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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Form 10-K

Commission file number: 0-18805

(650) 357-3500

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

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

     Indicate by check mark whether the registrant (1) has filed all reports required 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 þ         No o

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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.    o

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes þ         No o

     The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant computed by reference to the price at which the common equity was last sold on June 28, 2002.

Common Stock, $.01 par value: $625,969,929**

     The number of shares outstanding of each of the registrant’s classes of common stock as of February 28, 2003.

Common Stock , $.01 par value: 54,797,037

DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the definitive Proxy Statement to be delivered to stockholders in connection with the Annual Meeting of Stockholders to be held on May 22, 2003 are incorporated by reference into Part III hereof.

**

Based upon the last trade price of the Common Stock reported on the Nasdaq National Market on June 28, 2002. Excludes approximately 14,870,354 shares of common stock held by Directors, Officers and holders of 5% or more of the Registrant’s outstanding Common Stock on December 31, 2002. Exclusion of shares held by any person should not be construed to indicate that such person possesses the power, direct or indirect, to direct or cause the direction of the management or policies of the Registrant, or that such person is controlled by or under common control with the Registrant.

Table of Contents

PART I

      This Annual Report on Form 10-K includes certain registered trademarks and tradenames of Electronics for Imaging, Inc. (“EFI” or “the Company”) and others. EFI, the EFI logo, EFI Fiery, eBeam, Fiery, the Fiery logo, Fiery Driven, the Fiery Driven logo, Fiery Driven and Design, Fiery Spark, ColorWise, RIP-While-Print, EDOX, Mousitometer, PrintMe, Spot-On, Spot-On and Design, Check Mate, Freedom of Press, Go Wide, Splash, Velocity and Solitaire are registered trademarks of Electronics for Imaging, Inc. with the U.S. Patent and Trademark Office, and/or other foreign jurisdictions. Advanced Secure Print Module, Fiery Prints, Fiery ZX, Fiery LX, Fiery SI, Fiery XJ, Fiery XJe, Fiery XJ-W, BookletMaker, Fiery Downloader, Fiery Graphic Arts Package, Fiery Scan, Fiery Spooler, Fiery FreeForm, Fiery Link, Fiery Driver, PowerWise Architecture, RIPChips, Splash, WebTools, WebSpooler, WebInstaller, WebStatus, Command Workstation, Continuous Print, DocBuilder, EFICOLOR, EFICOLOR Works, EFI Color Profiler Kit, FreeForm, Memory Multiplier, NetWise, STARR Compression, EDOX Profile Manager, RIP Ahead, Instant Reprint, Document Recovery, Sapphire, Opal, PrintMe, PrintMe Networks, Harmony, eBeam and Unimobile are trademarks of Electronics for Imaging, Inc. All other terms and product names may be registered trademarks or trademarks of their respective owners, and are hereby acknowledged.

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

Item 1:     Business

Filings

      The company files annual reports, quarterly reports, proxy statements, and other documents with the Securities and Exchange Commission (SEC) under the Securities Exchange Act of 1934 (Exchange Act). The public may read and copy any materials that the company files with the SEC at the SEC’s Public Reference Room at 450 Fifth Street N.W., 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. Also, the SEC maintains an Internet website that contains reports, proxy and information statements, and other information regarding issuers, including the company, that file electronically with the SEC. The public can obtain any documents that the company files with the SEC at http://www.sec.gov.

      The corporation also makes available free of charge through its Internet website (http://www.efi.com) the company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and, if applicable, amendments to those reports filed or furnished pursuant to the Exchange Act as soon as reasonably practicable after the company electronically files such material with, or furnishes it to, the SEC.

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General

      EFI was founded in 1989 by Efraim Arazi. EFI is a global provider of printing and imaging solutions and services and is focused on making printing and imaging related technology easy to use. EFI’s main focus involves the design and marketing of products that support color and black-and-white printing on a variety of peripheral devices. Its products incorporate hardware and software technologies that transform digital copiers and printers from many leading printer and copier manufacturers into networked printing devices that can be shared across workgroups. The Company’s products include stand-alone servers, which are connected to digital copiers and other peripheral devices, and controllers, which are embedded in digital copiers and desktop color laser printers. The Company sells its products primarily to original equipment manufacturers (“OEM”) in North America, Europe and Japan.

