guarantees in accordance with ASC 460, Guarantees, which applies to both general guarantees and
product warranties.

Our Industrial Inkjet printer and Fiery DFE products are generally accompanied by a 12 to 15-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.

123

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

The changes in product warranty reserve for the years ended December 31, 2015 and 2014 were as follows (in
thousands):

Balance at January 1, . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liability assumed through business acquisitions . . . . . . . .
Provisions, net of releases . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 9,682
1,006
11,839
(12,892)

$ 11,047
—
9,874
(11,239)

Balance at December 31,

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

$ 9,635

$ 9,682

2015

2014

Indemnifications

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, 2015, we are subject to the matters discussed below.

Componex vs. EFI

MDG Matter

124

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

Other Matters

Note 9: Common Stock Repurchase Programs

On November 6, 2013, the board of directors approved the repurchase of $200 million of outstanding common
stock. Under this publicly announced plan, we repurchased 1.5 and 1.8 million shares for an aggregate purchase
price of $65.7 and $76.8 million during the years ended December 31, 2015 and 2014, respectively.

On November 9, 2015, the board of directors cancelled $54.9 million remaining for repurchase under the 2013
authorization and approved a new authorization to repurchase $150 million of outstanding common stock
commencing January 1, 2016. This authorization expires December 31, 2018.

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 connection with stock option exercises, certain employees can surrender
shares to satisfy the exercise price of certain stock options and any tax withholding obligations incurred in
connection with such exercises. Employees surrendered 0.2 and 0.6 million shares for an aggregate purchase
price of $10.7 and $24.3 million for the years ended December 31, 2015 and 2014, 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, as shown in our Consolidated Statement of Stockholders’ Equity, 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.

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125

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

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,
intercompany balances, trade receivables, anticipated cash flows, and to 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 primarily related to non-U.S. dollar-denominated revenue in Europe, the U.K., Latin America,
China, Israel, Australia, Canada, and to non-U.S. dollar-denominated operating expenses in Europe, India, Japan,
the U.K., China, Israel, Brazil, and Australia. We hedge our operating expense cash flow exposure in Indian
rupees. We hedge balance sheet remeasurement exposure associated with Brazilian real, British pound sterling,
Israeli shekel, Australian dollar, Japanese yen, Canadian dollar, Chinese renminbi, and Euro-denominated
intercompany balances; Brazilian real, British pound sterling, Australian dollar, Canadian dollar, and Euro-
denominated trade receivables, and Indian rupee-denominated net monetary assets.

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 (i.e., operating expense
exposure in Indian rupees; the collection of Brazilian real, British pound sterling, Australian dollar, Canadian
dollar, and Euro-denominated trade receivables; and the settlement of Brazilian real, British pound sterling,
Israeli shekel, Australian dollar, Japanese yen, Chinese renminbi, and Euro-denominated intercompany
balances). 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 $3.2 and $2.9 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, 2015 and 2014, 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.

126

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

Balance Sheet Hedges

Forward contracts not designated as hedging instruments with notional amounts of $115.4 and $86.6 million are
used to hedge foreign currency balance sheet exposures at December 31, 2015 and 2014, 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, Israeli shekel, Australian dollar, Japanese yen, Chinese renminbi, and Euro-denominated
intercompany balances with notional amounts of $63.7 and $63.8 million at December 31, 2015 and 2014,
respectively, hedges of Brazilian real, British pound sterling, Australian dollar, Canadian dollar, and Euro-
denominated trade receivables with notional amounts of $49.1 and $20.8 million at December 31, 2015 and
2014, respectively, and hedges of Indian rupee net monetary assets with notional amounts of $2.6 and $1.9
million at December 31, 2015 and 2014, respectively.

