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8-K - FORM 8-K - ELECTRONICS FOR IMAGING INCd570920d8k.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 All-Time Record Revenue for the Second Quarter of 2013

Revenue of $180M up 10% as More Customers Turn to EFI for a Competitive Edge

Foster City, Calif. – July 18, 2013 – Electronics For Imaging, Inc. (Nasdaq: EFII), a world leader in customer-focused digital printing innovation, today announced its results for the second quarter of 2013.

For the quarter ended June 30, 2013, the Company reported record revenue of $180.3 million, up 10% compared to second quarter 2012 revenue of $163.9 million. Second quarter 2013 non-GAAP net income was $18.3 million or $0.38 per diluted share, compared to non-GAAP net income of $14.2 million or $0.30 per diluted share for the same period in 2012. GAAP net income was $9.4 million or $0.20 per diluted share, compared to $7.0 million or $0.15 per diluted share for the same period in 2012.

For the six months ended June 30, 2013, the Company reported revenue of $351.7 million, up 9% year-over-year compared to $324.0 million for the same period in 2012. Non-GAAP net income was $34.0 million or $0.71 per diluted share, compared to non-GAAP net income of $28.3 million or $0.60 per diluted share for the same period in 2012. GAAP net income was $17.8 million or $0.37 per diluted share, compared to GAAP net income of $13.2 million or $0.28 per diluted share for the same period in 2012.

“We could not have been more delighted with the record results the EFI team delivered in the second quarter as our product innovation continues to drive demand across our three segments,” said Guy Gecht, CEO of EFI. “We look to maintain this momentum into the third quarter as customers increasingly turn to EFI to make their businesses more competitive.”

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, product portfolio, productivity, future opportunities for EFI and its customers, 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 supply of components; litigation involving intellectual property rights or other related matters; our ability to successfully integrate acquired businesses; the uncertainty regarding the amount and timing of future share repurchases by EFI and the origin of funds used for such repurchases; the market prices of EFI’s common stock prior to, during and after the share repurchases; any disruptions in our operations, the difficulty to retain employees, and additional expenses that we may incur as a result of our relocation from the Foster City campus; the compliance with the new requirements regarding the “conflict minerals,” if they are found to be used in our products, 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, 2013 and 2012 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,
 
     2013     2012     2013     2012  

Revenue

   $ 180,298      $ 163,901      $ 351,657      $ 323,957   

Cost of revenue

     82,315        74,109        159,814        146,498   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     97,983        89,792        191,843        177,459   

Operating expenses:

        

Research and development

     32,092        30,227        63,159        61,126   

Sales and marketing

     34,512        32,234        67,248        63,151   

General and administrative

     13,343        11,154        27,041        24,056   

Amortization of identified intangibles

     4,946        4,631        9,873        8,815   

Restructuring and other

     1,235        1,167        3,137        2,250   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     86,128        79,413        170,458        159,398   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

     11,855        10,379        21,385        18,061   

Interest and other expense, net

     (422     (1,325     (3,346     (755
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     11,433        9,054        18,039        17,306   

Provision for income taxes

     (2,009     (2,049     (253     (4,067
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 9,424      $ 7,005      $ 17,786      $ 13,239   
  

 

 

   

 

 

   

 

 

   

 

 

 

Fully Diluted EPS calculation

        

Net income

   $ 9,424      $ 7,005      $ 17,786      $ 13,239   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income per diluted common share

   $ 0.20      $ 0.15      $ 0.37      $ 0.28   
  

 

 

   

 

 

   

 

 

   

 

 

 

Shares used in diluted per share calculation

     48,254        47,814        48,149        47,599   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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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,
 
     2013     2012     2013     2012  

Net income

   $ 9,424      $ 7,005      $ 17,786      $ 13,239   
  

 

 

   

 

 

   

 

 

   

 

 

 

Amortization of identified intangibles

     4,946        4,631        9,873        8,815   

Stock based compensation – Cost of revenue

     382        235        851        533   

Stock based compensation – Research and development

     1,671        1,260        3,538        2,824   

Stock based compensation – Sales and marketing

     947        858        1,835        1,614   

Stock based compensation – General and administrative

     2,798        2,413        6,218        4,462   

Restructuring and other

     1,235        1,167        3,137        2,250   

General and administrative:

        

Acquisition-related transaction costs

     672        372        691        824   

Change in fair value of contingent consideration

     (544     (1,404     (806     (1,404

Insurance litigation settlement

     —          (250     —          (250

Sublease income related to our deferred property sale

     (997     —          (1,717     —     

Depreciation expense related to our deferred property sale

     410        —          820        —     

Interest and other expense, net:

        

