Electronics For Imaging (EFII) 8-K Results of Operations and Financial Condition

For more information:	Investor Relations
Joseph Cutts	JoAnn Horne
Chief Financial Officer	Market Street Partners
EFI		415-445-3235

650-357-3500

EFI Reports Third Quarter 2004 Results
Revenue of $98 million, GAAP EPS of $0.30, Pro Forma EPS of $0.16

Foster City, Calif. – October 20, 2004 – EFI (Nasdaq: EFII), the world leader in digital imaging and print management solutions for commercial and enterprise printing, announced today that, for the quarter ended September 30, 2004, revenues were $97.6 million compared to $97.3 million for the same period in 2003.

For the nine months ended September 30, 2004, revenue grew 15% to $313.4 million from the $271.7 million achieved in the first nine months of 2003.

Pro forma net income was $8.9 million or $0.16 per diluted share in the third quarter of 2004, compared to $12.8 million or $0.24 per diluted share for the same period in 2003.

Pro forma net income for the nine months ended September 30, 2004 was $33.8 million or $0.61 per diluted share, an increase of 17% from the $29.0 million or $0.53 per diluted share achieved during the same period in 2003.

GAAP net income was $16.1 million or $0.30 per diluted share in the third quarter of 2004, an increase of 31% compared to $12.2 million or $0.23 per diluted share for the same period in 2003.

GAAP net income for the nine months ended September 30, 2004 was $37.2 million or $0.67 per diluted share, compared to $25.4 million, or $0.47 per diluted share for the same period in 2003.

Pro forma net income is computed by adjusting GAAP net income by the impact of amortization of acquisition-related intangibles and other non-recurring charges and gains.

As of September 30, 2004, the Company’s total assets were $1.02 billion, up from the $1.01 billion reported as of December 31, 2003. Total liabilities as of September 30, 2004 were $358.8 million, even with $358.8 million as of December 31, 2003.

“Despite the difficult business environment, we were able to achieve our fifteenth consecutive quarter of gross margin expansion, strong cash flow from operations, and EPS above our revised expectations,” said Guy Gecht, CEO of EFI. “While we are still seeing softness in our embedded business, we remain committed to maintaining solid profitability and investing in key growth areas, particularly in software, where we continue to see strong market opportunities.”

Q4 Outlook

• The Company currently anticipates that Q4 revenues will be roughly flat with Q3 levels.

• The Company expects earnings of $0.17 per share pro forma and $0.13 per share GAAP, on an “if converted” basis. Under a recent FASB rule change, the Company is required to use the “if converted” method to calculate its diluted EPS. The diluted EPS calculation includes 9.1 million shares related to its convertible bond. This dilution is partially offset with an add-back to pre-tax income of $1.3 million related to interest and amortization of bond issuance expenses. Also, during the fourth quarter the Company expects to book a gain related to a catch-up adjustment for the extension of the R&D tax credit. This adjustment would reduce the tax rate to 28% on an annual basis. The gain on the tax adjustment is estimated to contribute $0.02 to both the pro forma and GAAP results in the fourth quarter.

	*If converted			Excluding conversion
**Pro forma EPS estimate	$	0.17		$	0.18
Amortization of acquisition related intangibles		($0.05	)	$	(0.06	)
Tax effect of pro forma adjustments	$	0.01		$	0.02
GAAP estimates	$	0.13		$	0.14
*Includes the dilutive impact of 9.1 million shares related to the company’s convertible bond. **Includes $0.02 cent gain related to the extension of the R&D tax credit

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

About our Pro Forma Net Income and Adjustments

To supplement our consolidated financial results prepared under generally accepted accounting principles (“GAAP”), we use a pro forma measure of net income that is GAAP net income adjusted to exclude certain costs, expenses and gains. Our pro forma net income gives an indication of our baseline performance before gains, losses or other charges that are considered by management to be outside of our core operating results. In addition, pro forma net income is among the primary indicators management uses as a basis for planning and forecasting future periods. These measures are not in accordance with or an alternative for GAAP and may be materially different from pro forma measures used by other companies. We compute pro forma net income by adjusting GAAP net income with the impact of amortization of acquisition-related intangibles, and other non-recurring charges and gains. The presentation of this additional information should not be considered in isolation or as a substitute for net income prepared in accordance with GAAP. In the fourth quarter of 2004, the expected amortization of acquisition related intangibles, net of tax benefit, would lead to a $0.04 per share reduction from the pro forma earnings per share amount.