Note 11: Income Taxes

The components of income before income taxes for the years ended December 31, 2015, 2014, and 2013 are as
follows (in thousands):

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

$ 9,311
28,211

$15,090
26,997

$127,232
45,906

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

$37,522

$42,087

$173,138

2015

2014

2013

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The provision for (benefit from) income taxes for the years ended December 31, 2015, 2014, and 2013 is
summarized as follows (in thousands):

Current:

U.S. Federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 3,754
1,813
5,798

$ 5,050
1,237
7,922

$ 6,589
(3,250)
6,845

Total current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11,365

14,209

10,184

2015

2014

2013

Deferred:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. Federal
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3,119)
(583)
(3,682)

(7,384)

(94)
846
(6,588)

20,875
33,532
(560)

(5,836)

53,847

Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 3,981

$ 8,373

$64,031

127

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

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, 2015, 2014, and 2013 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

2015

2014

2013

$13,133
800
(4,217)
(3,483)
351
—

35.0% $14,731
360
2.1
(2,629)
(11.2)
(2,293)
(9.3)
0.8
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%
0.3
(3.9)
(4.3)
(0.1)

assessments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4,808)

(12.7)

(2,088)

(5.0)

(4,427)

(2.6)

Non-deductible stock-based compensation pursuant to

ASC 718-740 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3,244

8.6

2,793

6.6

1,764

1.0

Valuation allowance changes affecting provision for

income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

— —

20,012

11.6

Benefit from reassessment of taxes from filing of prior

year tax returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Domestic Manufacturing Deduction . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other

—
(878)
(161)

—
(2.3)
(0.4)

— —
(598)
845

(1.4)
2.0

(0.1)

(72)
— —
(159)

(0.1)

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

$ 3,981

10.6% $ 8,373

19.9% $64,031

36.8%

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 our Productivity Software and Cretaprint intellectual property in 2012 to
parallel our worldwide intellectual property ownership. The impact of the prior year adjustment is immaterial to
our consolidated financial statements for the year ended December 31, 2013.

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%. 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.

128

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

In Altera Corp.v. Commissioner, the U.S Tax Court issued an opinion on July 27, 2015, related to the treatment
of stock-based compensation expense in an intercompany cost-sharing arrangement. To date, the U.S.
Department of the Treasury has not withdrawn the requirement to include stock-based compensation in
intercompany cost-sharing arrangements from its regulations. Due to the uncertainty related to the status of the
current regulations and whether the Internal Revenue Service will appeal the decision, we have not recorded any
benefit as of December 31, 2015 in our Consolidated Statement of Operations. We will continue to monitor
ongoing developments and potential impacts to our consolidated financial statements.

The tax effects of temporary differences that give rise to deferred tax assets (liabilities) as of December 31, 2015
and 2014 are as follows (in thousands):

2015

2014

Reserves and accruals not currently deductible for tax purposes . . . . . . . . . . . . . . . . . . . . . .
Net operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax credit carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 13,804
10,409
44,176
3,778
8,309
5,099

$ 13,776
10,528
54,321
2,403
7,778
2,956

Gross deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

85,575

91,762

Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(24,042)
(1,841)

(22,917)
(1,153)

Gross deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(25,883)

(24,070)

Deferred tax valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(37,652)

(32,337)

Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 22,040

$ 35,355

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We have $18.5 million ($50.1 million for state tax purposes) and $39.4 million ($33.4 million for state tax
purposes) of loss and credit carryforwards at December 31, 2015 for U.S. federal tax purposes. A majority of
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 $2.3 million of 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. In 2015,
these unrecognized deferred tax assets have been recognized as the excess tax benefits have been realized.

129

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 valuation allowances on deferred tax assets related to California and Luxembourg deferred tax assets that
will not be realized based on the size of the net operating loss and research and development credits being
generated, we have determined that it is more likely than not that we will realize the benefit related to all other
deferred tax assets. To the extent we increase a valuation allowance, we will include an expense within the tax
benefit in the Consolidated Statement of Operations in the period in which such determination is made.

A reconciliation of the change in the gross unrecognized tax benefits from January 1, 2013 to December 31, 2015
is as follows (in millions):

Federal, State,
and Foreign
Tax

Accrued
Interest and
Penalties

Gross
Unrecognized
Income Tax
Benefits

Balance at January 1, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . .
Additions for tax positions related to 2015 . . . . . . . . . . . . . . . . . . . . . . .
Reductions due to lapse of applicable statute of limitations . . . . . . . . . .

Balance at December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$29.0
2.7
7.3
(1.9)
(1.1)
(3.6)

$32.4
0.9
3.6
(2.7)

$34.2
14.1
4.7
(6.9)

$46.1

$ 0.8
0.3
—
—
(0.1)
(0.4)

$ 0.6
0.4
—
(0.2)

$ 0.8
0.2
—
(0.5)

$ 0.5

$29.8
3.0
7.3
(1.9)
(1.2)
(4.0)

$33.0
1.3
3.6
(2.9)

$35.0
14.3
4.7
(7.4)

$46.6

As of December 31, 2015, 2014, and 2013, gross unrecognized benefits that would affect the effective tax rate if
recognized were $43.5, $32.1, and $33.0 million, respectively, offset by deferred tax benefits of $1.0, $0.7, and
$1.1 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 $3.9 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 $23.7 million
of gross unrecognized tax benefits as an offset to deferred tax assets as of December 31, 2015, and the remaining
$11.3 million has been recorded as non-current income taxes payable.

We recognize potential accrued interest and penalties related to unrecognized tax benefits in income tax expense.
At December 31, 2015, 2014, and 2013, we have accrued $0.5, $0.9, and $1.0 million, respectively, for potential
payments of interest and penalties.

130

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

We are subject to examination by the Internal Revenue Service (“IRS”) for the 2012-2014 tax years, state tax
jurisdictions for the 2011-2014 tax years, the Netherlands tax authority for the 2014 tax year, the Spanish tax
authority for the 2011-2014 tax years, and the Italian tax authority for the 2012-2014 tax years.

Note 12: Employee Benefit Plans

Equity Incentive Plans

As of December 31, 2015, we had outstanding equity awards under our 2009 Plan and our 2007 Plan, which are
both defined below. No awards may be granted under our 2007 Stock 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 one 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.

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The shares of common stock covered by the 2009 Plan may be treasury shares, authorized but unissued shares, or
shares purchased in the open market. If an award under the 2009 Plan is forfeited (including a reimbursement of
a non-vested award upon a participant’s termination of employment at a price equal to the par value of the
common stock subject to the award) or expired, any shares of common stock subject to the award may be used
again for new grants under the 2009 Plan.

The 2009 Plan is administered by the Compensation Committee of the Board of Directors (“Committee”). The
Committee has the exclusive authority to administer the 2009 Plan, including the power to (i) designate
participants under the 2009 Plan, (ii) determine the types of awards granted to participants under the 2009 Plan,
the number of such awards, and the number of shares of our common stock that is subject to such awards,
(iii) determine and interpret the terms and conditions of any awards under the 2009 Plan, including the vesting
schedule, exercise price, whether to settle or accept the payment of any exercise price, in cash, common stock,
other awards, or other property, and whether an award may be cancelled, forfeited, or surrendered, (iv) prescribe
the form of each award agreement, and (v) adopt rules for the administration, interpretation, and application of
the 2009 Plan.

Persons eligible to participate in the 2009 Plan include all of our employees, directors, and consultants, as
determined by the Committee. As of December 31, 2015, approximately 3,500 employees and consultants and 5
non-employee directors were eligible to participate in the 2009 Plan.

There were 2.3, 2.5, and 2.7 million shares outstanding and 2.7, 3.4, and 4.5 million shares available for grant
under the 2009 Plan as of December 31, 2015, 2014, and 2013, respectively.

131

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

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.

