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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
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 June 30, 2002
 
OR
 
 
¨
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
Commission File Number: 0-18805
 
ELECTRONICS FOR IMAGING, INC.
(Exact name of registrant as specified in its charter)
 
Delaware
   
94-3086355
(State or other jurisdiction of incorporation or organization)
   
(I.R.S. Employer Identification No.)
 
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 ¨
 
The number of shares of Common Stock outstanding as of July 31, 2002 was 54,221,757.
 
An Exhibit Index can be found on Page 28.
 

Table of Contents
 
ELECTRONICS FOR IMAGING, INC.
 
INDEX
 
           
Page No.
PART I—Financial Information
       
Item 1.
   
Condensed Consolidated Financial Statements
       
    
June 30, 2002 and December 31, 2001
     
3
    
Three Months Ended June 30, 2002 and 2001
     
4
    
Three Months Ended June 30, 2002 and 2001
     
5
         
6
Item 2.
        
11
Item 3.
        
26
PART II—Other Information
       
Item 1.
        
27
Item 2.
        
27
Item 3.
        
27
Item 4.
        
27
Item 5.
        
27
Item 6.
        
27
    
28

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Table of Contents
 
PART I—FINANCIAL INFORMATION
 
ITEM 1.    Condensed Consolidated Financial Statements
 
Electronics for Imaging, Inc.
Consolidated Balance Sheets
(unaudited)
 
    
June 30, 2002
     
December 31, 2001
  
    
(In thousands, except share and per share amounts)
  
Assets
                  
Current assets:
                  
Cash and cash equivalents
   
$
163,530
 
   
$
190,816
 
Short-term investments
   
 
295,745
 
   
 
260,391
 
Accounts receivable, net
   
 
51,576
 
   
 
53,966
 
Inventories
   
 
6,737
 
   
 
9,297
 
Other current assets
   
 
19,814
 
   
 
19,639
 
    
  
Total current assets
   
 
537,402
 
   
 
534,109
 
Property and equipment, net
   
 
57,260
 
   
 
55,046
 
Restricted investments
   
 
43,080
 
   
 
40,135
 
Other assets
   
 
74,278
 
   
 
73,697
 
    
  
Total assets
   
$
712,020
 
   
$
702,987
 
    
  
Liabilities and Stockholders’ Equity
                  
Current liabilities:
                  
Accounts payable
   
$
21,400
 
   
$
21,616
 
Accrued and other liabilities
   
 
42,932
 
   
 
46,036
 
Income taxes payable
   
 
30,654
 
   
 
28,437
 
    
  
Total current liabilities
   
 
94,986
 
   
 
96,089
 
Long-term obligations
   
 
307
 
   
 
331
 
Commitments and contingencies (Note 7)
                  
Stockholder’s equity:
                  
Preferred stock, $0.01 par value, 5,000,000 shares authorized; none issued and outstanding
   
 
—  
 
   
 
—  
 
Common stock, $0.01 par value; 150,000,000 authorized; 54,214,787 and 53,878,256 shares issued and outstanding, respectively
   
 
587
 
   
 
583
 
Additional paid-in capital
   
 
267,038
 
   
 
261,703
 
Treasury stock, at cost, 4,477,500 shares
   
 
(99,959
)
   
 
(99,959
)
Accumulated other comprehensive income
   
 
1,552
 
   
 
1,219
 
Retained earnings
   
 
447,509
 
   
 
443,021
 
    
  
Total stockholders’ equity
   
 
616,727
 
   
 
606,567
 
    
  
Total liabilities and stockholders’ equity
   
$
712,020
 
   
$
702,987
 
    
  
 
See accompanying notes to consolidated financial statements.

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Table of Contents
 
Electronics for Imaging, Inc.
Consolidated Statements of Income
(unaudited)
 
    
Three Months Ended
June 30,
   
Six Months Ended
June 30,
    
2002
   
2001
   
2002
   
2001
    
(In thousands, except per share amounts)
Revenue
   
$
83,931
   
$
143,936
   
$
166,824
   
$
285,029
Cost of revenue
   
 
41,324
   
 
79,714
   
 
83,427
   
 
158,059
    
  
  
  
Gross profit
   
 
42,607
   
 
64,222
   
 
83,397
   
 
126,970
Operating expenses:
                            
Research and development
   
 
23,021
   
 
25,272
   
 
45,424
   
 
51,737
Sales and marketing
   
 
12,461
   
 
15,246
   
 
24,750
   
 
30,856
General and administrative
   
 
5,509
   
 
6,483
   
 
10,934
   
 
13,086
Amortization of goodwill and other identified intangibles
   
 
1,098
   
 
3,089
   
 
2,102
   
 
6,134
    
  
  
  
Total operating expenses
   
 
42,089
   
 
50,090
   
 
83,210
   
 
101,813
    
  
  
  
Income from operations
   
 
518
   
 
14,132
   
 
187
   
 
25,157
Other income, net
   
 
3,003
   
 
3,952
   
 
6,224
   
 
8,270
    
  
  
  
Income before income taxes
   
 
3,521
   
 
18,084
   
 
6,411
   
 
33,427
Provision for income taxes
   
 
1,056
   
 
6,420
   
 
1,923
   
 
11,867
    
  
  
  
Net income
   
$
2,465
   
$
11,664
   
$
4,488
   
$
21,560
    
  
  
  
Net income per basic common share
   
$
0.05
   
$
0.22
   
$
0.08
   
$
0.41
    
  
  
  
Shares used in per-share calculation
   
 
54,203
   
 
53,401
   
 
54,105
   
 
53,205
    
  
  
  
Net income per diluted common share
   
$
0.05
   
$
0.21
   
$
0.08
   
$
0.40
    
  
  
  
Shares used in per-share calculation
   
 
54,748
   
 
54,963
   
 
54,878
   
 
54,581
    
  
  
  
 
See accompanying notes to consolidated financial statements.

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Table of Contents
 
Electronics for Imaging, Inc.
Consolidated Statements of Cash Flows
(unaudited)
 
    
Six Months Ended
June 30,
  
    
2002
     
2001
  
    
(In thousands)
  
Cash flows from operating activities:
                  
Net income
   
$
4,488
 
   
$
21,560
 
Adjustments to reconcile net income to net cash provided by operating activities
                  
Depreciation and amortization
   
 
7,441
 
   
 
14,115
 
Bad debt reserve
   
 
(97
)
   
 
221
 
Deferred income tax
   
 
164
 
   
 
691
 
Changes in operating assets and liabilities:
                  
Accounts receivable
   
 
2,632
 
   
 
9,125
 
Inventories
   
 
2,560
 
   
 
8,834
 
Receivable from subcontract manufacturers
   
 
(838
)
   
 
10,373
 
Other current assets
   
 
548
 
   
 
1,529
 
Accounts payable and accrued liabilities
   
 
(5,299
)
   
 
(11,221
)
Income taxes payable
   
 
3,007
 
   
 
18,836
 
    
  
Net cash provided by operating activities
   
 
14,624
 
   
 
74,063
 
Cash flows from investing activities:
                  
Purchases and sales/maturities of short-term investments, net
   
 
(35,040
)
   
 
31,578
 
Net purchases of restricted investments
   
 
(2,945
)
   
 
(15,114
)
Investment in property and equipment, net
   
 
(7,032
)
   
 
(11,660
)
Acquisition of subsidiaries
   
 
(1,870
)
   
 
—  
 
Change in other assets
   
 
452
 
   
 
(542
)
    
  
Net cash provided by (used for) investing activities
   
 
(46,435
)
   
 
4,262
 
Cash flows from financing activities:
                  
Repayment of long-term obligation
   
 
(24
)
   
 
(159
)
Issuance of common stock
   
 
4,549
 
   
 
13,192
 
    
  
Net cash provided by financing activities
   
 
4,525
 
   
 
13,033
 
    
  
Increase (decrease) in cash and cash equivalents
   
 
(27,286
)
   
 
91,358
 
Cash and cash equivalents at beginning of year
   
 
190,816
 
   
 
102,804
 
    
  
Cash and cash equivalents at end of period
   
$
163,530
 
   
$
194,162
 
    
  
 
See accompanying notes to consolidated financial statements.

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Table of Contents
 
Electronics for Imaging, Inc.
Notes to unaudited Consolidated Financial Statements
 
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 June 30, 2002, have been prepared on the same basis as the audited consolidated financial statements as of and for the year ended December 31, 2001, contained in the Company’s Annual Report to Stockholders. 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 generally accepted accounting principles. 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.
 
The preparation of the interim condensed consolidated financial statements in conformity with generally accepted accounting principles for such financial statements 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 periods ended June 30, 2002 are not necessarily indicative of the results to be expected for any other interim period or the full year.
 
2.    Recent Accounting Pronouncements
 
SFAS 142
 
In July 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible Assets, which is effective for fiscal years beginning after March 15, 2001. SFAS No. 142 requires, among other things, the discontinuance of goodwill amortization. In addition, the standard includes provisions upon adoption for the reclassification of certain existing recognized intangibles as goodwill, reassessment of the useful lives of existing recognized intangibles, and reclassification of certain intangibles out of previously reported goodwill. Upon adoption of the standard on January 1, 2002, we ceased amortizing goodwill and reclassified net intangible assets and deferred tax liabilities relating to acquired workforce totaling $0.9 million to goodwill.
 
The provisions of SFAS No. 142 also require periodic testing of goodwill for impairment. A transitional impairment test must be completed within six months of adoption of SFAS No. 142, with any impairments treated as a cumulative effect of change in accounting principle. The Company completed the transitional impairment test during June 2002, and did not record any impairment.
 
A reconciliation of previously reported net income and earnings per share to the amounts adjusted for the exclusion of goodwill and workforce amortization, net of the related income tax effect, follows:
 
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