Safe Harbor for Forward Looking Statements

The statements: “Despite the difficult business environment, we were able to achieve our fifteenth consecutive quarter of gross margin expansion, strong cash flow from operations, and EPS above our revised expectations,” and “While we are still seeing softness in our embedded business, we remain committed to maintaining solid profitability and investing in key growth areas, particularly in software, where we continue to see strong market opportunities,” and

“Q4 Outlook

• The Company currently anticipates that Q4 revenues will be roughly flat with Q3 levels.

• The Company expects earnings of $0.17 per share pro forma and $0.13 per share GAAP, on an “if converted” basis. Under a recent FASB rule change, the Company is required to use the “if converted” method to calculate its diluted EPS. The diluted EPS calculation includes 9.1 million shares related to its convertible bond. This dilution is partially offset with an add-back to pre-tax income of $1.3 million related to interest and amortization of bond issuance expenses. Also, during the fourth quarter the Company expects to book a gain related to a catch-up adjustment for the extension of the R&D tax credit. This adjustment would reduce the tax rate to 28% on an annual basis. The gain on the tax adjustment is estimated to contribute $0.02 to both the pro forma and GAAP results in the fourth quarter” as well as the following table:

	*If converted			Excluding conversion
**Pro forma EPS estimate	$	0.17		$	0.18
Amortization of acquisition related intangibles		($0.05	)	$	(0.06	)
Tax effect of pro forma adjustments	$	0.01		$	0.02
GAAP estimates	$	0.13		$	0.14
*Includes the dilutive impact of 9.1 million shares related to the company’s convertible bond. **Includes $0.02 cent gain related to the extension of the R&D tax credit

are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities and Exchange Act of 1934, as amended . Past performance is not necessarily indicative of future results. Forward Looking Statements are subject to certain risks and uncertainties that could cause actual future results to differ materially, including, but not necessarily limited to, the following: (1) Management’s ability to forecast revenues and control expenses, especially on a quarterly basis, continues to be a challenge. Unexpected declines in revenue without a corresponding and timely decline in expenses could have a material adverse effect on results of operations; (2) current world wide financial/economic difficulties continue including variations in foreign exchange rates; (3) variations in growth rates or declines in the printing and imaging market across various geographic regions may cause a material impact in our results; (4) changes in historic customer order patterns, including changes in customer and channel inventory levels may cause a material impact in our results; (5) changes in the mix of products sold leads to variations in results; (6) market acceptance of new products and contribution to EFI’s revenue cannot be assured; (7) delays in product delivery can cause quarterly revenues and income to fall significantly short of anticipated levels; (8) competition and/or market factors in the various markets may pressure EFI to reduce prices on certain products; (9) competition with products internally developed by EFI’s customers may result in declines in EFI sales and revenues; (10) excess or obsolete inventory and variations in inventory valuation may cause a material impact in our results; (11) continued success in technological advances, including development and implementation of new processes and strategic products for specific market segments may not be assured; (12) timely and qualitative execution in the manufacturing of products may not be assured; (13) litigation involving intellectual property or other matters may cause a material impact in our results; (14) our ability to adequately service our debt and dilution of earnings if the company’s convertible debenture is treated on an “as converted basis” for purposes of calculating diluted earnings per share; (15) other risk factors listed from time to time in the company’s SEC reports. EFI undertakes no obligation to update information contained in this release. For further information regarding risks and uncertainties associated with EFI’s business, please refer to the Risk Factors section (entitled “Factors That Could Adversely Affect Performance’’) of EFI Corporation’s SEC filings, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained by contacting EFI Corporation’s Investor Relations Department at 650-357-3828 or email atinvestor.relations@efi.com or EFI’s Investor Relations website athttp://www.efi.com.

About Electronics For Imaging/EFI

EFI (<www.efi.com>) is the world leader in digital imaging and print management solutions for commercial and enterprise printing. EFI’s award-winning technologies offer document management tools from creation to print, including high fidelity color and black and white Fiery® print servers that can output up to 2000 ppm; powerful production workflow and print management information software solutions for increased performance and cost efficiency; and an array of business-critical enterprise and mobile printing solutions. EFI maintains 25 offices worldwide.