      The Company was founded to develop innovative solutions to enable color desktop publishing. In pursuit of this goal, the Company first developed the Fiery line of color servers (“Fiery Color Servers”) to enable in-house, short-production run color printing, together with application and system software to facilitate color correction and device-independent color. Fiery Color Servers are sophisticated, stand-alone computers that enable digital copier machines to accept, process, and print digital images from personal computers and computer networks. Historically, the Company primarily focused its efforts on its stand-alone Fiery Color Servers that supported printing on digital color copiers. The Company has since expanded its focus to include embedded solutions that support printing on a broader range of devices, including digital black-and-white copiers and desktop color laser and inkjet printers (“Fiery Controllers” and, together with Fiery Color Servers, “Fiery Products”). The Company has also developed stand-alone Fiery Color Servers for wide-format color inkjet printers and expanded its line of digital color servers through its merger with Management Graphics, Inc. (“MGI”) and its EDOX line of digital color servers (“EDOX Color Servers”) in 1999 and its acquisition of Splash Technology Holdings, Inc. (“Splash”) and Splash’s line of digital color servers (“Splash Color Servers” and together with Fiery Color Servers and EDOX Color Servers, “EFI Color Servers”) in 2000. In January 2003, the Company acquired Best GmbH (“Best”), a global software company providing products for the print and publishing markets. Best complements the Company’s strengths in graphic arts and workflow software, adding a range of pre-print, pre-press and remote proofing solutions to the Company’s portfolio of products. The Company also continues to promote other product lines such as eBeam, its first Internet appliance product, PrintMe Networks, an Internet printing solution and Unimobile wireless messaging software which the Company acquired through its acquisition of Unimobile, Inc. (“Unimobile”) in May 2002.

The Electronics for Imaging Solution

      The Company’s EDOX, Fiery and Splash brands of print servers transform digital copiers and printers into networked printing devices. Once networked, EFI-powered printers and copiers can be shared across workgroups, departments, the enterprise and the Internet to quickly and economically produce high-quality color and black-and-white documents. The Company develops products with a wide range of price and performance levels. The Company believes that consumers generally prefer color as evidenced by the migration of photographs, motion pictures, television and newspapers from black-and-white to color. In the personal computer field, EFI believes this preference is shown by the migration of personal digital assistants (“PDAs”) to color and the almost exclusive use of color monitors with color-oriented graphical user interfaces, application software and Internet content. In each of these cases, once the enabling technology developed sufficiently, consumer adoption of color quickly followed. The Company believes that consumers prefer color in documents created through desktop publishing. Until recently, however, the technology was not available to do this in a high quality, quick and cost-effective manner due to the complexity of accurate color reproduction. EFI’s Color Servers permit users of digital color copiers to transmit and convert digital data from a computer to a color copier so that the color copier can print high-quality color documents easily, quickly and cost-effectively. As a result, EFI’s Color Servers transform digital color copiers into fast, high-quality, networked color printers. The black-and-white copier market is migrating toward the development and use of digital black-and-white copiers. Thus, in addition to EFI Color Servers for digital color copiers, the Company has leveraged its technology to develop and manufacture other products that support both color and black-and-white printing. These products include: (i) Fiery Servers for digital black-and-white copiers;

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Growth and Expansion Strategies

      The Company’s overall objective is to continue to introduce new generations of controller products, new software applications, and other new product lines related to printing and imaging. With respect to its current products, the Company’s primary goal is to provide a range of processing and printing solutions that address broad sections of the color printing market and to continue to leverage its technology to enable digital black-and-white printing on additional peripheral devices including digital black-and-white copiers and multi-function devices. The Company’s strategy to accomplish these goals consists of five key elements.

      The Company intends to continue to develop new products that are scalable and offer a broad range of features and performance when connected to, or integrated with, digital color and black-and-white copiers, as well as desktop color laser printers. Historically, the Company sold products that supported digital color copiers. In 1996 the Company expanded its line of color servers to drive a wide range of output devices including desktop color laser printers and wide-format color inkjet printers with poster-size output. In 1997, the Company further expanded the use of its technology, shipping its first products that supported black-and-white printing systems and copiers. The Company has continued to introduce new generations of its products including the Fiery ZX and Fiery X2 platforms in 1998, the Fiery Z4 and Fiery X4 platforms in 1999, the Fiery X3 and EDOX 2000 Document Server platforms in 2000 and the Fiery Z5 and Z18 platforms in 2001. In 2002, the Company introduced its next generation of products, including: the Fiery Q4000 platform, the Fiery X5 platform, the Splash G640 platform, and the EDOX 4 Document Server. By utilizing the advantages of these new platforms, the Company intends to continue to develop new products.

      The Company also intends to continue to develop new software applications that advance the performance and usability of its servers and embedded controllers. In 2000, the Company introduced the Velocity line of software designed to maximize workflow efficiencies. The Velocity line of products includes Velocity Balance, Velocity Build, Velocity Estimate and Velocity Scan, as well as the Harmony Software Developers Kit which enables users to develop custom applications that maximize the power, speed and throughput of copiers and printers powered by Fiery technology. In 2001, the Company developed and released additional software applications including, the Fiery Graphics Arts Package , the EFI Color Profiler Kit, variable data printing solutions, and the Advanced Secure Print Module. In 2002, the Company developed and released the Fiery System 5, the Data Center Package software, new prepress workflow technology, and enhancements to its Velocity workflow software, document security software and variable data printing software. See “Products and Technology — EFI Technology.” We expect to continue developing new software applications as well as acquiring new software applications through business combinations such as the Best acquisition in January 2003. The Company is seeking to develop, acquire or partner with other suppliers to provide a full digital workflow suite of products for the professional printing market.

      The Company plans to continue to expand its product line to include Internet appliance products. In November, 1999, the Company introduced eBeam. eBeam converts a conventional whiteboard into a digital workspace, allowing users to capture whiteboard meeting-notes and diagrams in real time on their personal computers. Words and images can be viewed, edited and shared across the world using a standard web browser. In 2001, the Company introduced its third generation of eBeam software and also introduced eBeam System 3^TM, believed to be the smallest digital whiteboard solution on the market and the eBeam ImagePort^TM accessory, a whiteboard system that allows data to be beamed to a Palm^TM handheld computer. In 2002, the Company increased the size of the whiteboard surface captured by the device and introduced a Mac OS X

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      In October, 2001, the Company announced PrintMe Networks, a complete Internet printing solution that enables remote printing without requiring print drivers, cables or complex setup. PrintMe Networks allows people to access and print their e-mail messages, Internet content and other documents at virtually any time, anywhere, from any device, to any printer connected to the Internet. In early 2002 the Company released PrintMe Networks. The Company has partnered with many industry leaders including, Adobe Systems Incorporated , Xerox, IBM, Canon, IKON, Minolta, Toshiba, Sharp, Palm, Sir Speedy, Office Max, STSN, Yahoo! and Mariott to help provide the technologies and channels necessary to make this new technology widely available. The Company believes that PrintMe Networks expands the scope and sophistication of its products and will help it gain access to new markets.

      Through the acquisition of Unimobile in 2002, the Company acquired Unimobile’s suite of enterprise solutions, including the Mobile Messaging Platform and the Unimobile Intelligent Network, which allow users to deliver data to virtually any mobile device. In late 2002, the Company announced Unimobile 5.0, its latest version of the Unimobile enterprise messaging solution. The Company believes its acquisition of Unimobile’s technology is a strategic fit with PrintMe Network.

      The Company has established relationships with leading printer and copier industry companies, including Canon, Danka Business Systems, Epson, Fuji-Xerox, Hewlett-Packard, Ikon Office Solutions, Konica, Minolta, Océ, Ricoh, Sharp, Toshiba, and Xerox (collectively, the “Strategic Partners” or “OEM partners”). EFI seeks to expand its relationships with its Strategic Partners and other partners in pursuit of the goal of offering Fiery, EDOX and Splash products as well as its new technology for additional digital color and black-and-white devices produced by its Strategic Partners and other partners. The Company also seeks to establish relationships with other digital copier and printer distribution companies for the marketing of Fiery, EDOX and Splash products with their copiers and printers as well as the Company’s workflow software suite of products.

      In its development of new products and platforms, EFI seeks to establish coherence across its entire product line by designing products that provide a consistent “look and feel” to the end-user. For example, EFI believes enterprise coherence can create higher productivity levels as a result of shortened learning curves. Additionally, EFI believes enterprise coherence leads to a lower total cost of ownership by providing one source for sales, support and training. The Company believes that its effort to achieve enterprise coherence engenders goodwill among its Strategic Partners and other partners and end-users of its products and assists in the development of new strategic relationships and markets for the Company. The Company also advocates open architecture utilizing industry-established standards to provide inter-operability across a range of digital printing devices, ultimately giving the user more choice in their selection of products.

      The Company has assembled an experienced team of technical personnel with backgrounds in color reproduction, digital pre-press, image processing, networking, and software and hardware engineering. By applying its expertise in these areas, the Company expects to continue to expand the scope and sophistication of its products and gain access to new markets.

Products and Technology

      The Company is a leader in enabling networked printing solutions. EFI’s technology allows copiers, printers and digital presses to be shared across work groups, the enterprise and the Internet. The Company develops products with a wide range of price and performance levels designed to make high-quality, short-run

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	•	desktop color laser printers,
	•	high-end desktop ink jet printers,
	•	wide-format printers,
	•	mid-range color copiers,
	•	mid-range digital black-and-white copiers,
	•	production color copiers and
	•	high-speed color and black-and-white digital presses.

