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 September 30, 1997
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 (I.R.S. Employer
incorporation or organization) Identification No.)
2855 Campus Drive, San Mateo, CA 94403
(Address of principal executive offices, including zip code)
(650) 286-8600
(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 September 30, 1997 was
52,417,072.
An Exhibit Index can be found on Page 16.
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ELECTRONICS FOR IMAGING, INC.
INDEX
<CAPTION>
Page No.
<S> <C> <C>
PART I - Financial Information
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Statements of Income
Three Months Ended September 30, 1997 and 1996, and
Nine Months Ended September 30, 1997 and 1996 ....................................3
Condensed Consolidated Balance Sheets
September 30, 1997 and December 31, 1996 .........................................4
Condensed Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1997 and 1996 ....................................5
Notes to Condensed Consolidated Financial Statements ..................................6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations .......................................................8
Item 3. Not Applicable............................................................................15
PART II - Other Information
Items 1 - 5. Not Applicable ...........................................................................16
Item 6. Exhibits and Reports on Form 8-K .........................................................16
Signatures .................................................................................................18
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2
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<TABLE>
PART I FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
ELECTRONICS FOR IMAGING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- ------------------------------
1997 1996 1997 1996
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Revenue $ 107,323 $ 75,121 $ 298,962 $ 207,816
Cost of revenue 48,295 36,422 134,795 104,220
------------- ------------- ------------- --------------
59,028 38,699 164,167 103,596
------------- ------------- ------------- --------------
Operating expenses:
Research and development 10,753 5,806 28,144 15,052
Sales and marketing 10,520 7,695 30,565 20,538
General and administrative 2,913 2,634 8,627 7,387
------------- ------------- ------------- --------------
24,186 16,135 67,336 42,977
------------- ------------- ------------- --------------
Income from operations 34,842 22,564 96,831 60,619
Other income, net 2,523 1,738 7,779 5,087
------------- ------------- ------------- --------------
Income before income taxes 37,365 24,302 104,610 65,706
Provision for income taxes 13,451 8,749 37,659 23,655
------------- ------------- ------------- --------------
Net income $ 23,914 $ 15,553 $ 66,951 $ 42,051
============= ============= ============= ==============
Net income per share $ 0.43 $ 0.28 $ 1.20 $ 0.77
============= ============= ============= ==============
Shares used in computing
net income per share 56,216 55,028 55,897 54,648
============= ============= ============= ==============
<FN>
See accompanying notes to condensed consolidated financial statements.
</FN>
</TABLE>
3
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ELECTRONICS FOR IMAGING, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)
September 30, December 31,
1997 1996
-------- --------
ASSETS
Current assets:
Cash and cash equivalents $ 77,022 $ 71,946
Short-term investments 178,528 140,154
Accounts receivable 55,088 40,875
Inventories 15,750 11,004
Other current assets 32,052 22,970
-------- --------
Total current assets 358,440 286,949
Property and equipment, net 40,928 10,640
Other assets 1,447 1,364
-------- --------
Total assets $400,815 $298,953
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 25,040 $ 16,355
Accrued and other liabilities 26,933 25,980
Income taxes payable 19,488 7,248
-------- --------
Total current liabilities 71,461 49,583
Long term liabilities 4,532 --
-------- --------
Total liabilities 75,993 49,583
-------- --------
Stockholders' equity:
Preferred Stock, $.01 par value, 5,000,000 shares
authorized; none issued and outstanding -- --
Common Stock, $.01 par value, 150,000,000 shares
authorized; 52,417,072 and 51,503,314 shares issued
and outstanding, respectively 524 515
Additional paid-in capital 121,152 112,660
Retained earnings 203,146 136,195
-------- --------
Total stockholders' equity 324,822 249,370
-------- --------
Total liabilities and stockholders' equity $400,815 $298,953
======== ========
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
ELECTRONICS FOR IMAGING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended September 30,
1997 1996
--------- ---------
Cash flows from operating activities:
Net income $ 66,951 $ 42,051
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 4,454 2,702
Changes in operating assets and liabilities:
Accounts receivable (14,213) (12,014)
Inventories (4,746) (5,637)
Other current assets (9,082) (8,279)
Accounts payable and accrued liabilities 9,638 11,775
Income taxes payable 12,240 9,212
--------- ---------
Net cash provided by operating activities 65,242 39,810
--------- ---------
Cash flows from investing activities:
Purchase of short-term investments (141,013) (160,392)
Sales and maturities of short-term investments 102,639 116,921
Purchases of land, property and equipment, net (30,210) (7,471)
Other assets (83) (205)
--------- ---------
Net cash used for investing activities (68,667) (51,147)
--------- ---------
Cash flows from financing activities:
Issuance of common stock related to stock plans 8,501 4,659
--------- ---------
Net cash provided by financing activities 8,501 4,659
--------- ---------
Net change in cash and cash equivalents 5,076 (6,678)
Cash and cash equivalents at beginning of period 71,946 46,006
--------- ---------
Cash and cash equivalents at end of period $ 77,022 $ 39,328
========= =========
Supplemental disclosure - cash paid for income taxes $ 25,541 $ 14,286
========= =========
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
ELECTRONICS FOR IMAGING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
(Unaudited)
1. Basis of Presentation
The unaudited interim condensed consolidated financial statements of
Electronics for Imaging, Inc. (the Company) as of and for the interim
periods ended September 30, 1997 have been prepared on the same basis
as the audited consolidated financial statements as of and for the year
ended December 31, 1996, contained in the Company's Annual Report to
Stockholders, and, in the opinion of management, 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 and notes thereto referred to above.
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 September 30, 1997 are not necessarily indicative of the
results to be expected for any other interim period or the full year.
2. The Company effected on February 20, 1997, a two-for-one stock split in
the form of a stock dividend payable to stockholders of record as of
February 10, 1997. All references in the condensed consolidated
financial statements to weighted average numbers of shares outstanding
and per share amounts have been restated to reflect the stock split.
6
<PAGE>
3. Recent Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per
Share." This statement is effective for the Company's fiscal year
ending December 31, 1997. The Statement redefines earnings per share
under generally accepted accounting principles. Under the new standard,
primary earnings per share is replaced by basic earnings per share and
fully diluted earnings per share is replaced by diluted earnings per
share. If the Company had adopted this Statement as of the beginning of
1996, the pro-forma earnings per share for the three month and nine
month periods ended September 30, 1997 and September 30, 1996 would
have been as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
1997 1996 1997 1996
----- ----- ----- -----
Basic earnings per share $0.46 $0.31 $1.29 $0.83
Diluted earnings per share $0.43 $0.28 $1.20 $0.77
4. Inventory Composition
September 30, December 31,
1997 1996
------- -------
Raw materials $14,243 $ 6,696
Work-in-process 346 3,374
Finished goods 1,161 934
------- -------
$15,750 $11,004
======= =======
5. Subsequent Event
On October 15, 1997 the Company acquired all of the stock of
Parsippany, NJ based Pipeline Associates, Inc., a leading software
developer specializing in PostScript, HTML and PCL interpreter
technologies, for $13.1 million in cash. The Company is in the process
of determining the allocation of the purchase price to the tangible and
identifiable intangible assets and liabilities acquired. The Company
believes a substantial portion of the purchase price will be allocated
to in-process technology acquired, which will be written off in the
fourth quarter of 1997 because of the uncertainty as to realization.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
audited consolidated financial statements of Electronics for Imaging, Inc. (the
Company) and related notes thereto contained in the Company's 1996 Annual Report
to Stockholders. Results for the three and nine month periods ended September
30, 1997 are not necessarily indicative of the results to be expected for the
entire fiscal year ended December 31, 1997. All assumptions, anticipations,
expectations and forecasts contained herein are forward-looking statements that
involve risks and uncertainties. The Company's actual results could differ
materially from those discussed here. For a more complete discussion of factors
which might impact the Company's results, please see the section entitled
"Factors that Could Adversely Affect Performance" below and the section entitled
"Risk Factors" in the Company's 1996 Annual Report on Form 10-K, as filed with
the Securities and Exchange Commission. The Company periodically reviews such
factors to ensure their appropriateness.
