| The Company and Its Significant Accounting Policies (Policies) | 12 Months Ended |
| Dec. 31, 2016 |
| Basis of Presentation | Basis of
Presentation The accompanying
consolidated financial statements include the accounts of EFI and
our subsidiaries. All intercompany accounts and transactions have
been eliminated in consolidation. |
| Use of Estimates | Use of
Estimates The preparation of
consolidated financial statements requires estimates and judgments
that affect the reported amounts of assets, liabilities, revenue,
expenses, comprehensive income, cash flows, and related disclosure
of contingent assets and liabilities. We evaluate our estimates,
including those related to revenue recognition, bad debts,
inventory valuation and purchase commitment reserves, warranty
obligations, litigation expenses, restructuring activities, fair
value of financial instruments, stock-based compensation, income
taxes, valuation of goodwill and intangible assets, business
combinations, build-to-suit |
| Cash, Cash Equivalents, and Short-term Investments | Cash, Cash Equivalents,
and Short-term Investments We invest our excess cash on
deposit with major banks in money market, U.S. Treasury and
government-sponsored entity, corporate, municipal government,
asset-backed, and mortgage-backed residential securities. By
policy, we invest primarily in high-grade marketable securities. We
are exposed to credit risk in the event of default by the financial
institutions or issuers of these investments to the extent of
amounts recorded in our Consolidated Balance Sheets. We consider all highly
liquid investments with an original maturity of three months or
less at the time of purchase to be cash equivalents. Typically, the
cost of these investments has approximated fair value. Marketable
investments with a maturity greater than three months are
classified as available-for-sale Available-for-sale We review investments in
debt securities for other-than-temporary impairment whenever the
fair value is less than the amortized cost and evidence indicates
the investment’s carrying amount is not recoverable within a
reasonable period of time. We assess the fair value of individual
securities as part of our ongoing portfolio management. Our
other-than-temporary assessment includes reviewing the length of
time and extent to which fair value has been less than amortized
cost; the seniority and durations of the securities; adverse
conditions related to a security, industry, or sector; historical
and projected issuer financial performance, credit ratings, issuer
specific news; and other available relevant information. To
determine whether an impairment is other-than-temporary, we
consider whether we have the intent to sell the impaired security
or if it will be more likely than not that we will be required to
sell the impaired security before a market price recovery and
whether evidence indicating the cost of the investment is
recoverable outweighs evidence to the contrary. In determining whether a
credit loss existed, we used our best estimate of the present value
of cash flows expected to be collected from each debt security. For
these cash flow estimates, including prepayment assumptions, we
rely on data from widely accepted third party data sources or
internal estimates. In addition to prepayment assumptions, cash
flow estimates vary based on assumptions regarding the underlying
collateral including default rates, recoveries, and changes in
value. Expected cash flows were discounted using the effective
interest rate implicit in the securities. Based on this analysis,
there were no other-than-temporary impairments, including
credit-related impairments, during the years ended
December 31, 2016, 2015, and 2014. We have determined that
gross unrealized losses on short-term investments at
December 31, 2016 and 2015 are temporary in nature because
each investment meets our investment policy and credit quality
requirements. We have the ability and intent to hold these
investments until they recover their unrealized losses, which may
not be until maturity. Evidence that we will recover our
investments outweighs evidence to the contrary. We classify our investments
as current or noncurrent based on the nature of the investments and
their availability for use in current operations. |
| Restricted Investments and Cash Equivalents | Restricted Investments
and Cash Equivalents As explained further in
Note 8—Commitments and Contingencies, we have restricted
investments and cash equivalents of $6.3 million as of
December 31, 2016 related to a lease entered into with Bank of
Tokyo—Mitsubishi UFJ Leasing & Financing LLC
(“BTMU”) related to the construction of manufacturing
and warehouse facilities in Manchester, New Hampshire, in our
Industrial Inkjet operating segment.
The funds pledged under the
lease represent 115% of the total expenditures made by BTMU through
December 31, 2016. The funds are invested in $5.1 and
$1.2 million of U.S. government securities and cash
equivalents, respectively, with a third party trustee and are
restricted during the construction period. Upon completion of
construction, the funds will be released as cash and cash
equivalents. The portion of released funds representing 100% of the
total expenditures made by BTMU will be deposited with BTMU and
restricted as collateral until the end of the underlying lease
period. |
| Fair Value of Financial Instruments | Fair Value of Financial
Instruments We assess the fair value of
our financial instruments each reporting period. The carrying
amounts of cash, cash equivalents, accounts receivable, accounts
payable, and accrued and other liabilities, approximate their
respective fair values due to the short maturities of these
financial instruments. The fair value of our available-for-sale |
| Revenue Recognition | Revenue
Recognition We derive our revenue
primarily from product revenue, which includes hardware (DFEs,
design-licensed solutions including upgrades, industrial digital
inkjet printers including components replaced under maintenance
agreements, and ink), software licensing and development, and
royalties. We receive service revenue from software license and
printer maintenance agreements, customer support, training, and
consulting. We recognize revenue on the
sale of DFEs, printers, and ink in accordance with the provisions
of SEC Staff Accounting Bulletin (“SAB”) 104, Revenue
Recognition, and when applicable, ASC 605-25. Products generally must be
shipped against written purchase orders. We use either a binding
purchase order or signed contract as evidence of an arrangement.
Sales to the leading printer manufacturers are generally evidenced
by a master agreement governing the relationship together with a
binding purchase order. Sales to our resellers are also evidenced
by binding purchase orders or signed contracts and do not generally
contain rights of return or price protection. Our arrangements
generally do not include product acceptance clauses. When
acceptance is required, revenue is recognized when the product is
accepted by the customer. Delivery of hardware
generally is complete when title and risk of loss is transferred at
point of shipment from manufacturing facilities, or when the
product is delivered to the customer’s local common carrier.
We also sell products and services using sales arrangements with
terms resulting in different timing for revenue recognition as
follows:
•
if the title and/or risk of loss is transferred at a location
other than our manufacturing facility, revenue is recognized when
title and risk of loss transfers to the customer, per the terms of
the agreement;
•
if title is retained until payment is received, revenue is
recognized when title is passed upon receipt of payment;
•
if the sales arrangement is classified as an operating lease,
revenue is recognized ratably over the lease term;
•
if the sales arrangement is classified as a sales-type lease,
revenue is recognized upon shipment;
•
if the sales arrangement is a fixed price for performance
extending over a long period and our right to receive future
payment depends on our future performance in accordance with these
agreements, revenue is recognized under the percentage of
completion method. We assess whether the fee
is fixed or determinable based on the terms of the contract or
purchase order. We assess collectibility based on a number of
factors, including past transaction history with the customer, the
creditworthiness of the customer, customer concentrations, current
economic trends and macroeconomic conditions, changes in customer
payment terms, the length of time receivables are past due, and
significant one-time We license our software
primarily under perpetual licenses. Software revenue consists of
licensing, post-contract customer support, and professional
consulting. We apply the provisions of ASC 985-605, 605-25, We enter into contracts to
sell our products and services. While the majority of our sales
agreements contain standard terms and conditions, there are
agreements containing multiple elements or non-standard Multiple-Deliverable
Arrangements We recognize revenue in
multiple element arrangements involving tangible products
containing software and non-software 605-25. non-software non-software 985-605. We have calculated BESP for
software licenses and non-software When historical data is
unavailable to calculate and support the determination of BESP on a
newly launched or customized product, then BESP of similar products
is substituted for revenue allocation purposes. We offer
customization for some of our products. Customization does not have
a significant impact on the discounting or pricing of our
products. We have insignificant
transactions where tangible and software products are sold together
in a bundled arrangement. Accounting Standards Update
(“ASU”) 2009-14, non-software 985-605 985-605. Non-software Multiple element
arrangements containing only software elements remain subject to
the provisions of ASC 985-605 985-605. Subscription
Arrangements We have subscription
arrangements where the customer pays a fixed fee and receives
services over a period of time. We recognize subscription revenue
ratably over the service period. Any up front setup fees associated
with our subscription arrangements are recognized ratably,
generally over one year. Any up front setup fees that are not
associated with our subscription arrangements are recognized upon
completion. Leasing
Arrangements If the sales arrangement is
classified as a sales-type lease, then revenue is recognized upon
shipment. Leases that are not classified as sales-type leases are
accounted for as operating leases with revenue recognized ratably
over the lease term.
A lease is classified as a
sales-type lease with revenue recognized upon shipment if the lease
is determined to be collectible and has no significant
uncertainties and if any of the following criteria are
satisfied:
•
present value of all minimum lease payments is greater than or
equal to 90% of the fair value of the equipment at lease
inception,
•
noncancellable lease term is greater than or equal to 75% of
the economic life of the equipment,
•
bargain purchase option that allows the lessee to purchase the
equipment below fair value, or
•
transfer of ownership to the lessee upon termination of the
lease. Long-term Contracts
Involving Substantial Customization We have established our
ability to produce estimates sufficiently dependable to require
that we follow the percentage of completion method with respect to
fixed price contracts where we provide information technology
system development and implementation services. Revenue on such fixed price
contracts is recognized over the contract term based on the
percentage of development and implementation services that are
provided during the period compared with the total estimated
development and implementation services to be provided over the
entire contract using guidance from ASC 605-35, We recognize losses on
long-term fixed price contracts in the period that the contractual
loss becomes probable and estimable. We record amounts invoiced to
customers in excess of revenue recognized as deferred revenue until
the revenue recognition criteria are met. We record revenue that is
earned and recognized in excess of amounts invoiced on fixed price
contracts as trade receivables. Deferred Revenue and
Related Deferred Costs Deferred revenue represents
amounts received in advance for product support contracts, software
customer support contracts, consulting and integration projects, or
product sales. Product support contracts include stand-alone
product support packages, routine maintenance service contracts,
and upgrades or extensions to standard product warranties. We defer
these amounts when we invoice the customer and then generally
recognize revenue either ratably over the support contract life,
upon performing the related services, under the percentage of
completion method, or in accordance with our revenue recognition
policy. Deferred cost of revenue related to unrecognized revenue on
shipments to customers was $3.4 and $8.7 million as of
December 31, 2016 and 2015, respectively, and is included in
other current assets in our Consolidated Balance Sheets. |
| Shipping and Handling Costs | Shipping and Handling
Costs Amounts billed to customers
for shipping and handling costs are included in revenue. Shipping
and handling costs are charged to cost of revenue as
incurred. |
| Allowance for Doubtful Accounts and Sales-related Allowances | Allowance for Doubtful
Accounts and Sales-related Allowances We establish an allowance
for doubtful accounts to ensure that trade receivables are not
overstated due to uncollectibility. We record specific reserves for
individual accounts when we become aware of specific customer
circumstances, such as bankruptcy filings, deterioration in the
customer’s operating results or financial position, or
potential unfavorable outcomes from disputes with customers or
vendors.
We perform ongoing credit
evaluations of the financial condition of our printer manufacturer,
third-party distributor, reseller, and other customers and require
collateral, such as letters of credit and bank guarantees, in
certain circumstances. The past due or delinquency status of a
receivable is based on the contractual payment terms of the
receivable. The need to write off a receivable balance depends on
the age, size, and determination of collectibility of the
receivable. Balances are written off when we deem it probable that
the receivable will not be recovered. We make provisions for sales
rebates and revenue adjustments based on analysis of current sales
programs and revenue in accordance with our revenue recognition
policy. |
| Financing Receivables | Financing
Receivables ASC 310, Receivables,
requires disclosures regarding the credit quality of our financing
receivables and allowance for credit losses including disclosure of
credit quality indicators, past due information, and modifications
of our financing receivables. Our financing receivables were $31.0
and $14.8 million consisting of $17.8 and $10.2 million
of sales-type lease receivables, included within other current
assets and other assets, and $13.2 and $4.6 million of trade
receivables having a contractual maturity in excess of one year at
December 31, 2016 and 2015, respectively. The trade
receivables of $13.2 and $4.6 million having an original total
contractual maturity in excess of one year at December 31,
2016 and 2015, include $7.1 and $3.2 million, respectively,
which are scheduled to be received in less than one year. The
credit quality of financing receivables is evaluated on the same
basis as trade receivables. We do not have material past due
financing receivables. |
| Concentration of Risk | Concentration of
Risk We are exposed to credit
risk in the event of default by any of our customers to the extent
of amounts recorded in the Consolidated Balance Sheet. We perform
ongoing evaluations of the collectibility of accounts receivable
balances for our customers and maintain allowances for estimated
credit losses. Actual losses have not historically been
significant, but have risen over the past several years as our
customer base has grown through acquisitions. Our Fiery products, which
constitute approximately 28% of revenue for the year ended
December 31, 2016, are primarily sold to a limited number of
leading printer manufacturers. Although end customer and reseller
channel preference for Fiery products drives demand, most Fiery
revenue relies on these significant printer manufacturer /
distributors to integrate Fiery technology into the design and
development of their print engines. We expect that we will continue
to depend on a relatively small number of leading printer
manufacturers for a significant portion of our revenue, although
their significance is expected to decline in future periods as our
revenue increases from Industrial Inkjet and Productivity Software
products. We generally have experienced longer accounts receivable
collection cycles in our Industrial Inkjet and Productivity
Software operating segments compared to our Fiery operating segment
as, historically, the leading printer manufacturers have paid on a
more timely basis. Down payments are generally required from
Industrial Inkjet and Productivity Software customers as a means to
ensure payment. Since Europe is composed of
varied countries and regional economies, our European risk profile
is somewhat more diversified due to the varying economic conditions
among the countries. Approximately 28% of our receivables are with
European customers as of December 31, 2016. Of this amount,
26% of our European receivables (7% of consolidated net
receivables) are in the higher risk southern European countries
(mostly Spain, Portugal, and Italy). We rely on a limited number
of suppliers for certain key components, including textile ink, and
a few key contract manufacturers for our Fiery DFEs, label and
packaging digital inkjet printers, and certain Industrial Inkjet
subassemblies. Any disruption or termination of these arrangements
could materially adversely affect our operating results. Many of our current Fiery
and Productivity Software products include software that we license
from Adobe. To obtain licenses from Adobe, Adobe requires that we
obtain quality assurance approvals from them for our products that
use Adobe software. |
| Accounts Receivable Sales Arrangements | Accounts Receivable Sales
Arrangements We have facilities in Spain
and Italy that enable us to sell to third parties, on an ongoing
basis, certain trade receivables without recourse. Trade
receivables sold without recourse are generally short-term
receivables with payment due dates of less than one year, which are
secured by international letters of credit. Trade receivables sold
under these facilities were $3.5 and $3.7 million during the
years ended December 31, 2016 and 2015, respectively, which
approximates the cash received. We have facilities in the
U.S. and Italy that enable us to sell to third parties, on an
ongoing basis, certain trade receivables with recourse. The trade
receivables sold with recourse are generally short-term receivables
with payment due dates of less than 10 days after year end, which
are subject to a servicing obligation. Trade receivables sold under
these facilities were $19.8 and $23.2 million during the years
ended December 31, 2016 and 2015, respectively, which
approximates the cash received. In accordance with ASC
860-20, We report collections from
the sale of trade receivables to third parties as operating cash
flows in the Consolidated Statements of Cash Flows. |
| Inventories | Inventories Inventories are generally
stated at standard cost, which approximates the lower of actual
cost, using the first-in, first-out Work-in-process We estimate potential
future inventory obsolescence and purchase commitments to evaluate
the need for inventory reserves. Current economic trends, changes
in customer demand, product design changes, product life, demand,
and the acceptance of our products are analyzed to evaluate the
adequacy of such reserves. |
| Property and Equipment, Net | Property and Equipment,
Net Property and equipment is
recorded at cost. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets as follows:
desktop and laptop computers (two years), computer server equipment
(three years), software under perpetual licenses (three to five
years), manufacturing equipment (seven years), testing and other
equipment (three years), tooling (lesser of three years or the
product life), research and development equipment with alternative
future uses (three years), equipment leased to customers on
operating leases (greater of three years or the lease term),
furniture (five years), land improvements such as parking lots or
sidewalks (seven years), leasehold improvements (the lease term),
building improvements (five to ten years), building and
improvements under a build-to-suit Depreciation expense was
$14.1, $12.2, and $9.9 million for the years ended
December 31, 2016, 2015, and 2014, respectively. Repairs and
maintenance expenditures are expensed as incurred, unless they are
considered to be improvements and extend the useful life of the
property and equipment. |
| Internal Use Software | Internal Use
Software In accordance with ASC
350-40, Other—Internal-Use re-engineering, |
| Goodwill | Goodwill Goodwill is recorded when
the consideration paid for an acquisition exceeds the fair value of
net tangible and intangible assets acquired. We perform our annual
goodwill impairment analysis in the fourth quarter of each year or
more frequently if we believe indicators of impairment exist.
Triggering events that may require an impairment analysis include
indicators such as adverse industry or economic trends,
restructuring actions, significant changes in the manner of our use
of the acquired assets, significant changes in the strategy for our
overall business, lower projections of profitability, significant
decline in our stock price for a sustained period, or a sustained
decline in our market capitalization. According to the provisions
of ASC 350-20-35, two-step |
| Long-lived Assets, including Intangible Assets | Long-lived Assets,
including Intangible Assets Purchased intangible assets
are amortized on a straight-line basis over their economic lives of
two to six years for developed technology, three to nine years for
customer contracts/relationships, four to five years for covenants
not to compete, and three to sixteen years for trademarks and trade
names as we believe this method most closely reflects the pattern
in which the economic benefits of the assets will be consumed. The
useful life of certain developed technology was reduced during 2016
based on a re-assessment We review the carrying
values of long-lived assets whenever events and circumstances, such
as reductions in demand, lower projections of profitability,
significant changes in the manner of our use of acquired assets, or
significant negative industry or economic trends, indicate that the
net book value of an asset may not be recovered through expected
future cash flows from its use and eventual disposition. If this
review indicates that an impairment has occurred, the impaired
asset is written down to its fair value, which is typically
calculated using quoted market prices and/or expected
future cash flows. Our estimates regarding future anticipated net
revenue and cash flows, the remaining economic life of the products
and technologies, or both, may differ from those used to assess the
recoverability of assets. In that event, impairment charges or
shortened useful lives of certain long-lived assets may be
required, resulting in charges to our Consolidated Statements of
Operations when such determinations are made. No asset impairment
charges were recognized during the years ended December 31,
2016, 2015, or 2014. |
| Warranty Reserves | Warranty
Reserves Our Industrial Inkjet
printers are generally accompanied by a 12-month cost-per-claim, Warranty reserves were
$10.3 and $9.6 million as of December 31, 2016 and 2015,
respectively. |
| Litigation Accruals | Litigation
Accruals We may be involved, from
time to time, in a variety of claims, lawsuits, investigations, or
proceedings relating to contractual disputes, securities laws,
intellectual property rights, employment, or other matters that may
arise in the normal course of business. We assess our potential
liability in each of these matters by using the information
available to us. We develop our views on estimated losses in
consultation with inside and outside counsel, which involves a
subjective analysis of potential results and various combinations
of appropriate litigation and settlement strategies. We accrue
estimated losses from contingencies if a loss is deemed probable
and can be reasonably estimated. |
| Restructuring Reserves | Restructuring
Reserves Restructuring liabilities
are established when the costs have been incurred. Severance and
other employee separation costs are incurred when management
commits to a plan of termination identifying the number of
employees impacted, their termination dates, and the terms of their
severance arrangements. The liability is accrued at the employee
notification date unless service is required beyond the greater of
60 days or the legal notification period, in which case the
liability is recognized ratably over the service period. Facility
downsizing and closure costs are accrued at the earlier of the
lessor notification date, if the lease agreement allows for early
termination, or the cease use date. Relocation costs are incurred
when the related relocation services are performed. Costs related
to contracts without future benefit are incurred at the earlier of
the cease use date or the contract cancellation date. |
| Research and Development | Research and
Development Research and development
costs were $151.2, $141.4, and $134.7 million for the years
ended December 31, 2016, 2015, and 2014, respectively. We
expense research and development costs associated with new software
products as incurred until technological feasibility is
established. Research and development costs include salaries and
benefits of employees performing research and development
activities, supplies, and other expenses incurred from research and
development efforts. To date, we have not capitalized research and
development costs associated with software development as products
and enhancements have generally reached technological feasibility,
as defined by U.S. GAAP, and have been released for sale at
substantially the same time. We have capitalized research and
development equipment that has been acquired or constructed for
research and development activities and has alternative future uses
(in research and development projects or otherwise). Such research
and development equipment is depreciated on a straight-line basis
with a three year useful life. |
| Advertising | Advertising Advertising costs are
expensed as incurred. Total advertising and promotional expenses
were $4.6, $4.3, and $4.3 million for the years ended
December 31, 2016, 2015, and 2014, respectively. |
| Income Taxes | Income
Taxes We account for income taxes
in accordance with the provisions of ASC 740, which requires that
deferred tax assets and liabilities be determined based on the
differences between the financial statement and tax bases of assets
and liabilities by using enacted tax rates in effect for the year
in which the differences are expected to reverse. We estimate our
actual current tax expense including permanent charges and benefits
and the temporary differences resulting from differing treatment of
items for tax and financial accounting purposes such as deferred
revenue. These differences result in deferred tax assets and
liabilities, which are included in our Consolidated Balance
Sheets. We assess the likelihood
that our deferred tax assets will be recovered from future taxable
income by considering both positive and negative evidence relating
to their recoverability. If we believe that recovery of these
deferred tax assets is not more likely than not, we establish a
valuation allowance. Significant judgment is required in
determining any valuation allowance recorded against deferred tax
assets. In assessing the need for a
valuation allowance, we considered all available evidence,
including recent operating results, projections of future taxable
income, our ability to utilize loss and credit carryforwards, and
the feasibility of tax planning strategies. Other than a valuation
allowance related to realization of existing California,
Luxembourg, Israel, Netherlands, and Turkey deferred tax assets, we
have determined that it is more likely than not that we will
realize the benefit related to all other deferred tax assets. To
the extent we increase a valuation allowance, we include an expense
in the Consolidated Statement of Operations in the period in which
such determination is made. We account for uncertainty
in income taxes by recognizing a tax position only when it is more
likely than not that the tax position, based on its technical
merits, will be sustained upon ultimate settlement with the
applicable tax authority. The tax benefit to be recognized is the
largest amount of tax benefit that is greater than fifty percent
likely of being realized upon ultimate settlement with the
applicable tax authority that has full knowledge of all relevant
information. Tax benefits that are deemed to be less than fifty
percent likely of being realized are recorded in noncurrent income
taxes payable until the uncertainty has been resolved through
either examination by the relevant taxing authority or expiration
of the pertinent statutes of limitations. |
| Business Combinations | Business
Combinations We allocate the purchase
price of acquired companies to the tangible and intangible assets
acquired, including IPR&D, and liabilities assumed based on
their estimated fair values. Such a valuation requires management
to make significant estimates and assumptions, especially with
respect to intangible assets. The results of operations for each
acquisition are included in our financial statements from the date
of acquisition. Our acquisitions are
accounted for as purchase business combinations using the
acquisition method of accounting in accordance with ASC 805. Key
provisions of the acquisition method of accounting include the
following:
•
one hundred percent of assets and liabilities of the acquired
business, including goodwill, are recorded at fair value,
regardless of the percentage of the business acquired;
•
contingent assets and liabilities are recognized at fair value
at the acquisition date;
•
contingent consideration is recognized at fair value at the
acquisition date with changes in fair value recognized in earnings
as assumptions are updated or upon settlement;
•
IPR&D is recognized at fair value at the acquisition date
subject to amortization after product launch or otherwise assessed
for impairment;
•
acquisition-related transaction and restructuring costs are
expensed as incurred;
•
reversals of valuation allowances related to acquired deferred
tax assets and liabilities and changes to acquired income tax
uncertainties are recognized in earnings;
•
when making adjustments to finalize preliminary accounting
during the measurement period, which may be up to one year, we
recognize measurement period adjustments in the reporting period in
which the adjustment amounts are determined as required by ASU
2015-16,
•
upon final determination of the fair value of assets acquired
and liabilities assumed during the measurement period, any
subsequent adjustments are recorded to our Consolidated Statements
of Operations. |
| Stock-Based Compensation | Stock-Based
Compensation We account for stock-based
compensation in accordance with ASC 718, which requires stock-based
compensation expense to be recognized based on the fair value of
such awards on the date of grant. We amortize stock-based
compensation expense on a graded vesting basis over the vesting
period after assessing the probability of achieving the requisite
performance criteria with respect to performance-based awards.
Stock-based compensation expense is recognized over the requisite
service period for each separately vesting tranche as though the
award were, in substance, multiple awards. Forfeitures have been
estimated at the grant date and revised on a cumulative basis, if
necessary, in subsequent periods if actual forfeitures differ from
those estimates. We used historical data and future expectations of
employee turnover to estimate forfeitures. Upon adoption of ASU
2016-09,
Our determination of the
fair value of stock-based payment awards on the date of grant using
an option pricing model is affected by volatility, expected term,
and interest rate assumptions. Expected volatility is based on the
historical volatility of our stock over a preceding period
commensurate with the expected term of the option. The expected
term is based on management’s consideration of the historical
life of the options, the vesting period of the options granted, and
the contractual period of the options granted. The risk-free
interest rate for the expected term of the option is based on the
U.S. Treasury yield curve in effect at the time of grant. Expected
dividend yield was not considered in the option pricing formula
since we do not pay dividends and have no current plans to do so in
the future. The tax benefit resulting
from tax deductions in excess of the tax benefits related to
stock-based compensation expense recognized for those awards are
classified as financing cash flows. |
| Foreign Currency Translation | Foreign Currency
Translation In preparing our
consolidated financial statements, for subsidiaries that operate in
a U.S. dollar functional currency environment, we remeasure balance
sheet monetary items into U.S. dollars. Foreign currency assets and
liabilities are remeasured from the transaction currency into the
functional currency at current exchange rates, except for
non-monetary For subsidiaries that
operate in a local functional currency environment, all assets and
liabilities are translated into U.S. dollars using current exchange
rates, while revenue and expenses are translated using monthly
exchange rates, which approximate the average exchange rates in
effect during each period. Resulting translation adjustments are
reported as a separate component of OCI, adjusted for deferred
income taxes. The cumulative translation adjustment balance, net of
tax, at December 31, 2016 and 2015 was unrealized losses of
$24.2 and $17.0 million, respectively. Based on our assessment of
the salient economic indicators discussed in ASC 830-10-55-5, |
| Computation of Net Income Per Common Share | Net Income per Common
Share Net income per basic common
share is computed using the weighted average number of common
shares outstanding during the period. Net income per diluted common
share is computed using the weighted average number of common
shares and dilutive potential common shares outstanding during the
period. Potential common shares result from the assumed exercise of
outstanding common stock options having a dilutive effect using the
treasury stock method, non-vested non-vested Performance-based and
market-based restricted stock and stock options that would be
issuable if the end of the reporting period were the end of the
vesting period, if the result would be dilutive, are assumed to be
outstanding for purposes of determining net income per diluted
common share as of the later of the beginning of the period or the
grant date in accordance with ASC 260-10-45-48. |
| Derivative Instruments and Risk Management | Derivative Instruments
and Risk Management Our derivative instruments
consist of foreign currency exchange contracts as described
below: Cash Flow
Hedges We utilize foreign currency
exchange forward contracts to hedge foreign currency exchange
exposures related to forecasted operating expenses denominated in
Indian rupees. These derivative instruments are designated and
qualify as cash flow hedges and in general, closely match the
underlying forecasted transactions in duration. The changes in fair
value of these contracts are reported as a component of OCI and
reclassified to operating expense in the periods of payment of the
hedged operating expenses. We measure the effectiveness of hedges
of forecasted transactions by comparing the fair value of the
designated foreign currency exchange forward purchase contracts
with the fair values of the forecasted transactions. The
ineffective portion of the derivative hedging gain or loss, as well
as changes in the derivative time value (which is excluded from the
assessment of hedge effectiveness), are recognized as a component
of interest income and other income (expense), net. Balance Sheet
Hedges We utilize foreign currency
exchange forward and option contracts to hedge against the
short-term impact of foreign currency exchange rate fluctuations
related to certain foreign-currency-denominated monetary assets and
liabilities, primarily consisting of Brazilian real, British pound
sterling, Israeli shekel, Australian dollar, Japanese yen, Chinese
renminbi, and Euro-denominated intercompany balances; Brazilian
real, British pound sterling, Australian dollar, Israeli shekel,
and Euro-denominated trade receivables; and British pound sterling,
Indian rupee, and Euro-denominated other net monetary assets. These
derivative instruments are not designated for hedge accounting
treatment since there is a natural offset for the remeasurement of
the underlying foreign currency denominated asset or liability. We
recognize changes in the fair value of non-designated
Factors that could have an
impact on the effectiveness of our balance sheet and cash flow
hedging program include the accuracy of forecasts and the
volatility of foreign currency markets. These programs reduce, but
do not entirely eliminate, the impact of currency exchange
movements. The maturities of these instruments are generally less
than one year. Currently, we do not enter into any foreign exchange
forward contracts to hedge exposures related to firm commitments or
nonmarketable investments. We do not have any leveraged
derivatives, nor do we use derivative contracts for speculative
purposes. The related cash flow impacts of our derivative contracts
are reflected as cash flows from operating activities in the
Consolidated Statements of Cash Flows. |
| Variable Interest Entities | Variable Interest
Entities In accordance with the
Variable Interest Entities (“VIE”) sub-section |
| Recent Accounting Pronouncements | Recent Accounting
Pronouncements Debt Issuance Costs. 2015-03, 2015-03 Inventory Valuation. 2015-11, 2015-11 2015-11 Measurement Period
Adjustments. 2015-16, 2015-16 Lease Arrangements. 2016-02, right-of-use right-to-use The recognition,
measurement, and presentation of expenses and cash flows by a
lessee have not significantly changed from previous guidance. There
continues to be a differentiation between finance leases and
operating leases. The criteria for determining whether a lease is a
financing or operating lease are substantially the same as existing
guidance except that the “bright line” percentages have
been removed.
•
For finance leases, interest is recognized on the lease
liability separately from depreciation of the right-of-use
•
For operating leases, a lessee is required to recognize lease
expense generally on a straight-line basis. All operating lease
payments are classified as operating activities in the statement of
cash flows. The current build-to-suit build-to-suit We have not quantified the
impact, but we expect our consolidated financial position and
results of operations to be materially effected. Principal vs Agent. 2016-08, A number of indicators of
the nature of the relationship that are considered under current
guidance have been streamlined and clarified in the new guidance by
focusing more specifically on the performance obligations that must
be fulfilled in the transaction, which entity carries the inventory
risk in the transaction, and which entity controls the pricing of
the good or service. Credit risk will no longer be a criterion.
This guidance will be effective in the first quarter of 2018. We
are evaluating its impact on our revenue and results of
operations. Stock-based
Compensation. 2016-09,
•
Under the new guidance, all excess tax benefits and
deficiencies are recognized as income tax expense. Excess tax
benefits of less than $0.1 million that were charged to
additional paid-in
•
The requirement to reclassify gross excess tax benefits related
to stock-based compensation from operating to financing activities
in the statement of cash flows is eliminated. The reclassification
of $0.2 million in the first quarter of 2016 has been reversed
upon adoption. We applied this guidance retrospectively to all
prior periods to maintain the comparability of presentation between
periods, which resulted in a $3.3 million increase in cash
flows provided by operating activities during the year ended
December 31, 2015, and a corresponding decrease in cash flows
provided by financing activities.
•
We have elected to account for forfeitures when they occur
instead of estimating the expected forfeiture rate. Adoption of
this provision during the second quarter resulted in a retroactive
net income adjustment of $0.2 million, net of tax effect, in
the first quarter of 2016 and a cumulative effect adjustment to
retained earnings of $2.1 million, net of tax, as of
January 1, 2016.
•
Statutory tax withholding will be permitted up to the maximum
statutory tax rate in applicable jurisdictions. The retrospective
impact of this provision on prior period financial statements is
not material. Financial
Instruments. 2016-13, available-for-sale available-for-sale ASU 2016-13 available-for-sale Settlement of
Convertible Debt. 2016-15, ASU 2016-15 Restricted Cash. 2016-18, beginning-of-period end-of-period ASU 2016-18 Revenue Recognition. 2014-09,
The guidance requires
comprehensive annual and interim disclosures regarding the nature,
amount, timing, and uncertainty of recognized revenue. Qualitative
and quantitative disclosures will be required regarding:
•
contracts with customers, including revenue and impairments
recognized, disaggregation, and information about contract balances
and performance obligations,
•
significant judgments and changes in judgments required to
determine the transaction price, amounts allocated to performance
obligations, and the timing for recognizing revenue resulting from
the satisfaction of performance obligations, and
•
assets recognized from the costs to obtain or fulfill a
contract. ASU 2014-09 2014-09. Upon initial evaluation, we
believe the key changes in the guidance that impact our revenue
recognition relate to the allocation of contract revenues between
various services and software licenses, and the timing of when
those revenues are recognized. The requirement to defer incremental
contract acquisition costs and recognize them over the contract
period or expected customer life will result in the recognition of
a deferred charge on our balance sheet. We are currently assessing
the impact of these requirements on our consolidated financial
statements upon adoption. |
| Derivatives and Hedging | We are exposed to market
risk and foreign currency exchange risk from changes in foreign
currency exchange rates, which could affect operating results,
financial position, and cash flows. We manage our exposure to these
risks through our regular operating and financing activities and,
when appropriate, through the use of derivative financial
instruments. These derivative financial instruments are used to
hedge monetary assets and liabilities, intercompany balances, trade
receivables, anticipated cash flows, and to reduce earnings and
cash flow volatility resulting from shifts in market rates. Our
objective is to offset gains and losses resulting from these
exposures with losses and gains on the derivative contracts used to
hedge them, thereby reducing volatility of earnings or protecting
fair values of assets and liabilities. We do not have any leveraged
derivatives, nor do we use derivative contracts for speculative
purposes. ASC 815 requires the fair value of all derivative
instruments, including those embedded in other contracts, to be
recorded as assets or liabilities in our Consolidated Balance
Sheet. The related cash flow impacts of our derivative contracts
are reflected as cash flows from operating activities.
Our exposures are primarily
related to non-U.S. non-U.S. By their nature, derivative
instruments involve, to varying degrees, elements of market and
credit risk. The market risk associated with these instruments
resulting from currency exchange movement is expected to offset the
market risk of the underlying transactions, assets, and liabilities
being hedged (i.e., operating expense exposure in Indian rupees;
the collection of Brazilian real, British pound sterling,
Australian dollar, Israeli shekel, and Euro-denominated trade
receivables; and the settlement of Brazilian real, British pound
sterling, Israeli shekel, Australian dollar, Japanese yen, Chinese
renminbi, and Euro-denominated intercompany balances). We do not
believe there is significant risk of loss from non-performance Cash Flow
Hedges Foreign currency derivative
contracts with notional amounts of $3.2 million and net
asset/liability amounts that are immaterial have been designated as
cash flow hedges of our Indian rupee operating expense exposure at
December 31, 2016 and 2015. The changes in fair value of these
contracts are reported as a component of OCI and reclassified to
operating expense in the periods of payment of the hedged operating
expenses. The ineffective portion of the derivative hedging gain or
loss, as well as changes in the derivative time value (which is
excluded from the assessment of hedge effectiveness), are
recognized as a component of interest income and other income
(expense), net. Balance Sheet
Hedges Forward contracts not
designated as hedging instruments with notional amounts of $158.7
and $115.4 million are used to hedge foreign currency balance
sheet exposures at December 31, 2016 and 2015, respectively.
They are not designated for hedge accounting treatment since there
is a natural offset for the remeasurement of the underlying foreign
currency denominated asset or liability. We recognize changes in
the fair value of non-designated |
| Segment Reporting | Operating
segment information is required to be presented based on the
internal reporting used by the chief operating decision making
group (“CODM”) to allocate resources and evaluate
operating segment performance. Our CODM is comprised of our Chief
Executive Officer and Chief Financial Officer. The CODM group is
focused on assessment and resource allocation among the Industrial
Inkjet, Productivity Software, and Fiery operating
segments.
Our operating
segments are integrated through their reporting and operating
structures, shared technology and practices, shared sales and
marketing, and combined production facilities. Our enterprise
management processes use financial information that is closely
aligned with our three operating segments at the gross profit
level. Relevant discrete financial information is prepared at the
gross profit level for each of our three operating segments, which
is used by the CODM to allocate resources and assess the
performance of each operating segment. |
| Performance-based and market-based restricted stock [Member] | |
| Computation of Net Income Per Common Share | ASC 260-10-45-48. non-GAAP |
| ASU 2015-03 Debt Issuance Costs [Member] | |
| Recent Accounting Pronouncements | Debt Issuance Costs. 2015-03, 2015-03 |
| ASU 2016-02 Lease Arrangements [Member] | |
| Recent Accounting Pronouncements | Lease Arrangements. 2016-02, right-of-use right-to-use The recognition,
measurement, and presentation of expenses and cash flows by a
lessee have not significantly changed from previous guidance. There
continues to be a differentiation between finance leases and
operating leases. The criteria for determining whether a lease is a
financing or operating lease are substantially the same as existing
guidance except that the “bright line” percentages have
been removed.
•
For finance leases, interest is recognized on the lease
liability separately from depreciation of the right-of-use
•
For operating leases, a lessee is required to recognize lease
expense generally on a straight-line basis. All operating lease
payments are classified as operating activities in the statement of
cash flows. The current build-to-suit build-to-suit |
| ASU 2016-08 Principal Vs Agent [Member] | |
| Recent Accounting Pronouncements | Principal vs Agent. 2016-08, A number of indicators of
the nature of the relationship that are considered under current
guidance have been streamlined and clarified in the new guidance by
focusing more specifically on the performance obligations that must
be fulfilled in the transaction, which entity carries the inventory
risk in the transaction, and which entity controls the pricing of
the good or service. Credit risk will no longer be a criterion.
This guidance will be effective in the first quarter of 2018. We
are evaluating its impact on our revenue and results of
operations. |
| ASU 2016-13 Financial Instruments [Member] | |
| Recent Accounting Pronouncements | Financial
Instruments. 2016-13, available-for-sale available-for-sale ASU 2016-13 available-for-sale |
| ASU 2016-18 Restricted Cash [Member] | |
| Recent Accounting Pronouncements | Restricted Cash. 2016-18, beginning-of-period end-of-period ASU 2016-18 |
| ASU 2015-11 Inventory Valuation [Member] | |
| Recent Accounting Pronouncements | Inventory Valuation. 2015-11, 2015-11 2015-11 |
| ASU 2015-16 Measurement Period Adjustments [Member] | |
| Recent Accounting Pronouncements | Measurement Period
Adjustments. 2015-16, 2015-16 |
| ASU 2016-15 Statement of Cash Flows [Member] | |
| Recent Accounting Pronouncements | Settlement of
Convertible Debt. 2016-15, ASU 2016-15 |
| ASU 2016-09 Stock-based Compensation [Member] | |
| Recent Accounting Pronouncements | Stock-based
Compensation. 2016-09,
•
Under the new guidance, all excess tax benefits and
deficiencies are recognized as income tax expense. Excess tax
benefits of less than $0.1 million that were charged to
additional paid-in
•
The requirement to reclassify gross excess tax benefits related
to stock-based compensation from operating to financing activities
in the statement of cash flows is eliminated. The reclassification
of $0.2 million in the first quarter of 2016 has been reversed
upon adoption. We applied this guidance retrospectively to all
prior periods to maintain the comparability of presentation between
periods, which resulted in a $3.3 million increase in cash
flows provided by operating activities during the year ended
December 31, 2015, and a corresponding decrease in cash flows
provided by financing activities.
•
We have elected to account for forfeitures when they occur
instead of estimating the expected forfeiture rate. Adoption of
this provision during the second quarter resulted in a retroactive
net income adjustment of $0.2 million, net of tax effect, in
the first quarter of 2016 and a cumulative effect adjustment to
retained earnings of $2.1 million, net of tax, as of
January 1, 2016.
•
Statutory tax withholding will be permitted up to the maximum
statutory tax rate in applicable jurisdictions. The retrospective
impact of this provision on prior period financial statements is
not material. |
| ASU 2014-09 and ASU 2016-10 Revenue Recognition [Member] | |
| Recent Accounting Pronouncements | Revenue Recognition. 2014-09,
The guidance requires
comprehensive annual and interim disclosures regarding the nature,
amount, timing, and uncertainty of recognized revenue. Qualitative
and quantitative disclosures will be required regarding:
•
contracts with customers, including revenue and impairments
recognized, disaggregation, and information about contract balances
and performance obligations,
•
significant judgments and changes in judgments required to
determine the transaction price, amounts allocated to performance
obligations, and the timing for recognizing revenue resulting from
the satisfaction of performance obligations, and
•
assets recognized from the costs to obtain or fulfill a
contract. ASU 2014-09 2014-09. Upon initial evaluation, we
believe the key changes in the guidance that impact our revenue
recognition relate to the allocation of contract revenues between
various services and software licenses, and the timing of when
those revenues are recognized. The requirement to defer incremental
contract acquisition costs and recognize them over the contract
period or expected customer life will result in the recognition of
a deferred charge on our balance sheet. We are currently assessing
the impact of these requirements on our consolidated financial
statements upon adoption. |
