UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2004

OR

o 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.

303 Velocity Way, Foster City, CA 94404
(Address of principal executive offices, including zip code)

(650) 357 - 3500
(Registrant’s telephone number, including area code)

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  x  No  o

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

The number of shares of Common Stock outstanding as of October 31, 2004 was 53,783,315.

ELECTRONICS FOR IMAGING, INC.

INDEX

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PART I            FINANCIAL INFORMATION

Electronics for Imaging, Inc.

See accompanying notes to condensed consolidated financial statements.

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Electronics for Imaging, Inc.

See accompanying notes to condensed consolidated financial statements.

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Electronics for Imaging, Inc.

See accompanying notes to condensed consolidated financial statements.

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Electronics for Imaging, Inc.

1. Basis of Presentation

The unaudited interim condensed consolidated financial statements of Electronics for Imaging, Inc., a Delaware corporation (the “Company”), as of and for the interim period ended September 30, 2004, have been prepared on the same basis as the audited consolidated financial statements as of and for the year ended December 31, 2003, contained in the Company’s Annual Report to Stockholders on Form 10-K. The December 31, 2003 Consolidated Balance Sheet was derived from audited consolidated financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. In the opinion of management, the unaudited interim condensed consolidated financial statements of the Company include all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial position of the Company and the results of its operations and cash flows, in accordance with accounting principles generally accepted in the United States of America. The interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements referred to above and the notes thereto. Certain prior year balances have been reclassified to conform with the current year presentation.

Amounts within the financial statements and footnote disclosures have been recorded in thousands except for per share data.

The preparation of the interim condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the interim condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates.

The interim results of the Company are subject to fluctuation. As a result, the Company believes the results of operations for the interim period ended September 30, 2004 are not necessarily indicative of the results to be expected for any other interim period or the full year.

2. New Accounting Pronouncements

EITF 04-08

The Emerging Issues Task Force (EITF) of the Financial Accounting Standards Board (FASB) reached a consensus on Issue No. 04-8, “The Effect of Contingently Convertible Debt on Diluted Earnings per Share” at its September 29-30, 2004 meeting. The effective date has not been finalized but is expected to be for reporting periods ending after December 15, 2004. Under EITF Issue No. 04-8, net earnings and diluted shares outstanding, used for earnings per share calculations, would be retroactively restated using the if-converted method of accounting to reflect the contingent issuance of 9,084 shares under our outstanding 1.50% Convertible Senior Debentures which were issued in June 2003. Fully diluted earnings per share would have been approximately $0.48 for the year ended December 31, 2003 and $0.62 for the nine months ended September 30, 2004 as compared to $0.48 and $0.67 as reported for the same periods, respectively.

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3. Accounting for Derivative Instruments and Hedging

Statement of Financial Accounting Standard (“SFAS”) No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS No. 137, Accounting for Derivative Instruments and Hedging Activities — Deferral of the Effective Date of FASB Statement No. 133, and SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities, an Amendment of SFAS No. 133 requires companies to reflect the fair value of all derivative instruments, including those embedded in other contracts, as assets or liabilities in an entity’s balance sheet. The Company determined that its only derivative is an embedded derivative in its 1.50% Senior Convertible Debentures, which was determined to have an insignificant value.

4. Stock-based Employee Compensation

As permitted under SFAS No. 123 Accounting for Stock-Based Compensation, as amended, the Company has elected to use the intrinsic value method as set forth in Accounting Principles Board Opinion No. 25 Accounting for Stock Issued to Employees. Accordingly, no stock-based compensation costs related to stock options have been recorded in the income statement. The Company has determined pro forma net earnings and net earnings per share information as if the fair value method described in SFAS 123 had been applied to its employee stock-based compensation and had been recognized as compensation expense.