There were no shares outstanding under the 2007 Plan as of December 31, 2015. There were less than 0.1 million
shares outstanding under the 2007 Plan as of December 31, 2014. There were 0.5 million shares outstanding
under the 2007 Plan as of December 31, 2013.

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, 2015, 2014, and 2013, there were 0.3, 0.6, and 0.6 million shares
issued under the ESPP at an average purchase price of $31.66, $13.54, and $12.39, respectively. As of
December 31, 2015, there was $1.6 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, 2015, 2014, and 2013, there were 1.5, 1.8, and 2.4 million shares, respectively, of our
common stock reserved for issuance under the ESPP.

132

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 $2.3, $2.1,
and $2.0 million during the years ended December 31, 2015, 2014, and 2013, 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 purchase rights 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, ESPP purchase rights, and RSUs under ASC 718 for
the years ended December 31, 2015, 2014, and 2013 is summarized as follows (in thousands):

2015

2014

2013

Employee stock options . . . . . . . . . . . . . . . . . . . . . . . . . .
RSUs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ESPP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

397
29,671
4,003

264
32,429
3,368

921
22,026
2,823

Total stock-based compensation . . . . . . . . . . . . . . . . . .
Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

34,071
(9,436)

36,061
(10,045)

25,770
(7,535)

Stock-based compensation expense, net of tax . . . . . . .

$24,635

$ 26,016

$18,235

133

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, 2015, 2014, and 2013. The estimated
weighted average fair value per share of ESPP purchase rights issued and the assumptions used to estimate fair
value for the years ended December 31, 2015, 2014, and 2013 are as follows:

2015

2014

2013

Weighted average fair value per share . . . . . . . . . . . . . . . . . . . . . . . . .
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected term (in years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10.28

11.12
19% - 28% 25% - 28% 25% - 38%
0.1% - 0.7% 0.1% - 0.5% 0.1% - 0.4%
0.5 - 2.0

0.5 - 2.0

7.53

Stock Option Activity

Stock options outstanding and exercisable, including performance-based and market-based options, as of
December 31, 2015, 2014, and 2013 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, 2013 . . . . . . . . . . . . . . . . . . . . . . .

1,536

$14.19

Options forfeited and expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(42)
(434)

25.63
11.93

Options outstanding at December 31, 2013 . . . . . . . . . . . . . . . . . . . .

1,060

$14.66

Options forfeited and expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4)
(490)

25.63
15.72

Options outstanding at December 31, 2014 . . . . . . . . . . . . . . . . . . . .

567

$13.67

Options exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(124)

15.35

Options outstanding at December 31, 2015 . . . . . . . . . . . . . . . . . . . .

Options vested and expected to vest at December 31, 2015 . . . . . . . .

Options exercisable at December 31, 2015 . . . . . . . . . . . . . . . . . . . . .

443

418

$13.20

$13.22

2.11

2.13

$14,863

$14,850

$14,021

134

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, 2015, 2014, and 2013. The total intrinsic value of options
exercised, determined as of the date of option exercise, was $3.7, $13.2, and $5.5 million for the years ended
December 31, 2015, 2014, and 2013, respectively. There was $0.1 million of total unrecognized compensation
cost related to stock options expected to vest as of December 31, 2015 that is expected to be recognized as
expense over a weighted average period of 0.1 years.

Stock options outstanding and exercisable as of December 31, 2015 are summarized as follows (shares in
thousands):

Range of exercise prices

$10.77 to $10.77 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$11.40 to $11.40 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$11.92 to $11.92 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$12.00 to $12.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$12.05 to $12.05 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$13.72 to $13.72 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$14.28 to $14.28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$16.57 to $16.57 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$10.77 to $16.57 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

48
130
29
2
4
75
74
81

443

Options outstanding

Options exercisable

Weighted
average
remaining
contractual
term (years)

Weighted
average
exercise price

0.66
1.64
1.12
1.13
0.88
1.84
2.86
3.68

2.11

$10.77
11.40
11.92
12.00
12.05
13.72
14.28
16.57

$13.20

32
130
29
2
4
75
74
72

418

$10.77
11.40
11.92
12.00
12.05
13.72
14.28
16.57

$13.22

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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 one 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, 2015, 2014, and 2013 were $41.61, $41.71, and
$29.11, respectively.