      Given the breadth of our product offerings, we believe the Company’s products are attractive to a variety of end users including, multimedia authors, advertising agencies, print-for-pay businesses, graphic designers, pre-press providers and small to large businesses.

      The Company currently has three main product categories that support color and black-and-white printing: (i) stand-alone color servers which are connected to color digital copiers and other peripheral devices; (ii) embedded and chip-set color solutions which are used in digital color copiers and desktop laser printers; and (iii) digital black-and-white solutions, which include both stand-alone servers and embedded and chip-set solutions, for digital black-and-white copiers and laser printers. All of EFI’s products incorporate EFI’s proprietary software and hardware features. In addition, the Company is expanding its presence in software with the intent of offering a full suite of digital tools for the commercial print industry.

      From its inception, EFI has invested heavily in research and development. EFI has focused on developing technologies that can be implemented in a variety of products. Examples of such technologies include: (i) DocBuilder Pro^TM, which enables electronic collation, reverse order printing, job merging and editing, and Fiery WebTools which enables print job management from different computer platforms via a Java^TM-enabled Web Browser; (ii) RIP-While-Print which allows one page to be printed while subsequent pages are simultaneously processed; (iii) Continuous Print which allows processed pages to be stored in memory before printing, eliminating the need for the copier or printer to cycle down between unique pages; (iv) NetWise 3.0, EFI’s third generation networking architecture which provides enhanced programmability that helps users build customized printing solutions and provides extensive Internet-based functionality; (v) Colorwise 3.0, EFI’s third generation color management system which provides greater image quality and calibration (vi) workflow management architecture which allows for the management and manipulation of digital print jobs including, CommandWorkstation 4.0, Fiery WebTools, EFI SDK, Velocity Balance and Velocity OneFlow; (vi) Variable Data Printing solutions including, FreeForm and FreeForm 2, (vii) Fiery Driver, a unified printing interface that simplifies the printing process; (viii) Fiery Link, providing users with information on print job status and connected Fierys allowing users to monitor the status of any print job, its position in the queue, and general information on the Fiery and paper and toner levels from any workstation; and (ix) ECT compression, an improved and more advanced compression scheme than EFI’s previous STARR compression technologies, offering definite compression ratios and virtually lossless image quality. Compression software decreases the amount of memory necessary to store documents during processing and enables faster printing of documents. In addition to such software innovations, EFI custom designs its products to increase productivity. For example, EFI’s custom-designed RIPChips, application specific integrated circuit (“ASIC”) chips, decrease overall print times by off-loading data movement from the microprocessor. The Company expects to continue to refine these printing technologies and develop new printing technologies.

      In 2002, the Company continued its efforts to improve its products’ performance, features and ease of use. During 2002, the Company added new features to the following products: (i) Colorwise 3.0, (ii) Netwise

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     Stand-alone Color Servers

      EFI Color Servers permit users of digital color copiers to transmit and convert digital data from a computer to a color copier so that the color copier can print color documents easily, quickly and cost-effectively. As a result, EFI Color Servers transform digital color copiers into fast, high-quality networked color printers. In addition to EFI Color Servers for digital color copiers, the Company has leveraged its technology to develop and manufacture other products that support color printing. These products include Fiery Color Servers, EDOX Color Servers and Splash Color Servers for wide-format inkjet printers.

      Since the introduction of the first Fiery Color Server in 1991, the Company has expanded this product line. During 2002, the Company focused its development efforts on improvements to its products’ performance, features and ease of use and introduced the Fiery Q4000 server and the Splash G640 server. Each new platform features a major re-architecture — enabling improvements in printing speed — and is designed to run new EFI software featuring specialized tools for graphic arts professionals. The Fiery Q4000 server is capable of processing complex documents at twice the speed of other high-end printing systems with dual processors of at least 2.2 GHz speed. It also includes many of EFI’s most advanced software technologies including, the Fiery System 5 software, the Fiery Graphic Arts Package, variable data solutions, and the Data Center Package. The Splash G640 is a color server based on Macintosh operating systems. The Splash G640 is designed for the graphic arts market. In 2002, the Company shipped stand-alone EFI Color Servers for use with color copiers, color inkjet printers and wide-format color printers distributed by companies such as Canon, Epson, Fuji-Xerox, Minolta, Océ, Ricoh, Toshiba, Ikon Office Solutions, Sharp and Xerox. In 2002, the Company also shipped Fiery servers for use with digital black-and-white copiers distributed by Canon, Danka, Konica, Minolta, Océ and Sharp.

     Embedded and Chipset Color Solutions

      Unlike our Fiery, EDOX and Splash servers, which are sold as stand-alone products to be connected to copiers, controllers are embedded inside copiers and desktop printers manufactured by our OEM partners. Our OEM partners can design their own controller using our chipset solution, or purchase the controller from EFI. Controllers allow users to print documents directly from their computers to the digital color copier, desktop color laser printers, and color multi-function devices. Because the Company believes that the Fiery name and trademark, including the trademark “Fiery Driven,” are associated with substantial goodwill and recognition in the marketplace, the Company seeks to have the “Fiery Driven” logo placed on printing devices that include an embedded Fiery Controller or chipset solution. The Company has increased the use of the EFI technology by licensing the EFI color solutions to our OEM partners for their manufacture.

     Digital Black-and-White Solutions

      The Company has utilized its color technology to provide stand-alone servers, embedded controllers and chipset solutions for digital black-and-white copiers and laser printers. EFI Black-and-White Servers permit users of digital copiers to transmit and convert digital data from a computer to a black-and-white copier so that the copier can print documents easily, quickly and cost-effectively in professional environments. The Fiery X3e, an embedded controller, allows users to efficiently print large quantities of black-and-white documents in corporate environments.

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Significant Relationships

      The Company has established, and continues to try to build and expand relationships with its OEM partners and other leading copier and printer companies, in order to benefit from their respective products, distribution channels and marketing resources. These OEMs include domestic and international manufacturers, distributors and sellers of digital copiers (both color and black-and-white), wide-format printers and desktop color printers. The Company works closely with OEM partners with the aim of developing solutions that incorporate leading technology and that optimally work in conjunction with such companies’ products. OEMs that the Company sold products to in 2002 include, among others, Canon, Epson, Fuji-Xerox, Hewlett-Packard, Ikon Office Solutions, Konica, Minolta, Océ, Ricoh, Sharp, Toshiba and Xerox. Together, sales to Canon, Xerox, and Minolta accounted for approximately 67% of the Company’s 2002 revenue, with sales to each of these customers accounting for more than 10% of the Company’s revenue. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Factors That Could Adversely Affect Performance — We rely on sales to a relatively small number of OEM partners, and the loss of any of these customers could substantially decrease our revenues.”

      The Company customarily enters into development and distribution agreements with its OEM partners. These agreements can be terminated under a range of circumstances, and often upon relatively short notice. The circumstances under which an agreement can be terminated vary from agreement to agreement and there can be no assurance that the Company’s OEM partners will continue to purchase products from the Company in the future, despite such agreements. The Company recognizes the importance of, and works hard to maintain, its relationships with its customers. However, the Company’s relationships with its customers are affected by a number of factors including, among others: competition from other suppliers, competition from internal development efforts by the customers themselves (including the OEMs), and changes in general economic, competitive or market conditions (such as changes in demand for the Company’s or the OEM’s products, or fluctuations in currency exchange rates). There can be no assurance that the Company will continue to maintain or build the relationships it has developed to date. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Factors That Could Adversely Affect Performance — We face competition from other suppliers as well as our own OEM customers, and if we are not able to compete successfully then our business may be harmed.”

      In addition to its development and sales relationships with the OEM partners, in order to increase the distribution and presence of EFI Color Servers connected to both color and black-and-white copiers and wide-format printing devices, the Company has developed strategic relationships with well-known print-for-pay companies, including Kinko’s, AlphaGraphics, the CopyMax operations of office products superstore OfficeMax, the American Speedy group of franchised printing centers (including Allegra Print and Imaging, American Speedy, Speedy Printer, Zippy Print and Quik Print), MultiCopy, Inc. and the SAMPA Corporation, franchiser of Signal Graphics Printing Centers. Several of these print-for-pay companies, including, American Speedy, OfficeMax, MultiCopy, Inc. and SAMPA Corporation, have entered into worldwide strategic alliances with the Company whereby they have agreed to continue standardization efforts on EFI’s Fiery Color Servers with respect to their printing services.

      The Company also has a continuing relationship pursuant to a license agreement with Adobe and licenses PostScript® software from Adobe for use in many Fiery Products. This relationship is important because each Fiery Product requires page description language software such as that provided by Adobe in order to operate. Adobe’s PostScript® software is widely used to manage the geometry, shape and typography of hard copy documents and Adobe is a leader in providing page description software. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Factors That Could Adversely Affect Performance — We license software used in most of our products from Adobe Systems Incorporated, and the loss of this license would prevent us from shipping these products.”

Distribution and Marketing

      The Company’s primary distribution method for its Fiery and Splash servers is to sell the Fiery and Splash servers to its OEMs. The Company’s OEMs in turn sell these products to distributors and end-users for

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      The Company promotes all of its products through public relations, direct mail, advertising, promotional material, trade shows and ongoing customer communication programs.

Research and Development

      Research and development costs for 2002, 2001 and 2000 were $90.0 million, $98.1 million and $94.1 million, respectively. As of December 31, 2002, 502 of the Company’s 927 full-time employees were involved in research and development. The Company believes that development of new products and enhancement of existing products are essential to its continued success, and management intends to continue to devote substantial resources to research and new product development. The Company expects to make significant expenditures to support its research and development programs for the foreseeable future.

      The Company is developing products to support additional color and black-and-white printing devices including desktop printers, high-end color copiers, digital black-and-white copiers and multi-function devices. This ongoing development work includes a multiprocessor architecture for high-end systems and lower-cost designs for desktop color laser printers. The Company is also developing Internet printing solutions, new software applications designed to maximize workflow efficiencies and to meet the needs of the graphics arts and commercial print professional.

      The Company also expects to continue to enhance functionality of its other product lines, including eBeam, PrintMe and Unimobile. See “— Growth and Expansion Strategies — Proliferate and Expand Product Lines.” Substantial additional work and expense will be required to complete and bring to market each of the products currently being developed by the Company See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Factors That Could Adversely Affect Performance — If we are unable to develop new products, or execute product introductions on a timely basis, our future revenue may be harmed.”

Manufacturing

      The Company utilizes subcontractors to manufacture its products. These subcontractors work closely with the Company to ensure low costs and high quality in the manufacture of the Company’s products. Subcontractors purchase components needed for the Company’s products from third parties. The Company is totally reliant on the ability of its subcontractors to produce products sold by the Company, and although the Company supervises its subcontractors, there can be no assurance that such subcontractors will continue to perform for the Company as well as they have in the past. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Factors That Could Adversely Affect Performance — We are dependent on subcontractors to manufacture and deliver products to our customers.”

      Certain components necessary for the manufacture of the Company’s products, including ASICs and certain other semiconductor components, are obtained from a sole supplier or a limited group of suppliers. The purchase of certain of these key components may involve significant lead times. Accordingly, in the event of interruptions in the supply of these key components or unanticipated increases in demand for the Company’s products, the Company could be unable to manufacture certain of its products in a quantity sufficient to meet customer demand. There can be no assurance that such supply or manufacturing problems would not adversely affect the Company’s results of operations or financial condition. In an attempt to mitigate these supply issues, the Company purchases certain components for later resale to the Company’s subcontractors

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Human Resources

      As of December 31, 2002, the Company employed 927 full-time individuals. Of the 927 total employees, approximately 232 were in sales and marketing, 124 were in management and administration, 69 were in manufacturing, and 502 were in research and development. Of the total number of employees, the Company had approximately 784 employees located in U.S. and Canadian offices, and 143 employees located in international offices including employees based in The United Kingdom, The Netherlands, Germany, Japan, France, Italy, Finland, Spain, Australia, Singapore, Brazil, Mexico, Sweden, India and Hong Kong. The Company’s employees are not represented by any collective bargaining organization and the Company has never experienced a work stoppage. However, there can be no assurance that collective bargaining, work stoppage or other employment related issues will not arise.

Competition

      Competition in the Company’s markets is intense and involves rapidly changing technologies and frequent new product introductions. To maintain and improve its competitive position, the Company must continue to develop and introduce, on a timely and cost-effective basis, new products and features that keep pace with the evolving needs of its customers. The principal competitive factors affecting the markets for the Company’s Fiery, EDOX and Splash products include, among others, customer service and support, product reputation, quality, performance, price and product features such as functionality, scalability, ability to interface with OEM products and ease of use. The Company believes it has generally competed effectively in the past against product offerings of its competitors on the basis of such factors. However, there can be no assurance that the Company will continue to be able to compete effectively in the future based on these or any other competitive factors.

      The Company also faces competition from its OEM partners and other copier and printer manufacturers that offer internally developed server products or that incorporate internally developed embedded solutions or server features into their copiers and printers, thereby eliminating the need for the Company’s products and limiting future opportunities for the Company. In addition, the Company competes directly with other independent manufacturers of color servers, independent manufacturers of embedded solutions, copier manufacturers, printer manufacturers and others. The Company also faces competition from wide-format printer manufacturers that develop their own controllers and other companies that develop controllers for wide-format printers and manufacturers of desktop color laser printers which do not utilize a controller (relying instead on host based processing of data) and which offer increasing speed and color capability. The Company believes that it competes effectively due to, among other things, its efforts to continually advance its technology, name recognition, end-user loyalty, sizable installed base, number of products supported and price. The Company expects that competition in its markets will increase due to, among other factors, market demand for higher performance products at lower prices, rapidly changing technology and product offerings from competitors and customers. There can be no assurance that the Company will be able to continue to advance its technology and products or to compete effectively against other companies’ product offerings, and any failure to do so could have a material adverse effect upon the Company’s business, operating results and financial condition.

