Exhibit 99.2
ELECTRONICS FOR IMAGING, INC.
INTRODUCTORY NOTE TO THE UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial statements are presented to illustrate the effects of the merger on the historical financial position and operating results of EFI. The unaudited pro forma condensed combined balance sheet gives effect to the merger as if it was completed on September 30, 2003. The unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2003 and for the year ended December 31, 2002 give effect to the merger as if it was completed on January 1, 2002.
The following unaudited pro forma condensed combined financial statements were derived from (a) EFI’s audited statement of income for the year ended December 31, 2002, its unaudited statement of income for the nine months ended September 30, 2003 and its unaudited balance sheet as of September 30, 2003, and (b) Printcafe’s audited statement of operations for the year ended December 31, 2002, and Printcafe’s unaudited statement of operations for the nine months ended September 30, 2003 and Printcafe’s unaudited balance sheet as of September 30, 2003.
The following unaudited pro forma condensed combined financial statements are not necessarily indicative of EFI’s financial position or results of operations if the merger had been completed as of the dates indicated. Additionally, the following unaudited pro forma condensed combined financial statements are not necessarily indicative of EFI’s future financial condition or operating results.
The following unaudited pro forma condensed combined financial statements are based on estimates and assumptions set forth in the notes to these statements. EFI prepared the unaudited pro forma condensed combined financial statements using the purchase method of accounting with EFI as the acquirer. Accordingly, EFI’s costs to acquire Printcafe were allocated to the assets and the liabilities assumed based upon their estimated fair values as of the date of acquisition. The valuation of the intangible assets was based upon an evaluation of Printcafe’s technology, the knowledge of the technology embedded in Printcafe’s products, and EFI’s extensive knowledge of the industry and the marketplace.
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ELECTRONICS FOR IMAGING, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
September 30, 2003
(in thousands)
| EFI | Printcafe | Pro Forma | EFI | ||||||||||||||
| Historical | Historical | Adjustments | Pro Forma | ||||||||||||||
| ASSETS | |||||||||||||||||
| Cash and cash equivalents | $ | 172,812 | $ | 3,624 | $ | (42,636 | )(a) | $ | 133,800 | ||||||||
| Short-term investments | 479,602 | — | — | 479,602 | |||||||||||||
| Restricted marketable securities | 69,486 | — | — | 69,486 | |||||||||||||
| Accounts receivable, net | 42,848 | 9,019 | — | 51,867 | |||||||||||||
| Inventories | 4,232 | — | — | 4,232 | |||||||||||||
| Other current assets | 28,540 | 1,769 | (5,529 | )(f) | 24,780 | ||||||||||||
| Total current assets | 797,520 | 14,412 | (48,165 | ) | 763,767 | ||||||||||||
| Property and equipment, net | 49,829 | 1,774 | — | 51,603 | |||||||||||||
| Restricted investments | 43,080 | — | — | 43,080 | |||||||||||||
| Goodwill | 49,140 | 22,480 | 1,854 | (b) | 73,474 | ||||||||||||
| Intangible assets, net | 18,853 | 331 | 26,869 | (b) | 46,053 | ||||||||||||
| Other assets | 13,034 | — | — | 13,034 | |||||||||||||
| Total assets | $ | 971,456 | $ | 38,997 | $ | (19,442 | ) | $ | 991,011 | ||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||||||||