Interest expense related to our deferred property sale

     611        —          1,491        —     

Relocation expenses related to deferred property sale

     34        —          110        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Tax effect of non-GAAP adjustments

     (3,302     (2,101     (9,789     (4,558
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP net income

   $ 18,287      $ 14,186      $ 34,038      $ 28,349   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP net income per diluted common share

   $ 0.38      $ 0.30      $ 0.71      $ 0.60   
  

 

 

   

 

 

   

 

 

   

 

 

 

Shares used in per share calculation

     48,254        47,814        48,149        47,599   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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Electronics For Imaging, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

 

     June 30,
2013
     December 31,
2012
 

Assets

     

Cash and cash equivalents

   $ 290,010       $ 283,996   

Short-term investments

     63,550         80,966   

Accounts receivable, net

     129,262         135,110   

Inventories

     63,099         58,343   

Other current assets

     87,959         74,877   
  

 

 

    

 

 

 

Total current assets

     633,880         633,292   

Property and equipment, net

     119,360         86,582   

Goodwill

     222,398         219,383   

Intangible assets, net

     72,333         80,244   

Other assets

     60,768         55,397   
  

 

 

    

 

 

 

Total assets

   $ 1,108,739       $ 1,074,898   
  

 

 

    

 

 

 

Liabilities & Stockholders’ equity

     

Accounts payable

   $ 70,973       $ 63,446   

Deferred proceeds from property transaction

     181,981         180,216   

Accrued and other liabilities

     120,671         119,174   

Income taxes payable

     4,616         7,562   
  

 

 

    

 

 

 

Total current liabilities

     378,241         370,398   

Imputed financing obligation

     11,000         —     

Contingent and other liabilities

     9,284         17,742   

Deferred tax liabilities

     6,629         6,210   

Long term taxes payable

     33,807         29,755   
  

 

 

    

 

 

 

Total liabilities

     438,961         424,105   

Total stockholders’ equity

     669,778         650,793   
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 1,108,739       $ 1,074,898   
  

 

 

    

 

 

 

Note: In accordance with ASC 805, we revised previously issued financial information to reflect adjustments to the accounting for business acquisitions as if they occurred on the acquisition date. Accordingly, we have increased goodwill and accrued and other liabilities by $1.1 million at December 31, 2012 to reflect opening balance sheet adjustments related to our acquisitions of Cretaprint, OPS, and Technique.

 

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Electronics For Imaging, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

     Six Months Ended
June 30,
 
     2013     2012  

Cash flows from operating activities:

    

Net income

   $ 17,786      $ 13,239   

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

    

Depreciation and amortization

     14,343        13,110   

Deferred taxes

     (7,714     1,281   

Tax benefit (release) from employee stock plans

     2,474        (367

Excess tax benefit from stock-based compensation

     (2,637     (495

Stock-based compensation

     12,442        9,433   

Provisions for inventory obsolescence

     2,361        2,122   

Provisions for bad debts and sales-related allowances

     2,169        199   

Contingent consideration payment related to business acquired

     (618     —     

Other non-cash charges and adjustments

     627        1,494   

Changes in operating assets and liabilities

     444        (21,636
  

 

 

   

 

 

 

Net cash provided by operating activities*

     41,677     18,380   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Purchases of short-term investments

     (17,781     (28,542

Proceeds from sales and maturities of short-term investments

     34,513        36,193   

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

     (27,324     (3,801

Businesses purchased, net of cash acquired

     (4,533     (44,533

Proceeds from notes receivable of acquired businesses

     —          5,216   
  

 

 

   

 

 

 

Net cash used for investing activities

     (15,125     (35,467
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Proceeds from issuance of common stock

     7,906        15,041   

Purchases of treasury stock

     (17,838     (9,456

Repayment of acquired business debt

     (1,620     (6,666

Contingent consideration payments related to businesses acquired

     (9,998     (252

Excess tax benefit from stock-based compensation

     2,637        495   
  

 

 

   

 

 

 

Net cash used for financing activities

     (18,913     (838
  

 

 

   

 

 

 

Effect of foreign exchange rate changes on cash and cash equivalents

     (1,625     (308
  

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

     6,014        (18,233

Cash and cash equivalents at beginning of year

     283,996        120,058   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 290,010      $ 101,825   
  

 

 

   

 

 

 

 

* If we excluded $5.5 million of taxes paid related to the sale of our corporate headquarters facility, then our net cash provided by operating activities would be $47.2 million for the six months ended June 30, 2013

 

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Electronics For Imaging, Inc.