135

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

Non-vested RSUs, including performance-based and market-based RSUs, as of December 31, 2015, 2014, and
2013, 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, 2013 . . . . . . . . . . . . . . . . . . . . .

2,345

$15.26

Restricted stock granted . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted stock vested . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted stock forfeited . . . . . . . . . . . . . . . . . . . . . . . . .

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

1,104
(925)
(368)

41.61
32.39
39.08

Non-vested at December 31, 2015 . . . . . . . . . . . . . . . . . .

1,814

$40.53

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, 2015, 2014, and 2013 were $32.39, $21.94, and $14.4 million, respectively. Aggregate intrinsic
value of RSUs vested and expected to vest at December 31, 2015 was $72.0 million, calculated as the closing
price per share of our common stock on the last trading day of the fiscal period multiplied by 1.5 million RSUs
vested and expected to vest at December 31, 2015. There was approximately $29.8 million of unrecognized
compensation costs related to RSUs expected to vest as of December 31, 2015. That cost is expected to be
recognized over a weighted average period of 1.2 years.

136

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, 2015, 2014, and
2013, and activity for each of the years then ended, are summarized below (in thousands):

Non-vested at January 1, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . .

Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Non-vested at December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . .

Non-vested at December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . .

Non-vested at December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . .

Performance-based

Market-based

RSUs

611

524
(291)
(164)

680

709
(403)
(134)

852

569
(284)
(217)

920

Stock
Options

—
—
—

RSUs

—
(86)
—

—

—
—

18
(3)
(26)

Stock
Options

131

—
(131)
—

—

—
—
—

—

—
—
—

—

Approximately 21% of the non-vested performance-based RSUs at December 31, 2015 subsequently vested
during the first quarter of 2016 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. 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, 2015, 2014, and 2013 are as follows:

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Year ended December 31, 2015 Grants
Grant date fair value per share . . . . . . . . . . . . . . . . . . . . . . . .
Service period (years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derived service period (years)
. . . . . . . . . . . . . . . . . . . . . . . .
Implied volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

Short-term

Long-term

$38.77
1.0

42.82
2.0 - 3.0

$33.84

1.60
30.0%
1.7%

$42.04
1.0

40.30
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
1.0

30.63
4.0

137

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

Our performance-based RSUs generally vest when specified performance criteria are met based on bookings,
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

138

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, and office furniture.

Note 14: Restructuring and Other

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139

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

Restructuring and other reserve activities for the years ended December 31, 2015 and 2014 are summarized as
follows (in thousands):

Reserve balance at January 1 . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2015

2014

$ 2,102
3,109
2,622
—
(4,814)

873
4,400
2,177
(27)
(5,321)

Reserve balance at December 31 . . . . . . . . . . . . . . . . . . . . . .

$ 3,019

$ 2,102

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 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 a complete software suite that enables efficient and automated end-to-
end business and production workflows for the print and packaging industry. This Productivity Suite also
provides tools to enable revenue growth, efficient scheduling, and optimization of processes, equipment, and
personnel. Customers are provided the financial and technical flexibility to deploy locally within their business or
to be hosted in the cloud. The Productivity Suite addresses all segments of the print industry and consists of the:
(i) Packaging Suite, with Radius at its core, for tag & label, cartons, and flexible packaging businesses;
(ii) Corrugated Packaging Suite, with CTI at its core, for corrugated packaging businesses; (iii) Enterprise
Commercial Print Suite, with Monarch at its core, for enterprise print businesses; (iv) Publication Print Suite,
with Monarch or Technique at its core, for publication print businesses; (v) Mid-market Print Suite, with Pace at
its core, for medium size print businesses; (vi) Quick Print Suite, with PrintSmith at its core, for small printers
and in-plant sites; and (vii) Value Add Products, available with the suite and standalone, such as web-to-print, e-
commerce, cross media marketing, warehousing, fulfillment, shop floor data collection, and shipping to reduce
costs, increase profits, and offer new products and services to their existing and future customers.

140

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

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, 2015, 2014, and 2013 is summarized as follows (in thousands):

2015

2014

2013

Industrial Inkjet

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

$447,705
152,918

$379,170
143,981

$354,614
140,095

34.2%

38.0%

39.5%

Productivity Software

$135,350
99,278

$130,743
94,733

$118,409
85,246

73.3%

72.5%

72.0%

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Fiery

$299,458
210,140

$280,514
193,585

$254,670
171,642

70.2%

69.0%

67.4%

A reconciliation of operating segment gross profit to the Consolidated Statements of Operations for the years
ended December 31, 2015, 2014, and 2013 is as follows (in thousands):

Segment gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . . . . .
Other items excluded from segment profit . . . . . . . . . .

$462,336
(2,837)
(115)

$432,299
(2,562)
—

$396,983
(1,817)
—

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

$459,384

$429,737

$395,166

2015

2014

2013

141

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, 2015
and 2014 as follows (in thousands):

Industrial
Inkjet

Productivity
Software

Fiery

Corporate and
Unallocated
Net Assets

Total

December 31, 2015
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . $142,183 $133,128 $63,482
497
Identified intangible assets, net . . . . . . . . . . .
Tangible assets, net of liabilities . . . . . . . . . .
23,954
Net tangible and intangible assets . . . . . . . . . $346,157 $156,537 $87,933

33,432
(10,023)

101,623
102,351

December 31, 2014
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 59,124 $121,486 $64,833
Identified intangible assets, net . . . . . . . . . . .
1,211
23,017
Tangible assets, net of liabilities . . . . . . . . . .
Net tangible and intangible assets . . . . . . . . . $184,053 $147,103 $89,061

34,425
(8,808)

26,935
97,994

—

$ — $338,793
135,552
349,849
$824,194

233,567
$233,567

$ — $245,443
62,571
480,675
$788,689

—
368,472
$368,472

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, Italy, France, the U.K., Spain, Israel,
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, 2015, 2014, and 2013 was as follows
(in thousands):

Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EMEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
APAC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$473,599
291,103
117,811

$438,421
244,545
107,461

$412,127
207,665
107,901

Total Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$882,513

$790,427

$727,693

2015

2014

2013

Our tangible long-lived assets consist primarily of property and equipment, net, of $97.8 million. Of this amount,
$83.5 million resides in the Americas, $12.6 million resides in EMEA, consisting primarily of Cretaprint and
Reggiani equipment and leasehold improvements, and $1.7 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 12%, 11%, and
12% of our consolidated revenue for the years ended December 31, 2015, 2014, and 2013, respectively.

One customer, Xerox, had an accounts receivable balance greater than 10% of our net consolidated accounts
receivables at December 31, 2015 and 2014, accounting for 10% and 11%, respectively.

142

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, 2015
and 2014. 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.

2015

(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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$194,554
105,440
11,076
5,237
0.11
0.11

$
$

$202,721
108,403
13,368
7,717
0.16
0.16

$
$

$228,694
116,285
12,780
10,257
0.22
0.21

$
$

$256,544
129,256
19,419
10,329
0.22
0.21

$
$

(in thousands except per share data)

$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

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 Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosure. Our management, including the Chief
Executive Officer and Chief Financial Officer, is engaged in a comprehensive effort to review, evaluate, and
improve our controls; however, management does not expect that our disclosure controls will prevent all errors
and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not
absolute, assurance that the control system’s objectives are met. Additionally, in designing disclosure controls
and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit
relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures
is also based in part on certain assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential future conditions.

Based on their evaluation as of the end of the period covered by this Annual Report on Form 10-K, our
Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures
were effective to provide reasonable assurance as of December 31, 2015.

143

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(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 Chief Financial Officer, assessed the
effectiveness of the Company’s internal control over financial reporting as of December 31, 2015. 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, 2015.

Our management has excluded the internal control over financial reporting at Reggiani, Matan, CTI, and
Shuttleworth from its assessment of internal control over financial reporting as of December 31, 2015 because
they were acquired in purchase business combinations during 2015. Reggiani, Matan, CTI, and Shuttleworth
represent approximately 17.5% and 10.0% of the total consolidated assets and total consolidated revenue,
respectively, of the Company as of and for the year ended December 31, 2015.

Deloitte & Touche LLP, an independent registered public accounting firm, has audited the effectiveness of our
internal control over financial reporting as of December 31, 2015, as stated in their report included in this Annual
Report on Form 10-K.

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 2015
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 (the
“Company”) as of December 31, 2015, 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 Reggiani Macchine
SpA (“Reggiani”), Matan Digital Printers (“Matan”), Corrugated Technologies, Inc. (“CTI”), and Shuttleworth
Business Systems Limited and CDM Solutions Limited (collectively, “Shuttleworth”) from its assessment of
internal control over financial reporting as of December 31, 2015 because they were acquired in purchase business
combinations during 2015. Reggiani, Matan, CTI, and Shuttleworth represent approximately 17.5% and 10.0% of
the total consolidated assets and total consolidated revenue, respectively, of the Company as of and for the year
ended December 31, 2015. Accordingly, our audit did not include the internal control over financial reporting at
Reggiani, Matan, CTI, and Shuttleworth. 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.

144

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
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, 2015, based on the criteria established in Internal Control—Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

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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 years
ended December 31, 2015 and 2014 of the Company and our report dated February 18, 2016 expressed an
unqualified opinion on those financial statements and financial statement schedule.

/S/ DELOITTE & TOUCHE LLP
San Jose, California
February 18, 2016

Item 9B: Other Information

None.

145

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 2016 Annual Meeting of Stockholders (the
“2016 Proxy Statement”). Information regarding our current executive officers is incorporated by reference from
information contained under the caption “Executive Officers” in our 2016 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 2016 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 2016 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 2016 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 2016 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 2016 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 2016 Proxy Statement.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table sets forth information as of December 31, 2015 concerning securities that are authorized
under equity compensation plans:

Plan category

Equity compensation plans approved by stockholders . . .
Equity compensation plans not 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)

2,255,246

$13.20(1)

5,206,789(2)

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

—

Total

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

2,255,246

—

$13.20

—

5,206,789

(1) Calculated without taking into account 1,812,091 RSUs that will become issuable as those units vest,

(2)

without any cash consideration or other payment required for such shares.
Includes 2,707,434 shares available under the 2009 Plan, 1,016,195 treasury shares available due to net
share settlement, and 1,483,160 shares available under the ESPP.

146

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 2016 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 2016 Proxy Statement.

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, 2015 and 2014 . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations for the Years Ended December 31, 2015, 2014, and

2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2015,

2014, and 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2015,

2014, and 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Cash Flows for the Years Ended December 31, 2015, 2014, and

2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

80
82

86
87

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(2) Financial Statement Schedule

Schedule II—Valuation and Qualifying Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

151

(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.)

147

(3) Exhibits

Exhibit
No.