| Accounts payable | $ | 17,440 | $ | 1,735 | — | $ | 19,175 | ||||||||||
| Accrued and other liabilities | 45,729 | 3,154 | — | 48,883 | |||||||||||||
| Deferred revenue | — | 8,996 | (2,249 | )(d) | 6,747 | ||||||||||||
| Restructuring reserve | — | 62 | — | 62 | |||||||||||||
| Current portion of long-term obligations, related party | — | 16,278 | (16,278 | )(c) | — | ||||||||||||
| Current portion of long-term debt | — | 178 | (178 | )(c) | — | ||||||||||||
| Debt discount | — | (917 | ) | 917 | (c) | — | |||||||||||
| Income taxes payable | 35,512 | — | — | 35,512 | |||||||||||||
| Total current liabilities | 98,681 | 29,486 | (17,788 | ) | 110,379 | ||||||||||||
| Long-term obligations, related party | — | 525 | (525 | )(c) | — | ||||||||||||
| Long-term debt | 240,249 | — | — | 240,249 | |||||||||||||
| Other long-term liabilities | — | — | 10,880 | (e) | 10,880 | ||||||||||||
| Common stock | 609 | 1 | 1 | (f)(g) | 611 | ||||||||||||
| Treasury stock | (158,150 | ) | (1,930 | ) | 1,930 | (f) | (158,150 | ) | |||||||||
| Additional paid-in capital | 303,507 | 258,615 | (253,040 | )(f)(g) | 309,082 | ||||||||||||
| Warrants | — | 8,677 | (8,677 | )(f) | — | ||||||||||||
| Deferred compensation | — | (2,233 | ) | 2,233 | (f) | — | |||||||||||
| Other comprehensive income | 1,238 | (83 | ) | 83 | (f) | 1,238 | |||||||||||
| Notes receivable from stockholder | — | (40 | ) | 40 | (f) | — | |||||||||||
| Retained earnings (deficit) | 485,322 | (254,021 | ) | 245,421 | (f) | 476,722 | |||||||||||
| Total stockholders’ equity | 632,526 | 8,986 | (12,009 | ) | 629,503 | ||||||||||||
| Total liabilities and stockholders’ equity | $ | 971,456 | $ | 38,997 | $ | (19,442 | ) | $ | 991,011 | ||||||||
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
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ELECTRONICS FOR IMAGING, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
Year Ended December 31, 2002
(in thousands, except per share data)
| EFI | Printcafe | Pro Forma | |||||||||||||||
| Historical | Historical | Adjustments | EFI Pro Forma | ||||||||||||||
| Revenue | $ | 350,185 | $ | 46,521 | $ | — | $ | 396,706 | |||||||||
| Cost of revenue | 167,685 | 10,377 | 749 | (h) | 178,811 | ||||||||||||
| Gross profit | 182,500 | 36,144 | (749 | ) | 217,895 | ||||||||||||
| Research and development | 89,973 | 12,003 | 976 | (h) | 102,952 | ||||||||||||
| Sales and marketing | 50,624 | 16,989 | 814 | (h) | 68,427 | ||||||||||||
| General and administrative | 21,778 | 6,193 | 383 | (h) | 28,354 | ||||||||||||
| Amortization of identified intangibles and other acquisition related charges | 4,391 | 29,511 | (24,832 | )(i) | 9,070 | ||||||||||||
| Depreciation | — | 2,922 | (2,922 | )(h) | — | ||||||||||||
| Stock-based compensation and warrants | — | 1,386 | — | 1,386 | |||||||||||||
| Restructuring charge | — | 525 | — | 525 | |||||||||||||
| Total operating expenses | 166,766 | 69,529 | (25,581 | ) | 210,714 | ||||||||||||
| Income (loss) from operations | 15,734 | (33,385 | ) | 24,832 | 7,181 | ||||||||||||
| Other income (expense), net | 7,077 | (524 | ) | (1,208 | )(j) | 5,345 | |||||||||||
| Debt discount | (3,300 | ) | 3,300 | (k) | — | ||||||||||||
| Interest expense, related party | — | (3,588 | ) | 3,588 | (l) | — | |||||||||||
| Income (loss) before income taxes | 22,811 | (40,797 | ) | 30,512 | 12,526 | ||||||||||||
| Provision for income taxes | (6,843 | ) | — | 3,448 | (m) | (3,395 | ) | ||||||||||