Results of Operations - Three and Nine Month Period Ended 9/30/97 and 9/30/96
Revenue
The Company's revenue was $107.3 million in the third quarter of 1997, compared
to $75.1 million in the corresponding quarter of 1996. Revenue for the nine
months ended September 30, 1997 was $299.0 million, compared to $207.8 million
in the corresponding period of 1996. The substantial majority of the Company's
revenue to date is attributable to the sale of Fiery and Fiery XJ Color Servers.
Revenue growth has been generated by ongoing expansion of the Company's sales
and marketing organizations and corresponding new market penetration, as well as
introductions of new features on the Company's Fiery XJ Color Server and Fiery
XJe Controller products. Additionally, the company continues to benefit from the
ongoing expansion of the color print market worldwide.
International revenue continued to grow in the third quarter of 1997, and was
affected by sales mix and certain OEM product requirements and shipping
requirements. Direct sales into Japan accounted for approximately 19% and 23% of
revenue in the third quarter of 1997 and 1996, respectively. This decline is due
to some softness in the Japanese economy that has shifted the company's
geographic mix more toward the European, Domestic and Rest-of-World regions.
Sales into Japan were 19% and 23% of revenue for the nine months ended September
30, 1997 and 1996, respectively. This also is a result of the mix shift
mentioned above as well as a large product launch and the resultant pipeline
fill in the second quarter of 1996. Sales into Europe accounted for
approximately 34% and 28% of revenue in the third quarter of 1997 and 1996,
respectively, and 30% and 24% of revenue for the nine months ended September 30,
1997 and 1996, respectively.
8
<PAGE>
Beginning in the second quarter of 1997, some sales that were previously being
shipped to destinations in the United States and redistributed to Europe began
being shipped directly to Europe due to a change in the Company's logistics
arrangements with one of its major customers. Other shipments to some of the
Company's OEM partners are made to centralized purchasing and manufacturing
locations which in turn sell through to foreign locations. As a result of these
factors, the Company believes that sales of its products into Europe and Japan
may actually be higher, though accurate data is difficult to obtain. In the
Rest-of-World region, the company experienced substantial year over year growth.
Sales into this region accounted for 5% and 1% of revenue in the third quarter
of 1997 and 1996, respectively. For the nine months ended September 30, 1997 and
1996, sales to Rest-of-World accounted for 4% and 2% respectively. The Company
expects that international revenue will continue to represent a significant
portion of its total revenue.
The Company continues to derive the substantial majority of its revenue from OEM
agreements with its partners. No assurance can be given that the Company's
relationships with these OEM partners will continue. In the event that any of
such relationships is discontinued or scaled back, the Company could experience
a significant negative impact on its consolidated financial position and results
of operations. A discussion of these agreements is contained in this 10Q under
the section titled Factors That Could Adversely Affect Performance. Please refer
to this section of the 10Q for further detail on the agreements.
Cost of Revenue
The substantial majority of the Company's cost of revenue to date has been
attributable to the sale of Fiery and Fiery XJ Color Servers. Fiery XJ Color
Servers are manufactured by third-party manufacturers who purchase most of the
necessary components. The Company sources directly proprietary memory and
certain ASICs, and software licensed from various sources, including PostScript
interpreter software, which the Company licenses from Adobe Systems, Inc. The
Company's gross margin was 55.0% in the third quarter of 1997, up from 51.5% in
the corresponding quarter of 1996. The Company's gross margin was 54.9% for the
nine months ended September 30, 1997, up from 49.8% in the corresponding period
of 1996. Overall gross margin in 1997 continued to be supported by low market
prices for DRAM components used in the Company's products and other ongoing
manufacturing savings efforts.