Intellectual Property Rights

      The Company relies on a combination of patent, copyright, trademark and trade secret laws, non-disclosure agreements and other contractual provisions to establish, maintain and protect its intellectual property rights, all of which afford only limited protection. As of December 31, 2002, the Company had 92 issued U.S. patents, 62 pending U.S. patent applications and various foreign counterpart patents and applications. There can be no assurance that patents will issue from these pending applications or from any

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      The Company has registered certain trademarks, which include, among others, its EFI, Fiery, Fiery and Design, Fiery Driven, Fiery Driven and Design, ColorWise, EDOX, Splash and RIP-While-Print trademarks, and has applied for registration of certain additional trademarks. The Company will continue to evaluate the registration of additional trademarks as appropriate. Any failure by the Company to properly register or maintain its trademarks or to otherwise take all necessary steps to protect its trademarks may diminish the value associated with the Company’s trademarks. The Company’s products include software sold pursuant to “shrink wrap” licenses that are not signed by the end user and, therefore, may be unenforceable under the laws of certain jurisdictions. In addition, the laws of some foreign countries, including several in which the Company operates or sells its products, do not protect intellectual property and proprietary rights to as great an extent as do the laws of the United States.

      From time to time, litigation may be necessary to defend and enforce the Company’s proprietary rights. Such litigation, whether or not concluded successfully for the Company, could involve significant expense and the diversion of management’s attention and other Company resources. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Factors That Could Adversely Affect Performance — We may be unable to adequately protect our proprietary information and may incur expenses to defend our proprietary information.”

Risk Factors

      In addition to the above information, a discussion of factors that may adversely affect the Company’s future performance and financial results can be found in this Report under the heading “Factors That Could Adversely Affect Performance” in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation.”

Financial Information About Foreign and Domestic Operations and Export Sales

      See Note 9 of the Company’s Notes to Consolidated Financial Statements. See also Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Factors That Could Adversely Affect Performance — We face risks from our international operations and from currency fluctuations.”

Item 2:     Properties

      The Company’s principal offices are located at 303 Velocity Way, Foster City, California on approximately 35 acres of land which the Company owns. The corporate headquarters facility, which is leased by the Company, includes approximately 295,000 square feet completed in July, 1999 and 163,000 square feet of additional facilities completed in December 2001. In addition to the Foster City offices, the Company has leased facilities in Parsippany, New Jersey; Vancouver, Washington and Amsterdam, The Netherlands. The Company also leases a number of domestic and international sales offices. In January 2001 the Company purchased facilities with approximately 44,000 square feet in Minneapolis, Minnesota. For additional information on the Company’s lease obligations see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”

      The Company believes that its facilities, in general, are adequate for its present and currently foreseeable future needs.

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Item 3:     Legal Proceedings

      In December 1997, class action complaints were filed naming the Company and certain principal officers and directors as defendants in both the California Superior Court of the County of San Mateo, and the United States District Court for the Northern District of California on behalf of purchasers of the common stock of the Company during the class period from April 10, 1997, through December 11, 1997. On August 30, 2001, the Federal Court dismissed the complaint filed in the United States District Court for the Northern District of California, leaving only the California Superior Court case on which the plaintiffs could proceed. From the beginning, the Company viewed these lawsuits as having absolutely no merit. However, EFI determined that a proposed settlement of the suit was in the best interests of the Company and its shareholders and on September 4, 2002 the Company announced its decision to settle all pending claims in this action. The Company incurred a one-time charge to after-tax net income in the third quarter of 2002 of $3.1 million or $0.06 per share, including legal fees and costs related to the settlement. On December 20, 2002, the court issued its final approval of the settlement.

      In January 1999, two class action complaints were filed naming Splash Technology Holdings, Inc. and certain of its officers (“Splash), in the United States District Court for the Northern District of California, on behalf of purchasers of the common stock of Splash during the class period from January 7, 1997 through October 13, 1998 (EFI acquired Splash in October 2000). The complaints alleged violations of securities laws during the class period. The two cases were subsequently consolidated into one case. On August 28, 2001, the Court dismissed the complaint with prejudice; however, the plaintiffs appealed that ruling. On December 4, 2002, after oral argument on the appeal, the plaintiffs dismissed their appeal, resulting in the final dismissal of the action against Splash. Throughout the litigation, the Company maintained its belief that these lawsuits were without merit.