| Net income (loss) | 15,968 | (40,797 | ) | 33,960 | 9,131 | ||||||||||||
| Accretion of redeemable preferred stock | — | (6,201 | ) | — | (6,201 | ) | |||||||||||
| Net income (loss) attributable to common stock | $ | 15,968 | $ | (46,998 | ) | $ | 33,960 | $ | 2,930 | ||||||||
| Shares used in basic per share calculation | 54,256 | 5,797 | 202 | (n) | 54,458 | ||||||||||||
| Net income (loss) per basic common share | $ | 0.29 | $ | (8.11 | ) | $ | 0.05 | ||||||||||
| Shares used in diluted per share calculation | 54,852 | 5,797 | 202 | (n) | 55,054 | ||||||||||||
| Net income (loss) per diluted common share | $ | 0.29 | $ | (8.11 | ) | $ | 0.05 | ||||||||||
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements
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ELECTRONICS FOR IMAGING, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
| EFI | Printcafe | Pro Forma | EFI Pro | ||||||||||||||
| Historical | Historical | Adjustments | Forma | ||||||||||||||
| Revenue | $ | 271,734 | $ | 27,185 | $ | — | $ | 298,919 | |||||||||
| Cost of revenue | 109,139 | 6,564 | 300 | (o) | 116,003 | ||||||||||||
| Gross profit | 162,595 | 20,621 | (300 | ) | 182,916 | ||||||||||||
| Research and development | 69,807 | 8,803 | 391 | (o) | 79,001 | ||||||||||||
| Sales and marketing | 44,659 | 12,770 | 326 | (o) | 57,755 | ||||||||||||
| General and administrative | 15,510 | 7,966 | 153 | (o) | 23,629 | ||||||||||||
| Amortization of identified intangibles and other acquisition related charges | 5,208 | 5,176 | (1,667 | )(p) | 8,717 | ||||||||||||
| Depreciation | — | 1,170 | (1,170 | )(o) | — | ||||||||||||
| Stock-based compensation and warrants | — | 745 | — | 745 | |||||||||||||
| Total operating expenses | 135,184 | 36,630 | (1,967 | ) | 169,847 | ||||||||||||
| Income (loss) from operations | 27,411 | (16,009 | ) | 1,667 | 13,069 | ||||||||||||
| Other income (expense), net | 7,094 | — | (886 | )(q) | 6,208 | ||||||||||||
| Litigation settlement income | 1,568 | — | — | 1,568 | |||||||||||||
| Debt discount | — | (2,531 | ) | 2,531 | (r) | — | |||||||||||
| Interest expense related party | — | (791 | ) | 791 | (s) | — | |||||||||||
| Income (loss) before income taxes | 36,073 | (19,331 | ) | 4,103 | 20,845 | ||||||||||||
| Provision for income taxes | (9,740 | ) | — | 5,342 | (t) | (4,398 | ) | ||||||||||
| Net income (loss) | $ | 26,333 | $ | (19,331 | ) | $ | 9,445 | $ | 16,447 | ||||||||
| Shares used in basic per share calculation | 53,734 | 11,555 | 202 | (n) | 53,936 | ||||||||||||
| Net income (loss) per basic common share | $ | 0.49 | $ | (1.67 | ) | $ | 0.30 | ||||||||||
| Shares used in diluted per share calculation | 54,569 | 11,555 | 202 | (n) | 54,771 | ||||||||||||
| Net income (loss) per diluted common share | $ | 0.48 | $ | (1.67 | ) | $ | 0.30 | ||||||||||
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements
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ELECTRONICS FOR IMAGING, INC.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
(in thousands, except per share data)
NOTE 1 DESCRIPTION OF TRANSACTION AND BASIS OF PRESENTATION
On February 26, 2003, EFI and Printcafe signed a merger agreement providing for the acquisition of Printcafe for $2.60 per share for each outstanding Printcafe share of common stock. The merger agreement provided each Printcafe stockholder with the right to elect whether to receive the merger consideration in cash or shares of EFI’s common stock. The merger was completed on October 21, 2003.