9
<PAGE>
The Company's gross margin depends in part on prices it is able to attain on
Fiery XJ Color Servers, Fiery XJe Controllers and future products. The lower
manufacturing costs of the Fiery XJ Color Servers have given the Company
flexibility to offer products with a broad range of prices. In the first and
second quarters of 1997, the Company made significant price reductions across
its line of products and saw substantial increases in volumes while still
maintaining its gross margins. In addition, as the Company continues to
introduce new Fiery products, it may continue to lower prices on existing
products. Embedded Fiery Controllers for desktop color printers will continue to
have lower margins than the Company's other products, reflecting the different
distribution and marketing practices employed for desktop color laser printers.
This will also be the case with the new black and white products currently being
developed. Accordingly, if embedded Fiery Controllers for desktop color printers
and Fiery Servers for digital black and white copiers increase as a percentage
of revenue, the Company's overall gross margin is expected to decline, all other
things being equal. In general, gross margin will continue to be impacted by a
variety of factors including, among others, the availability and pricing of key
components (including DRAMs and PostScript interpreter software), third-party
manufacturing costs, product, channel and geographic mix, the success of the
Company's product transitions and new products, competition, and general
economic conditions in the United States and abroad. The Company currently
expects to continue to take steps to reduce product costs, expand product
offerings and control operating expenses; however, no assurance can be given
that these efforts will be successful.
10
<PAGE>
Operating Expenses
Research and Development. Expenses for research and development consist
primarily of personnel expenses and, to a lesser extent, consulting services,
costs of prototype materials and technology, and depreciation. Research and
development expenses were $10.8 million or 10.0% of revenue in the third quarter
of 1997, compared to $5.8 million or 7.7% of revenue in the corresponding
quarter of 1996, and $28.1 million or 9.4% for the nine months ended September
30, 1997, compared to $15.1 million or 7.2% in the corresponding period of 1996.
Research and development expenses increased primarily due to incremental costs
related to the number of engineers employed which in turn relates to the number
of projects now underway. The Company believes that the development of new
products and enhancement of existing products is essential to its continued
success, and management intends to continue to devote substantial resources to
research and new product development. Accordingly, the Company expects that its
research and development expenses may increase in absolute dollars and possibly
also as a percentage of revenue.
Sales and Marketing. Such expenses include personnel expenses, tradeshows and
other promotional expenses, sales commissions, travel, public relations, and
depreciation and facility costs associated with sales offices in the United
States, Europe, Japan and other locations. Sales and marketing expenses were
$10.5 million or 9.8% of revenue in the third quarter of 1997, compared to $7.7
million or 10.2% of revenue in the corresponding quarter of 1996, and $30.6
million or 10.2% for the nine months ended September 30, 1997, compared to $20.5
million or 9.9% in the corresponding period of 1996. Sales and marketing
expenses increased as a percentage of total revenue due primarily to increases
in employee headcount, opening of new sales offices and costs required for the
promotion and support of the Company's existing and new products. The Company
expects that its sales and marketing expenses may increase in absolute dollars
and also as a percentage of revenue as it continues to actively promote its
products, launch new Fiery models and other products, increase or defend market
share and continue to build its sales and marketing organization.
General and Administrative. Such expenses consist primarily of personnel
expenses and, to a lesser extent, professional fees, expenses required of a
public company, and depreciation and facility costs. General and administrative
expenses were $2.9 million or 2.7% of revenue in the third quarter of 1997,
compared to $2.6 million or 3.5% of revenue in the corresponding quarter of
1996, and $8.6 million or 2.9% of revenue for the nine months ended September
30, 1997, compared to $7.4 million or 3.6% of revenue in the corresponding
period of 1996. While general and administrative expenses decreased as a
percentage of total revenue, these expenses have increased in absolute dollars.