Electronics For Imaging, Inc.
Consolidated Statements of Income
(in thousands, except per share data)
(unaudited)
	Three Months Ended September 30,						Nine Months Ended September 30,
		2004			2003			2004			2003
Revenue	$	97,586		$	97,330		$	313,375		$	271,734
Cost of revenue		33,989			37,652			110,166			109,139
Gross profit		63,597			59,678			203,209			162,595
Research and development		28,448			23,725			83,269			69,807
Sales and marketing		17,999			14,746			57,017			44,659
General and administrative		7,208			5,518			20,619			15,510
Real estate related charges		14,394			—			14,394			—
Amortization of identified intangibles and other acquisition-related charges		3,520			1,330			11,515			5,208
Total operating expenses		71,569			45,319			186,814			135,184
(Loss) income from operations		(7,972	)		14,359			16,395			27,411
Interest income and other income, net		1,716			1,854			4,936			7,094
Litigation settlement income and gain on sale of Unimobile assets		—			1,568			3,052			1,568
Loss on equity investment		—			(731	)		—			(891	)
(Loss) income before income taxes		(6,256	)		17,050			24,383			35,182
Benefit from (provision for) income taxes		22,315			(4,801	)		12,823			(9,740	)
Net income	$	16,059		$	12,249		$	37,206		$	25,442
Shares used in per share calculation		54,314			53,594			55,268			54,569
Net income per diluted common share	$	0.30		$	0.23		$	0.67		$	0.47
Reconciliation of Reported GAAP Net Income to Pro Forma Net Income
Net income	$	16,059		$	12,249		$	37,206		$	25,442
Benefit from tax settlement		(18,935	)		—			(18,935	)		—
Loss on real estate refinancing activities		11,350			—			11,350			—
Loss on real estate asset impairment charge		3,044						3,044
Headcount reduction expense		1,011						1,011
Amortization of acquisition related intangibles		3,520			1,330			10,515			3,988
In process research and development expense		—						1,000			1,220
Loss on equity investment		—			731			—			891
Litigation settlement income and gain on sale of Unimobile assets		—			(1,568	)		(3,052	)		(1,568	)
Tax effect of pro forma adjustments		(7,181	)		64			(8,363	)		(982	)
Pro forma net income	$	8,868		$	12,806		$	33,776		$	28,991
Shares used in per share calculation		54,314			53,594			55,268			54,569
Pro forma net income per diluted common share	$	0.16		$	0.24		$	0.61		$	0.53

Electronics For Imaging, Inc.
Consolidated Balance Sheets
(in thousands)
		September 30, 2004			December 31, 2003
		(unaudited)
ASSETS
Cash, cash equivalents and short-term investments		$	649,286		$	624,112
Restricted short-term investments			—			69,669
Accounts receivable, net			55,492			53,317
Inventories, net			5,151			7,989
Other current assets			29,006			28,718
Total current assets			738,935			783,805
Property and equipment, net			44,237			49,094
Restricted investments			88,580			43,080
Goodwill			76,559			67,166
Intangible assets, net			43,680			51,032
Other assets			31,165			19,484
	Total assets	$	1,023,156		$	1,013,661
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable		$	27,709		$	17,995
Accrued and other liabilities			63,663			67,386
Income taxes payable			27,196			33,231
Total current liabilities			118,568			118,612
Long-term obligations			240,224			240,236
Total liabilities			358,792			358,848
Stockholders’ equity:
Common stock			637			620
Treasury stock			(214,722	)		(159,077	)
Additional paid-in-capital			356,741			326,761
Retained earnings			521,708			486,509
Total stockholders’ equity			664,364			654,813
Total liabilities and stockholders’ equity		$	1,023,156		$	1,013,661

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Electronics For Imaging, Inc.
Revenue Break-Down
(in thousands)
(unaudited)
	Three Months Ended September 30,				Nine Months Ended September 30,
		2004		2003		2004		2003
Revenue by product
Servers	$	42,970	$	39,507	$	139,470	$	117,837
Embedded Products		30,158		45,468		98,558		112,450
Professional Printing Applications		16,784		3,538		50,385		10,826
Miscellaneous		7,674		8,817		24,962		30,621
Total	$	97,586	$	97,330	$	313,375	$	271,734
Shipments by geographic area
North America	$	54,879	$	47,135	$	173,287	$	133,721
Europe		24,391		27,252		83,925		84,435
Japan		14,246		19,768		44,212		40,636
Rest of World		4,070		3,175		11,951		12,942
Total	$	97,586	$	97,330	$	313,375	$	271,734

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