NOTE 2 PURCHASE PRICE
Printcafe’s stockholders could elect to receive cash or shares of EFI common stock in the merger. The exchange ratio was derived as follows:
| (A) | Consideration per share of Printcafe common stock | $ | 2.60 | |||||
| (B) | 10-day average closing price of EFI stock ending on and | $ | 24.82 | |||||
| including October 14, 2003 | ||||||||
| (C) | Exchange ratio (A÷ B) | 0.1048 | ||||||
The allocation of the purchase price was made as follows:
Purchase Price | |||||||||
| Fair value of 201,923 shares of EFI common stock issued in exchange for 1,926,747 shares of Printcafe common stock electing to exchange shares in the Merger | $ | 5,011 | |||||||
| Cash paid to Printcafe shareholders in exchange for Printcafe common stock | 22,916 | ||||||||
| Pre-merger acquisition of Printcafe common stock | 5,529 | ||||||||
| Estimated acquisition costs comprised of investment banking fees, employee retention bonuses, legal fees and accounting and administrative fees | 2,739 | ||||||||
| Fair value of stock options and warrants assumed using Black-Scholes valuation with the following assumptions: stock price at grant of $25.28; volatility of 52%; risk free interest rate of 2.3%; no dividend yield; and the contractual remaining term of the option or warrant | 566 | ||||||||
| Total purchase price | $ | 36,761 | |||||||
Net Assets Acquired | |||||||||
| Excess of Printcafe liabilities over its tangible assets | 12,493 | ||||||||
| In-process research and development | 8,600 | ||||||||
| Developed technology | $ | 7,400 | |||||||
| Patents, trademarks & trade names | 3,700 | ||||||||
| Maintenance agreements | 10,700 | ||||||||
| Customer contracts & relationships | 5,400 | ||||||||
| Identifiable intangibles (estimated 7 year life) | 27,200 | ||||||||
| Goodwill | 24,334 | ||||||||
Adjustments to Recorded Balances | |||||||||
| Increase in deferred tax liability related to intangibles | 10,880 | ||||||||
| Elimination of debt discount | 917 | ||||||||
| Reduction in deferred revenue | (2,249 | ) | |||||||
| Elimination of EFI’s investment in Printcafe | (5,529 | ) | |||||||
NOTE 3 ACCOUNTING POLICIES AND FINANCIAL STATEMENT CLASSIFICATION
EFI and Printcafe will review their accounting policies and financial statement classifications. As a result of the review, it may become necessary to make certain reclassifications to the combined company’s financial statements to conform to those accounting policies and classifications.
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NOTE 4 PRO FORMA ADJUSTMENTS
(a) To record the cash portion of the purchase price, acquisition costs and retirement of Printcafe debt that becomes due upon completion of the merger.
| Cash portion of purchase price | $ | (22,916 | ) | |
| Acquisition costs | (2,739 | ) | ||
| Retirement of Printcafe’s outstanding debt balances at September 30, 2003 | (16,981 | ) | ||
| $ | (42,636 | ) | ||
(b) To record the elimination of Printcafe intangibles as of September 30, 2003, and record the EFI intangible assets recognized as a result of the merger.
| Elimination of Printcafe goodwill | $ | (22,480 | ) | |
| Recognition of goodwill as a result of the EFI/Printcafe merger | 24,334 | |||
| $ | 1,854 | |||
| Elimination of Printcafe identified intangibles | $ | (331 | ) | |
| Recognition of identified intangibles as a result of the EFI/Printcafe merger | 27,200 | |||
| $ | 26,869 | |||
(c) To record the payment by EFI of Printcafe’s outstanding debt balances as of September 30, 2003.
| Current portion, long-term debt | $ | (178 | ) | ||
| Current portion, long-term obligations, related parties | (16,278 | ) | |||
| Long-term debt | (525 | ) | |||
| Subtotal | (16,981 | ) | |||
| Debt discount | 917 | ||||
| $ | (16,064 | ) | |||
(d) To reduce deferred revenue by 25%, to an amount which represents EFI’s estimate of the estimated fair market value of the deferred revenue balance as of September 30, 2003.
| Deferred revenue | $ | (2,249 | ) |
(e) To establish deferred tax liability related to identified intangibles.
| Deferred tax liability | $ | 10,880 |
(f) Elimination of Printcafe equity balance at September 30, 2003.
| Common stock | $ | (1 | ) | |
| Treasury stock | 1,930 | |||
| Additional paid-in capital | (258,615 | ) | ||
| Warrants | (8,677 | ) | ||
| Deferred compensation | 2,233 | |||
| Foreign currency translation adjustments | 83 | |||
| Notes receivable from stockholder | 40 | |||
| Retained deficit (Printcafe September 30, 2003 balance of $(254,021) adjusted for EFI acquisition-related in-process research and development expense of $8,600) | 245,421 | |||
| Investment in Printcafe common stock | (5,529 | ) | ||
| $ | (23,115 | ) |
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(g) Increase common stock and paid-in capital for equity related activity.