Revenue by Operating Segment and Geographic Area

(in thousands)

(unaudited)

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2013      2012      2013      2012  

Revenue by Operating Segment

           

Industrial Inkjet

   $ 88,003       $ 79,820       $ 168,306       $ 154,912   

Productivity Software

     28,509         25,722         56,238         49,791   

Fiery

     63,786         58,359         127,113         119,254   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 180,298       $ 163,901       $ 351,657       $ 323,957   
  

 

 

    

 

 

    

 

 

    

 

 

 

Revenue by Geographic Area

           

Americas

   $ 100,516       $ 82,725       $ 194,414       $ 164,906   

EMEA

     49,984         51,560         100,030         106,686   

APAC

     29,798         29,616         57,214         52,365   

Japan

     5,815         7,867         13,034         14,819   

APAC, ex Japan

     23,983         21,749         44,180         37,546   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 180,298       $ 163,901       $ 351,658       $ 323,957   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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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 and significant recurring and non-recurring items that we believe are important to understanding financial and business trends relating to our financial condition and results of operations. Non-GAAP net income and non-GAAP earnings per diluted share are among the primary indicators used by management as a basis for planning and forecasting future periods and by management and our Board of Directors to determine whether our operating performance has met specified targets and thresholds. Management uses non-GAAP net income and non-GAAP earnings per diluted share when evaluating operating performance because it believes the exclusion of the items described below, for which the amounts and/or timing may vary significantly depending on 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 expenses and the costs to integrate such acquisitions into our business, changes in the fair value of contingent consideration, corporate headquarters relocation expenses, and imputed interest expense and depreciation, net of accrued sublease income, related to the sale of our corporate headquarters facility and related land.

These excluded items are described below:

 

   

Recurring charges and gains, including:

 

   

Amortization of acquisition-related intangibles. Intangible assets acquired to date are being amortized on a straight-line basis. Post-acquisition non-competition agreements are amortized over their term.

 

   

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

 

   

Non-recurring charges and gains, including:

 

   

Restructuring and other consists of:

 

   

Restructuring charges incurred as we consolidate the number and size of our facilities and, as a result, reduce the size of our workforce.

 

   

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

 

   

Expenses incurred to integrate businesses acquired during the periods reported and anticipated acquisitions.

 

   

Acquisition-related transaction costs associated with businesses acquired during the periods reported and anticipated transactions.

 

   

Changes in fair value of contingent consideration. Our management determined that we should analyze the total return provided by the investment when evaluating operating results of an acquired entity. The total return consists of operating profit generated from the acquired entity compared to the purchase price paid, including the final amounts paid for contingent consideration without considering any post-acquisition adjustments related to changes in the fair value of the contingent consideration. Because our management believes the final purchase price paid for the acquisition reflects the accounting value assigned to both contingent consideration and to the intangible assets, we exclude the GAAP impact of any adjustments to the fair value of acquisition-related contingent consideration from the operating results of an acquisition in subsequent periods. We believe this approach is useful in understanding the long-term return provided by our acquisitions and that investors benefit from a supplemental non-GAAP financial measure that excludes the impact of this adjustment.

 

8


   

Imputed net expenses related to sale of building and land. On November 1, 2012, we sold the 294,000 square foot building located at 303 Velocity Way in Foster City, California, which serves as our corporate headquarters, along with approximately four acres of land and certain other assets related to the property, to Gilead Sciences, Inc. for $179.7 million. We will continue to use the facility for up to one year for which rent is not required to be paid. This constitutes a form of continuing involvement that prevents gain recognition. Until we vacate the building, the proceeds from the sale will be recognized as deferred proceeds from property transaction on our condensed consolidated balance sheet, which is currently $182.0 million, including imputed interest costs. Imputed interest expense and depreciation of $1.0 million, net of accrued sublease income and capitalized interest, has been accrued as of June 30, 2013.

 

   

Expenses incurred during the period related to the upcoming relocation of our corporate headquarters facility.

 

   

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 740, Income Taxes, to estimate the non-GAAP income tax provision in each jurisdiction in which we operate.

 

   

To facilitate comparability of our operating performance between 2013 and 2012, we have excluded the following from our non-GAAP net income:

 

   

Tax charge of $0.3 million resulting from the filing of tax returns by foreign subsidiaries for periods prior to their acquisition by EFI for the six months ended June 30, 2013.

 

   

Tax benefit of $3.2 and $0.2 million from the retroactive renewal of both the 2012 U.S. federal research and development tax credit and certain international tax provisions, respectively, on January 2, 2013, for the six months ended June 30, 2013. The tax benefit for these items had been previously recognized in our non-GAAP net income for the year ended December 31, 2012

 

   

Interest expense accrued on prior year tax reserves of $0.1 million for the three months ended June 30, 2013 and 2012, respectively, and $0.2 million for the six months ended June 30, 2013 and 2012, respectively, as well as other tax benefits of $0.3 million for the three and six months ended June 30, 2013.

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.

 

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