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8-K - FORM 8-K - ELECTRONICS FOR IMAGING INCd382389d8k.htm
EX-99.2 - PRESS RELEASE - EFI ENTERS INTO REAL ESTATE ASSET SALE AGREEMENT - ELECTRONICS FOR IMAGING INCd382389dex992.htm

Exhibit 99.1

 

For more information:     Investor Relations:
Vincent Pilette     JoAnn Horne
Chief Financial Officer     Market Street Partners
EFI     415-445-3235
650-357-3500    

EFI Reports Record Revenue for the Second Quarter of 2012

Revenue Increases 16% Driven by 39% Growth in Industrial Inkjet

and 33% Growth in Productivity Software

Foster City, Calif. – July 19, 2012 – Electronics For Imaging, Inc. (Nasdaq: EFII), a world leader in customer-focused digital printing innovation, today announced its results for the second quarter of 2012.

For the quarter ended June 30, 2012, the Company reported record revenue of $163.9 million, up 16% compared to second quarter 2011 revenue of $141.2 million. Second quarter 2012 non-GAAP net income was $14.2 million or $0.30 per diluted share, which included an unfavorable non-operational currency impact of $0.03 per share, compared to non-GAAP net income of $11.3 million or $0.23 per diluted share for the same period in 2011, which included a favorable non-operational currency impact of $0.01 per share. GAAP net income was $7.0 million or $0.15 per diluted share, compared to $3.6 million or $0.07 per diluted share for the same period in 2011.

For the six months ended June 30, 2012, the Company reported revenue of $324.0 million, up 15% year-over-year compared to $281.2 million for the same period in 2011. Non-GAAP net income was $28.3 million or $0.60 per diluted share, compared to non-GAAP net income of $24.8 million or $0.51 per diluted share for the same period in 2011. GAAP net income was $13.2 million or $0.28 per diluted share, compared to GAAP net income of $9.9 million or $0.20 per diluted share for the same period in 2011.

“Our team delivered a record revenue quarter with 16% growth in an increasingly challenging operating environment coupled with currency headwinds. Strong results in our Industrial Inkjet and Productivity Software business segments led to our tenth consecutive quarter of double-digit growth,” said Guy Gecht, Chief Executive Officer of EFI. “While our business isn’t immune to broader economic trends even though EFI targets the growth areas of print, we continue to see growth opportunities in enabling our customers to transform their businesses and optimize their operations, which allows us both to continue to grow even in a tough environment.”

Separately, the company today announced that it has entered into a real estate asset sale agreement with Gilead Sciences, Inc., to sell its Foster City facility for $180 million. Details can be found in a press release posted on the Investor Relations section of the EFI website at http://ir.efi.com.

EFI will discuss the Company’s financial results by conference call at 2:00 p.m. PDT today. Instructions for listening to the conference call over the Web are available on the investor relations portion of EFI’s website at www.efi.com.

About EFI

EFI™ (www.efi.com) is a worldwide provider of products, technology, and services leading the transformation of analog to digital imaging. Based in Silicon Valley with offices around the globe, the company’s powerful integrated product portfolio includes digital front-end servers; superwide, wide-format, label, and ceramic inkjet presses and inks; production workflow, web-to-print, and business automation software; and office, enterprise, and mobile cloud solutions. These products allow users to produce, communicate and share information in an easy and effective way, and enable businesses to increase their profits, productivity, and efficiency.

 

1


Safe Harbor for Forward Looking Statements

Certain statements in this press release are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements other than statements of historical fact including words such as “anticipate”, “believe”, “estimate”, “expect”, “consider” and “plan” and statements in the future tense are forward looking statements. The statements in this press release that could be deemed forward-looking statements include statements regarding EFI’s strategy, plans, expectations regarding its revenue growth and new technology, and any statements or assumptions underlying any of the foregoing.