| Shares of EFI common stock issued as merger consideration | $ | 2 | ||
| Additional paid in capital on shares issued | $ | 5,009 | ||
| Assumed Printcafe stock options and warrants | 566 | |||
| $ | 5,575 | |||
(h) Reclassification of Printcafe depreciation expense for the twelve months ended December 31, 2002 to conform with EFI’s financial statement presentation.
| Elimination of depreciation expense presented as a separate line item | $ | (2,922 | ) | |
| Reclassification of depreciation expense to cost of revenue | 749 | |||
| Reclassification of depreciation expense to research and development expense | 976 | |||
| Reclassification of depreciation expense to sales and marketing expense | 814 | |||
| Reclassification of depreciation expense to general and administrative expense | 383 | |||
| $ | 0 | |||
(i) To eliminate Printcafe’s amortization of acquired identified intangibles, offset by the amortization of the identifiable intangibles of $27,200. The developed technology has an estimated useful life of 4 years, with trademarks, trade names, patents, maintenance agreements and customer relationships to have estimated useful lives of 7 years.
| Eliminate Printcafe amortization of acquired identified intangibles for twelve months ended December 31, 2002 | $ | (29,511 | ) | |
| Recognize amortization of EFI acquired identified intangibles for twelve months ended December 31, 2002 | 4,679 | |||
| $ | (24,832 | ) | ||
(j) To reduce interest income related to reduction in cash balances expended upon completion of acquisition (cash consideration and payoff of Printcafe’s debt), and to eliminate interest related to the forgiveness of a stockholder note.
| Reduction of interest income earned on cash balance through December 31, 2002 | $ | (1,208 | ) |
(k) To eliminate debt origination fees related to Printcafe debt.
| Elimination of debt origination fees | $ | 3,300 |
(l) To eliminate interest expense associated with Printcafe’s related party outstanding debt.
| Elimination of interest expense | $ | 3,588 |
(m) Reduction of income tax liability related to the incorporation of Printcafe losses.
| Reduction in provision for income taxes | $ | 3,448 |
(n) Increase in EFI shares outstanding of 202 (1,927 shares of Printcafe common stock converted at a ratio of 0.1048).
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(o) Reclassification of Printcafe depreciation expense for the nine months ended September 30, 2003 to conform with EFI’s financial statement presentation.
| Elimination of depreciation expense presented as a separate line item | $ | (1,170 | ) | |
| Reclassification of depreciation expense to cost of revenue | 300 | |||
| Reclassification of depreciation expense to research and development expense | 391 | |||
| Reclassification of depreciation expense to sales and marketing expense | 326 | |||
| Reclassification of depreciation expense to general and administrative expense | 153 | |||
| $ | 0 | |||
(p) To eliminate Printcafe’s amortization of goodwill and intangibles, offset by the amortization of the acquired identifiable intangibles of $27,200. The developed technology has an estimated useful life of 4 years, with trademarks, trade names, patents, maintenance agreements and customer relationships to have estimated useful lives of 7 years.
| Eliminate Printcafe amortization of acquired identified intangibles for nine months ended September 30, 2003 | $ | (5,176 | ) | |
| Recognize amortization of EFI acquired identified intangibles for nine months ended September 30, 2003 | 3,509 | |||
| $ | (1,667 | ) | ||
(q) To reduce interest income related to reduction in cash balances expended upon completion of acquisition (cash consideration and payoff of Printcafe’s debt), and to eliminate interest related to the forgiveness of a stockholder note.
| Reduction of interest income earned on cash balance through September 30, 2003 | $ | (886 | ) |
(r) To eliminate debt origination fees related to Printcafe debt.
| Elimination of debt origination fees | $ | 2,531 |
(s) To eliminate interest expense associated with Printcafe’s related party outstanding debt.
| Elimination of interest expense | $ | 791 |
(t) Reduction of income tax liability related to the incorporation of Printcafe losses.
| Reduction in provision for income taxes | $ | 5,342 |
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