The increases were primarily due to the addition of personnel and related
expenses to support the Company's operations. The Company expects that its
general and administrative expenses may increase in absolute dollars and
possibly also as a percentage of revenue in order to support ongoing growth in
operations.
11
<PAGE>
Income Taxes
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes, for all periods
presented. The Company's effective tax rate was 36.0% for the third quarter of
1997 and 1996. In each period the Company benefited from increased tax-exempt
interest income, increases in foreign sales and to a lesser extent the
utilization of research and development credits in achieving a consolidated
effective tax rate lower than that prescribed by the respective taxing
authorities. The Company anticipates that these benefits will continue to have a
favorable impact on the Company's consolidated effective tax rate.
Liquidity and Capital Resources
Cash, cash equivalents and short-term investments increased to $255.6 million as
of September 30, 1997, up from $212.1 million as of December 31, 1996. Working
capital increased to $287.0 million as of September 30, 1997, up from $237.4
million as of December 31, 1996. Net cash provided by operating activities was
$65.2 million and $39.8 million for the nine month periods ended September 30,
1997 and 1996, respectively, primarily as a result of profitable operations in
both periods. In the third quarter of 1997, the Company purchased land for its
new corporate campus in Foster City, California for $20.2 million in cash and
the assumption of $4.5 million in bonds payable due through 2009. In addition to
the land purchase, the Company had outlays of $10.0 million for capital
equipment and furniture during the nine month period ended September 30, 1997,
compared to purchases of $7.5 million of capital equipment and furniture in the
corresponding period of 1996. On October 15, 1997 the Company acquired
Parsippany, NJ based Pipeline Associates, Inc. for $13.1 million in cash, as
discussed in Footnote 5 to the Condensed Consolidated Financial Statements,
above.
The Company believes that its existing capital resources together with cash
generated from continuing operations will be sufficient to fund its operations
and meet capital requirements through at least 1998.
12
<PAGE>
Factors That Could Adversely Affect Performance
The following may impact the Company's future performance and financial results:
Distributor and Development Agreements. The Company completed in the fourth
quarter of 1995 an agreement with Canon Inc. for the purchase of Fiery XJ Color
Servers. The agreement provides Canon exclusive distribution rights for Fiery XJ
Color Servers designed for Canon's proprietary color copiers. The agreement
effectively replaced the Company's existing distribution channel through the
Canon dealer and distributor network beginning in April 1995 with shipments to
Canon under the terms of a letter of intent preceding the agreement. This
arrangement has resulted to some extent in lower associated selling and
marketing costs. During the first quarter of 1997, the agreement with Canon
expired, but the parties have extended the agreement on a quarterly basis
through the fourth quarter of 1997. The Company expects to finalize the terms of
the new agreement in due course and is continuing the relationship with Canon
under the terms of the original agreement. No assurance can be given that the
Company will be able to successfully complete the agreement under terms
considered favorable to the Company. If the agreement with Canon is not signed,
the Company's operating results could be adversely affected, as it would have to
transition back to sales through Canon dealers and distributors worldwide. The
Company sells Fiery XJ Color Server products to each of its significant OEM
partners under similar agreements.
The Company also sells the Fiery XJe Controller through similar agreements with
OEM partners. These companies combine the Fiery XJe Controller with a color
laser engine to produce a desktop color laser printer with superior speed and
output quality.
The Company completed a development agreement in the first quarter of 1997 with
Konica to produce a next generation Fiery Print Controller which when combined
with a desktop color laser printer will deliver superior performance at an
extremely economical price point. During the second quarter of 1997 the Company
entered into a similar development agreement with Mita Copystar America. In July
1997, a development agreement was signed with Sharp Electronics Corporation to
produce a Fiery Server for the new generation of mid-range digital black and
white copiers allowing the Company to leverage the technology created for color
products into the black and white digital copier marketplace. The company
further entered into an OEM agreement with Sharp during the third quarter of
1997 to market the new Fiery LX for digital black and white devices. Also during
the third quarter, the company entered into a development agreement with Epson
to launch a Fiery Server for an Epson Color Inkjet Printer in Japan. Finally,
the Company has finalized the terms of a development agreement with Oce to
produce a new Fiery Server for Oce's high-speed black and white production
printing system. The combination printing solution was previewed at a trade show
in the second quarter of 1997. No assurance can be given that any of the above
products will meet with market acceptance upon development.
Product Transitions. Delays in the launch or availability of new product models
could have an adverse effect on the Company's financial results. Product
transitions also carry the risk that customers will delay or cancel orders for
existing models pending shipments of new models. If the Company is not able to
successfully manage future product transitions or cannot guarantee the
availability of products, its results of operations could be adversely affected.
13
<PAGE>
New Product Introductions. The Company continues to look at opportunities to
develop product lines distinct from the Fiery XJ Color Server. Such new products
may require the investment of capital for the development of new distribution
and marketing channels, at an unknown cost to the Company. There can be no
guarantee that the Company would be successful in the development of such
channels or that any new products will gain market acceptance. Further, new
products may directly impact the sales of the Company's Fiery XJ products. If
the Company is not able to successfully manage the introduction of new products,
its results of operations could be adversely affected.
During the first three quarters of 1997, the Company introduced several new
product upgrades and enhancements. These included the R5000 CPU, which runs at
200 MHz, for the Fiery XJ+ series of color servers and the Fiery Web Tools which
allow the user to access any Fiery Color Server or Fiery Driven desktop printer
from the World Wide Web and distribute data electronically. The user can then
print directly in a remote location as opposed to printing locally and
transporting the document to further locations. In addition, the company
demonstrated Fiery FreeForm Variable Data Printing technology during the third
quarter of 1997. This technology allows the utilization of a customer's existing
software and workflow processes to create personalized or variable documents.
While the initial response has been favorable to these upgrades and
enhancements, it is too soon to assess the extent of market acceptance. The
Company continues to work on the development of products utilizing the Fiery XJ
architecture and other products and intends to continue to introduce new
generations of Fiery Products and other new product lines in 1997 and 1998.
There can be no assurance that these products will be met with market
acceptance.
Competition. The Company has seen competition in the market from companies and
products that provide similar functionality and believes that such competition
will continue and may intensify. In addition, the marketplace for printer
controllers and black and white servers involves competitors with significant
resources. There can be no assurance that the Company will be able to continue
to successfully compete against other companies' product offerings or their
financial and other resources.
Fiery XJe. The Company is currently selling the Fiery XJe Controller to several
manufacturers under OEM agreements and has entered into development agreements
with additional companies. No assurance can be given that the Company will
continue to recognize significant revenue from such sales or that the Company
will be successful in further marketing this product or next generation embedded
Fiery Controller products to other OEM partners or other parties.
Reliance on OEM Partners. No assurance can be given that the Company will
continue to supply products to each of its current OEM partners. In the event
that an OEM partner discontinues or reduces its level of purchases of Fiery XJ
Color Servers, the Company would experience a significant negative impact on its
consolidated financial position and results of operations.
14
<PAGE>
Fluctuations in Operating Results. Operating results may fluctuate due to
factors such as demand for the Company's products, success and timing of the
introduction of new products, price reductions by the Company and its
competitors, delay, cancellation or rescheduling of orders, product performance,
seasonal purchasing patterns of its OEM partners, performance of third-party
manufacturers, product inventory levels, availability of key components for the
Company's products, the status of the Company's relationships with its OEM
partners and Adobe, among others, the Company's ability to develop and market
new products, the timing and amount of sales and marketing expenditures, the
costs of developing new product offerings and the general demand for color
copiers and color laser printers.