Forward-looking statements are subject to certain risks and uncertainties that could cause our actual future results to differ materially, or cause a material adverse impact on our results. Potential risks and uncertainties include, but are not necessarily limited to, unforeseen expenses; the difficulty of aligning expense levels with revenue; management’s ability to forecast revenues, expenses and earnings; any world-wide financial and economic difficulties and downturns; adverse tax-related matters such as tax audits, changes in our effective tax rate or new tax legislative proposals; the unpredictability of development schedules and commercialization of products by the leading printer manufacturers and declines or delays in demand for our related products; changes in the mix of products sold; the uncertainty of market acceptance of new product introductions; intense competition in each of our businesses, including competition from products developed by EFI’s customers; challenge of managing asset levels, including inventory and variations in inventory levels; the uncertainty of continued success in technological advances; the challenges of obtaining timely, efficient and quality product manufacturing and components supplying; litigation involving intellectual property rights or other related matters; our ability to successfully integrate acquired businesses; and any other risk factors that may be included from time to time in the Company’s SEC reports.

The statements in this press release are made as of the date of this press release. EFI undertakes no obligation to update information contained in this press release. For further information regarding risks and uncertainties associated with EFI’s businesses, please refer to the section entitled “Risk Factors” in the Company’s SEC filings, including, but not limited to, its annual report on Form 10-K and its quarterly reports on Form 10-Q, copies of which may be obtained by contacting EFI’s Investor Relations Department by phone at 650-357-3828 or by email at investor.relations@efi.com or EFI’s Investor Relations website at www.efi.com.

Use of Non-GAAP Financial Information

To supplement our condensed consolidated financial results prepared under generally accepted accounting principles, or GAAP, we use non-GAAP measures of net income (loss), as the case may be, and earnings per diluted share that are GAAP net income (loss), as the case may be, and GAAP earnings per diluted share adjusted to exclude certain recurring and non-recurring costs, expenses and gains. A reconciliation of the adjustments to GAAP results for the three and six months ended June 30, 2012 and 2011 is provided below. In addition, an explanation of how management uses non-GAAP financial information to evaluate its business, the substance behind management’s decision to use this non-GAAP financial information, the material limitations associated with the use of non-GAAP financial information, the manner in which management compensates for those limitations, and the substantive reasons management believes that this non-GAAP financial information provides useful information to investors is included under “About our Non-GAAP Net Income and Adjustments” after the tables below.

These non-GAAP measures are not in accordance with or an alternative to GAAP and may be materially different from other non-GAAP measures, including similarly titled non-GAAP measures, used by other companies. The presentation of this additional information should not be considered in isolation from, as a substitute for, or superior to, net income (loss), as the case may be, or earnings per diluted share prepared in accordance with GAAP.

 

2


Electronics For Imaging, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

 

     Three Months Ended
June  30,
    Six Months Ended
June  30,
 
     2012     2011     2012     2011  

Revenue

   $ 163,901      $ 141,162      $ 323,957      $ 281,215   

Cost of revenue

     74,109        62,585        146,498        123,927   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     89,792        78,577        177,459        157,288   

Operating expenses:

        

Research and development

     30,227        28,905        61,126        56,376   

Sales and marketing

     32,234        29,651        63,151        57,899   

General and administrative

     11,154        13,298        24,056        26,455   

Amortization of identified intangibles

     4,631        2,989        8,815        6,409   

Restructuring and other

     1,167        366        2,250        1,713   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     79,413        75,209        159,398        148,852   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

     10,379        3,368        18,061        8,436   

Interest and other income (expense), net

     (1,325     812        (755     3,208   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     9,054        4,180        17,306        11,644   

Provision for income taxes

     (2,049     (565     (4,067     (1,780
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 7,005      $ 3,615      $ 13,239      $ 9,864   
  

 

 

   

 

 

   

 

 

   

 

 

 

Fully Diluted EPS calculation

        

Net income

   $ 7,005      $ 3,615      $ 13,239      $ 9,864   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income per diluted common share

   $ 0.15      $ 0.07      $ 0.28      $ 0.20   
  

 

 

   

 

 

   

 

 

   

 

 

 

Shares used in diluted per share calculation

     47,814        48,458        47,599        48,365   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

3


Electronics For Imaging, Inc.

Reconciliation of GAAP Net Income to Non-GAAP Net Income

(in thousands, except per share data)

(unaudited)

 

      Three Months Ended
June  30,
    Six Months Ended
June  30,
 
     2012     2011     2012     2011  

Net income

   $ 7,005      $ 3,615      $ 13,239      $ 9,864   
  

 

 

   

 

 

   

 

 

   

 

 

 

Amortization of identified intangibles

     4,631        2,989        8,815        6,409   

Stock based compensation – Cost of revenue

     235        441        533        677   

Stock based compensation – Research and development

     1,260        1,890        2,824        2,767   

Stock based compensation – Sales and marketing

     858        1,174        1,614        2,059   

Stock based compensation – General and administrative

     2,413        3,599        4,462        6,772   

Acquisition-related transaction costs

     372        266        824        866   

Change in fair value of contingent consideration

     (1,404     —          (1,404     —     

Restructuring and other

     1,167        366        2,250        1,713   

Litigation settlement

     (250     —          (250     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Tax effect of non-GAAP adjustments

     (2,101     (3,012     (4,558     (6,297
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP net income

   $ 14,186      $ 11,328      $ 28,349      $ 24,830   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP net income per diluted common share

   $ 0.30      $ 0.23      $ 0.60      $ 0.51   
  

 

 

   

 

 

   

 

 

   

 

 

 

Shares used in per share calculation

     47,814        48,458        47,599        48,365   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

4


Electronics For Imaging, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

 

     June 30,      December 31,  
     2012      2011  

Assets

     

Cash and cash equivalents

   $ 101,825       $ 120,058   

Short-term investments

     90,551         99,100   

Accounts receivable, net

     124,505         91,923   

Inventories

     61,204         44,788   

Other current assets

     29,226         20,792   
  

 

 

    

 

 

 

Total current assets

     407,311         376,661   

Property and equipment, net

     30,796         30,096   

Restricted investments

     56,850         56,850   

Goodwill

     200,514         164,323   

Intangible assets, net

     76,766         55,992   

Other assets

     53,991         55,812   
  

 

 

    

 

 

 

Total assets

   $ 826,228       $ 739,734   
  

 

 

    

 

 

 

Liabilities & Stockholders’ equity

     

Accounts payable

   $ 64,807       $ 46,965   

Accrued and other liabilities

     98,668         82,289   

Income taxes payable

     4,729         2,583   
  

 

 

    

 

 

 

Total current liabilities

     168,204         131,837   

Contingent and other liabilities

     14,695         3,427   

Deferred tax liabilities

     13,184         4,090   

Long term taxes payable

     38,898         35,597   
  

 

 

    

 

 

 

Total liabilities

     234,981         174,951   

Total stockholders’ equity

     591,247         564,783   
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 826,228       $ 739,734   
  

 

 

    

 

 

 

 

5


Electronics For Imaging, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

     Six Months Ended  
     June 30,  
     2012     2011  

Cash flows from operating activities:

    

Net income

   $ 13,239      $ 9,864   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization

     13,110        10,302   

Deferred taxes

     1,281        (768

Excess tax benefit from stock-based compensation

     (495     (1,218

Stock-based compensation

     9,433        12,275   

Provision for inventory obsolescence

     2,122        4,186   

Other non-cash charges and adjustments

     1,326        1,725   

Changes in operating assets and liabilities

     (21,636     (4,448
  

 

 

   

 

 

 

Net cash provided by operating activities

     18,380        31,918   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Purchases of short-term investments

     (28,542     (66,460

Proceeds from sales and maturities of short-term investments

     36,193        54,417   

Purchases, net of proceeds from sales, of property and equipment

     (3,801     (4,849

Businesses purchased, net of cash acquired

     (44,533     (9,298

Proceeds from collection of notes receivable of acquired business

     5,216        713   
  

 

 

   

 

 

 

Net cash used for investing activities

     (35,467     (25,477
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Proceeds from issuance of common stock

     15,041        4,119   

Purchases of treasury stock and net settlement of restricted stock

     (9,456     (19,189

Repayment of acquired business debt

     (6,666     (210

Contingent consideration related to businesses acquired

     (252     (1,746

Excess tax benefit from stock-based compensation

     495        1,218   
  

 

 

   

 

 

 

Net cash used for financing activities

     (838     (15,808
  

 

 

   

 

 

 

Effect of foreign exchange rate changes on cash and cash equivalents

     (308     97   
  

 

 

   

 

 

 

Decrease in cash and cash equivalents

     (18,233     (9,270

Cash and cash equivalents at beginning of year

     120,058        126,363   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 101,825      $ 117,093   
  

 

 

   

 

 

 

 

6


Electronics For Imaging, Inc.

Revenue by Operating Segment and Geographic Area

(in thousands)

(unaudited)

 

     Three Months Ended      Six Months Ended  
     June 30,      June 30,  
     2012      2011      2012      2011  

Revenue by Operating Segment

           

Industrial Inkjet

   $ 79,820       $ 57,244       $ 154,912       $ 108,279   

Productivity Software (1)

     25,722         19,332         49,791         35,986   

Fiery

     58,359         64,586         119,254         136,950   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 163,901       $ 141,162       $ 323,957       $ 281,215   
  

 

 

    

 

 

    

 

 

    

 

 

 

Revenue by Geographic Area

           

Americas

   $ 82,725       $ 82,854       $ 164,906       $ 157,046   

EMEA

     51,560         42,643         106,686         87,181   

APAC

     29,616         15,665         52,365         36,988   

Japan

     7,867         9,499         14,819         21,320   

ROW

     21,749         6,166         37,546         15,668   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 163,901       $ 141,162       $ 323,957       $ 281,215   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

Previously referred to as APPS. In Q1 2012, we re-named our APPS operating segment as the “Productivity Software operating segment.”

 

7


About our Non-GAAP Net Income and Adjustments

Use of Non-GAAP Financial Information

To supplement our condensed 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 recurring and non-recurring costs, expenses, and gains.

We believe that the presentation of non-GAAP net income and non-GAAP earnings per diluted share provides important supplemental information regarding non-cash expenses, significant recurring and non-recurring items that we believe are important to understanding our 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 that the exclusion of the items described below, for which the amounts and/or timing may vary significantly depending upon the Company’s activities and other factors, facilitates comparability of the Company’s 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 recurring amortization of acquisition-related intangibles and stock-based compensation expense, as well as restructuring-related and non-recurring charges and gains and the tax effect of these adjustments. Such non-recurring charges and gains include acquisition-related transaction costs and costs to integrate such acquisitions into our business.

 

   

Recurring charges and gains, include:

 

   

Amortization of acquisition-related intangibles. Intangible assets acquired to date are being amortized on a straight-line basis.

 

   

Stock-based compensation expense recognized in accordance with FASB Accounting Standards Codification (“ASC”), Topic 718, Stock Compensation.

 

   

Non-recurring charges and gains consists of:

 

   

Restructuring related charges.

 

   

We have incurred Restructuring and other charges as we reduced the number and size of our facilities and the size of our workforce.

 

   

Acquisition-related executive deferred compensation costs, which are dependent on the continuing employment of a former shareholder, which are being amortized on a straight-line basis.

 

   

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.

   

We have excluded a $1.4 million benefit from our non-GAAP operating results related to the change in fair value on the Entrac acquisition 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 the change in the fair value of the contingent consideration. Because 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 an acquisition and that investors benefit from a supplemental non-GAAP financial measure that excludes the impact of this adjustment.

 

8


   

Pursuant to a settlement executed in April 2012, we received an additional $0.3 million in insurance proceeds, net of legal fees and costs, related to our previously disclosed settlement of the shareholder derivative litigation concerning our historical option granting practices

 

   

Tax effect of non-GAAP adjustments.

 

   

After excluding the items described above, we apply the principles of ASC Topic 740, Income Taxes, to estimate the non-GAAP income tax provision in each jurisdiction in which we operate. The expected annual non-GAAP income tax rate assumes that the U.S. federal research and development tax credit will be retroactively re-enacted in 2012 as well as achieving certain operational efficiencies related to our foreign business operations that will be implemented in the second half of 2012.

 

   

We have excluded the recognition of interest expense accrued on prior year tax reserves of $0.1 and $0.2 million from our non-GAAP net income for the three and six months ended June 30, 2012 and 2011, respectively, to facilitate comparability of our operating performance from period to period.

Usefulness of Non-GAAP Financial Information to Investors

These non-GAAP measures are not in accordance with or an alternative to GAAP and may be materially different from other non-GAAP measures, including similarly titled non-GAAP measures, used by other companies. The presentation of this additional information should not be considered in isolation from, as a substitute for, or superior to, net income or earnings per diluted share prepared in accordance with GAAP. Non-GAAP financial measures have limitations as 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.

 

9