Description

3.1

3.2

4.1

4.2

10.1*

10.2*

10.3*

10.4*

10.5*

10.6*

10.7*

10.8*

10.9*

10.10*

10.11*

10.12+

10.13+

10.14+

10.15

10.16

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 (17)

Agreement dated December 6, 2000, by and between Adobe Systems Incorporated and the
Company (4)

Electronics For Imaging, Inc. 2007 Equity Incentive Award Plan (5)

Electronics For Imaging, Inc. 2007 Equity Incentive Award Plan Stock Option Grant Notice and
Stock Option Agreement (6)

Electronics For Imaging, Inc. 2007 Equity Incentive Award Plan Restricted Stock Award Grant
Notice and Restricted Stock Award Agreement (6)

Electronics For Imaging, Inc. 2007 Equity Incentive Award Plan Restricted Stock Unit Award
Grant Notice and Restricted Stock Unit Award Agreement (6)

Electronics For Imaging, Inc. 2009 Equity Incentive Award Plan Stock Option Grant Notice and
Stock Option Agreement (2)

Electronics For Imaging, Inc. 2009 Equity Incentive Award Plan Restricted Stock Unit Award
Grant Notice and Restricted Stock Unit Award Grant Agreement (2)

Electronics For Imaging, Inc. 2009 Equity Incentive Award Plan Restricted Stock Award Grant
Notice and Restricted Stock Award Grant Agreement (2)

Electronics For Imaging, Inc. 2009 Equity Incentive Award Plan (7)

Form of Indemnification Agreement (3)

Form of Indemnity Agreement (8)

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 (9)

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 (10)

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 (11)

Purchase and Sale Agreement and Joint Escrow Instructions dated as of July 18, 2012 by and
between the Company and Gilead Sciences, Inc. (12)

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. (13)

148

Exhibit
No.

10.17

10.18

10.19

10.20*

10.21*

10.22*

10.23*

10.24*

10.25

10.26

12.1

23.1

23.2

24.1

31.1

31.2

32.1

Description

Lease Agreement dated as of November 1, 2012 by and between the Company and Gilead
Sciences, Inc. (13)

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 (14)

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 (14)

EFI 2015 Bonus Program

EFI 2015 Performance Accelerator Bonus Program

Employment Agreement Effective January 27, 2014 by and between the Company and Guy
Gecht (15)

Employment Agreement Effective January 16, 2014 by and between the Company and Marc
Olin (16)

Employment Agreement Effective April 22, 2015 by and between the Company and Marc Olin

Form of Call Option Confirmation relating to the Company’s 0.75% Convertible Senior Notes
due 2019 (17)

Form of Warrant Confirmation relating to the Company’s 0.75% Convertible Senior Notes due
2019 (17)

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

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101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Taxonomy Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

Management contracts or compensatory plan or arrangement

149

+
(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

(9)

(10)

(11)

(12)

(13)

(14)

(15)

(16)

(17)

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 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 June 6, 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 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 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).

150

ELECTRONICS FOR IMAGING, INC.
Schedule II
Valuation and Qualifying Accounts

(in thousands)

Year Ended December 31, 2015
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$17,517

$7,536

$ —

$(3,060)

$21,993

Year Ended December 31, 2014
Allowance for bad debts and sales-related

allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16,433

7,408

Year Ended December 31, 2013
Allowance for bad debts and sales-related

allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12,850

9,595

—

(6,324)

17,517

(6,012)

16,433

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151

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 18, 2016

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

Title

Date

Chief Executive Officer, Director

February 18, 2016

(Principal Executive Officer)

Chief Financial Officer (Principal

February 18, 2016

Financial and Accounting Officer)

Director

February 18, 2016

/s/ THOMAS GEORGENS

Director

February 18, 2016

Thomas Georgens

/s/ RICHARD A. KASHNOW

Director

February 18, 2016

Richard A. Kashnow

/s/ DAN MAYDAN

Director

February 18, 2016

Dan Maydan

152

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 12, 2016

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
Chief Financial Officer

Board of Directors

Gill Cogan (1)(2)
Chairman of the Board of the Company
Founding Partner,
Opus Capital Ventures LLC

Guy Gecht
Chief Executive Officer and President of the
Company

Eric Brown (3)
Chief Financial Officer
Chief Operating Officer
Tanium, Inc.

Thomas Georgens (3)
Self-Employed

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