Limited Backlog. The Company typically does not obtain long-term volume purchase
contracts from its customers, and a substantial portion of the Company's backlog
is scheduled for delivery within 90 days or less. Customers may cancel orders
and change volume levels or delivery times without penalty. Quarterly sales and
operating results therefore depend on the volume and timing of the backlog as
well as bookings received during the quarter. A significant portion of the
Company's operating expenses are fixed, and planned expenditures are based
primarily on sales forecasts and product development programs. If sales do not
meet the Company's expectations in any given period, the adverse impact on
operating results may be magnified by the Company's inability to adjust
operating expenses sufficiently or quickly enough to compensate for such a
shortfall.
Volatility of Stock Price. Due to various factors, including those noted above,
the Company's future earnings and stock price may be subject to significant
volatility, particularly on a quarterly basis. Any shortfall in revenue or
earnings from levels expected by securities analysts could have an immediate and
significant adverse effect on the trading price of the Company's common stock in
any given period. The Company participates in a highly dynamic industry, which
often results in significant volatility for the Company's common stock price.
ITEM 3. NOT APPLICABLE
15
<PAGE>
PART II OTHER INFORMATION
ITEMS 1 - 5.
There is no applicable information to report under Part II, Items 1 - 5 during
the period covered by this report.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 11.1 Statement re Computation of per Share Earnings.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the
three-month period ended September 30, 1997.
16
<TABLE>
EXHIBIT 11.1
ELECTRONICS FOR IMAGING, INC.
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS (1)(2)
(In thousands, except per share data)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ ------------------------------
1997 1996 1997 1996
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Net income for purposes of computing
net income per share $ 23,914 $ 15,553 $ 66,951 $ 42,051
============= ============== ============= ==============
Weighted average common shares outstanding 52,139 50,868 51,866 50,512
Weighted common equivalent shares
from options (3) 4,077 4,160 4,031 4,136
------------- -------------- ------------- --------------
Weighted average common shares
and equivalents 56,216 55,028 55,897 54,648
============= ============== ============= ==============
Net income per share $ 0.43 $ 0.28 $ 1.20 $ 0.77
============= ============== ============= ==============
<FN>
(1) This Exhibit should be read in conjunction with "Summary of Significant
Accounting Policies - Net Income per Share" in Note 1 of Notes to
Consolidated Financial Statements, contained in the Company's 1996 Annual
Report to Stockholders.
(2) All per share data and shares used in computing net income per share have
been restated to reflect the Company's two-for-one stock split of
February 20, 1997.
(3) Computed using the treasury stock method. The difference between primary
net income per share and fully diluted net income per share is not
significant.
</FN>
</TABLE>
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ELECTRONICS FOR IMAGING, INC.
Date: November 13, 1997
By /s/ Dan Avida
--------------------------------------
Dan Avida
President and Chief Executive Officer
and Acting Principal Financial Officer
By /s/ Eric Saltzman
--------------------------------------
Eric Saltzman
Vice President, Strategic Relations
and Duly Authorized Officer
18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed balance sheet, condensed statement of operations and condensed
statement of cash flows included in the Company's Form 10-Q for the three month
period ended September 30, 1997 and is qualified in its entirety by reference to
such financial statements and the notes thereto.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 77,022
<SECURITIES> 178,528
<RECEIVABLES> 56,456
<ALLOWANCES> 1,368
<INVENTORY> 15,750
<CURRENT-ASSETS> 358,440
<PP&E> 60,735
<DEPRECIATION> 19,807
<TOTAL-ASSETS> 400,815
<CURRENT-LIABILITIES> 71,461
<BONDS> 4,532
0
0
<COMMON> 524
<OTHER-SE> 324,298
<TOTAL-LIABILITY-AND-EQUITY> 400,815
<SALES> 107,323
<TOTAL-REVENUES> 107,323
<CGS> 48,295
<TOTAL-COSTS> 48,295
<OTHER-EXPENSES> 24,186
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 37,365
<INCOME-TAX> 13,451
<INCOME-CONTINUING> 23,914
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,914
<EPS-PRIMARY> 0.46
<EPS-DILUTED> 0.43
</TABLE>