      Over the past five years, Mr. Jan R. Coyle, an individual living in Nevada, has repeatedly demanded that the Company buy technology allegedly invented by his company, Kolbet Labs. In December 2001, Coyle threatened to sue the Company and its customers for allegedly infringing his soon to issue patent and for misappropriating his alleged trade secrets. The Company believes Coyle’s claims are completely without merit and on December 11, 2001, the Company filed a declaratory relief action in the United States District Court for the Northern District of California, asking the Court to declare that the Company and its customers have not breached any nondisclosure agreement with Coyle or Kolbet Labs, nor has it infringed any alleged patent claims or misappropriated any alleged trade secrets belonging to Coyle or Kolbet Labs through its sale of Fiery, Splash or EDOX print controllers. The Company also sought an injunction enjoining both Coyle and Kolbet Labs from bringing or threatening to bring a lawsuit against the Company, its suppliers, vendors, customers and users of its products for breach of contract and misappropriation of trade secrets. On March 26, 2002, the Northern District of California court dismissed the Company’s complaint for lack of jurisdiction over Coyle. The Company has appealed the Court’s dismissal to the Federal Circuit Court of Appeals in Washington, D.C. That motion is pending. However, due to the inherent uncertainties of litigation, the Company cannot accurately predict the ultimate outcome of the litigation. Any unfavorable outcome of the litigation could have an adverse impact on the Company’s financial condition and results of operations.

      On February 26, 2002, J & L Electronics, another company owned by Coyle, filed a complaint against the Company in the United States District Court for the District of Nevada alleging patent infringement, breach of non-disclosure agreements, misappropriation of trade secrets, violations of federal antitrust law, and related causes of action and is seeking damages, costs and an injunction. On April 22, 2002, the Company filed a motion to dismiss the Nevada complaint. That motion is pending. The Company denies all of these allegations and believes this lawsuit is without merit and intends to defend the actions vigorously. However, due to the inherent uncertainties of litigation, the Company cannot accurately predict the ultimate outcome of the litigation. Any unfavorable outcome of the litigation could have an adverse impact on the Company’s financial condition and results of operations.

      On September 16, 2002, ArrivalStar, Inc., a privately held Delaware corporation, (“ArrivalStar”) filed a complaint in the U.S. District Court for the Northern District of Georgia against fourteen defendants, including EFI, alleging that each of the defendants infringed one or more claims of six identified patents

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      On February 13, 2003, Printcafe Software, Inc. (“Printcafe”) entered into the following three agreements with the Company; a standby credit facility in the amount of $11 million plus a working capital facility which will provide up to an additional $3 million under certain circumstances; a stock option agreement granting the Company an option to purchase up to 2,126,574 shares of Common Stock at a purchase price equal to $2.60 per share; and a letter agreement that places certain restrictions on Printcafe’s ability to take actions in order to facilitate a business combination with a party other than the Company subject to customary “fiduciary out” provisions (collectively, the “Agreements”). The Agreements were entered into in connection with EFI’s proposal to acquire all of the outstanding shares of common stock of Printcafe at a purchase price equal to $2.60 per share, payable in cash or EFI stock. On February 19, 2003, Creo Inc. commenced litigation in the Delaware Court of Chancery against the Company, Printcafe and certain of Printcafe’s principal officers and directors, challenging and seeking to temporarily restrain the use of a newly adopted stockholder rights plan by Printcafe, the Agreements and seeking to restrain the Company and Printcafe from proceeding to enter into any further agreements with respect to a business combination. On February 21, 2003, the Delaware Court of Chancery denied the temporary restraining order sought by Creo. The underlying litigation is still pending and management of the Company intends vigorously to defend such action. However, due to the inherent uncertainties of litigation, the Company cannot accurately predict the ultimate outcome of the litigation. Any unfavorable outcome of the litigation could have an adverse impact on the Company’s financial condition and results of operations.

      In addition, the Company is involved from time to time in litigation relating to claims arising in the normal course of its business. The Company believes that the ultimate resolution of such claims will not materially affect the Company’s business or financial condition. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Factors That Could Adversely Affect Performance — We face risks from third party claims of infringement and potential litigation.”

Item 4:     Submission of Matters to a Vote of Security Holders

      None.

PART II

Item 5:     Market for Registrant’s Common Equity and Related Stockholder Matters

      The Company’s common stock was first traded on the Nasdaq National Market under the symbol EFII on October 2, 1992. The table below lists the high and low closing sales price during each quarter the stock was traded in 2002 and 2001.

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      As of February 28, 2003, there were approximately 270 stockholders of record. The Company has never paid cash dividends on its capital stock. The Company currently anticipates that it will retain all available funds for its business, and does not anticipate paying any cash dividends in the foreseeable future.

Item 6:     Selected Financial Data

      The following table summarizes selected consolidated financial data as of, and for the five years ended December 31, 2002. This information should be read in conjunction with the audited consolidated financial statements and related notes thereto.