5. Comprehensive Income

The Company’s comprehensive income, which includes net income, market valuation adjustments and currency translation adjustments, is as follows:

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6. Earnings Per Share

The following table represents unaudited disclosures of basic and diluted earnings per share for the periods presented below:

Anti-dilutive weighted average shares of common stock of 3,264 and 4,881 as of September 30, 2004 and 2003, respectively, have been excluded from the effect of dilutive securities because the options’ exercise prices were greater than the average market price of the common stock for the periods then ended. The convertible debentures issued June 4, 2003 are considered contingently convertible securities and were excluded from the earnings per share calculations for all periods presented. The debentures represent 9,084 potential shares of common stock issuable upon conversion. See Note 2 for further discussion regarding the contingently convertible securities and potential dilution.

7. Acquisitions

2003 Acquisitions

Best GmbH

In January 2003 the Company acquired Best GmbH, a German-based software company that provides proofing products for worldwide print and publishing markets, for approximately $9,585 in cash. The acquisition was accounted for as a purchase business combination and accordingly, the purchase price has been allocated to the tangible and identifiable intangible assets acquired and liabilities assumed on the basis of their fair values on the date of acquisition. The following table summarizes the allocation of the purchase price to assets acquired and liabilities assumed:

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The amounts allocated to intangible assets are being amortized using the straight-line method over their respective estimated useful lives; developed technology has a five-year life and all other acquired intangibles have a ten-year life.

The acquisition complements the Company’s strengths in graphic arts and workflow software, adding a range of pre-print, pre-press and remote proofing solutions for inkjet printers to its product portfolio.

Printcafe Software, Inc.

In October 2003 the Company acquired Printcafe Software, Inc. (“Printcafe”) for total consideration of approximately $33,401, paid in cash and common stock of the Company. Approximately 12,877 shares of Printcafe common stock were issued and outstanding on that date, of which approximately 8,813 shares of Printcafe common stock were redeemed for $22,916 and approximately 1,927 shares of Printcafe common stock were exchanged for approximately 202 shares of the Company’s common stock, valued at $5,011. The remaining 2,126 shares of stock were acquired by the Company for $5,529 earlier in 2003. The Company applied the equity method of accounting for its investment in Printcafe and accordingly recorded a charge of $1,562 based upon its share of Printcafe’s losses for the pre-acquisition period. The Company incurred $941 of capitalized transaction-related costs including legal fees, accounting fees and other consulting fees and assumed stock options with a fair value of $566. The Company assumed liabilities in excess of assets on the date of acquisition of $14,906. The acquisition was accounted for as a purchase business combination and accordingly, the purchase price has been allocated to the tangible and identifiable intangible assets acquired and liabilities assumed on the basis of their estimated fair values on the date of acquisition as follows:

The amounts allocated to intangible assets are being amortized using the straight-line method over their respective estimated useful lives; developed technology has a four-year life and all other acquired intangibles, including customer relationships, have a five-year life.

With the addition of the Printcafe suite of products, the Company can now offer a full range of products for the commercial print market. Printcafe’s market position in print supply chain management will allow the Company to offer both printers and their customers powerful end-to-end solutions to maximize their efficiency and profitability. By increasing its sales to distributors and end-users with the Printcafe direct sales force, the Company also lessened its revenue dependency on its traditional customer base.

T/R Systems, Inc.

In November 2003 the Company acquired T/R Systems, Inc., for approximately $20,021 in cash. The acquisition was accounted for as a purchase business combination and accordingly, the purchase price has been allocated to the tangible and identifiable intangible assets acquired and liabilities assumed on the basis of their estimated fair values on the date of acquisition. The following table summarizes the allocation of the purchase price to assets acquired and liabilities assumed:

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The amounts allocated to intangible assets are being amortized using the straight-line method over their respective estimated useful lives; developed technology has a three-year life, customer relationships have a four-year life and the remaining acquired intangibles have a five- to seven-year life.

T/R Systems’s Micropress engine enhanced our black-and-white server offerings. T/R also provided us access to a web-based document submission program.

2004 Acquisitions

Automated Dispatch Systems Inc.

In February 2004 the Company acquired Automated Dispatch Systems, Inc. (“ADS”), for approximately $11,811 in cash. The acquisition was accounted for as a purchase business combination and accordingly, the purchase price has been allocated to the tangible and identifiable intangible assets acquired and liabilities assumed on the basis of their estimated fair values on the date of acquisition. The following table summarizes the allocation of the purchase price to assets acquired and liabilities assumed: