EFI Reports Fourth Quarter 2004 Results Revenue of $81.2 million, GAAP EPS of $0.02, Pro Forma EPS of $0.06
Foster City, Calif. – January 26, 2005 – 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 December 31, 2004, revenues were $81.2 million.
For the year ended December 31, 2004, revenue grew 4% to $394.6 million from the $379.6 million achieved in the year ended December 31, 2003.
Pro forma net income was $3.1 million or $0.06 per diluted share in the fourth quarter of 2004, compared to $14.9 million or $0.24 per diluted share for the same period in 2003.
Pro forma net income for the year ended December 31, 2004 was $36.9 million or $0.62 per diluted share, compared to the $43.9 million or $0.76 per diluted share achieved during the same period in 2003.
GAAP net income was $0.8 million or $0.02 per diluted share in the fourth quarter of 2004, compared to $1.1 million or $0.02 per diluted share for the same period in 2003.
GAAP net income for the year ended December 31, 2004 was $38.0 million or $0.64 per diluted share, compared to $26.5 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 December 31, 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 December 31, 2004 were $350.3 million, down $8.5 million when compared with $358.8 million as of December 31, 2003.
“We are continuing to see impressive growth in our software business, including closing several significant deals this quarter with Fortune 500 customers. Our expanding product portfolio has enabled us to serve larger enterprises, where customers appreciate both the breadth of our product line and our commitment to open standards.” said Guy Gecht, CEO of EFI. “Despite a challenging quarter, we are pleased that we achieved strong cash flow from operations, and delivered our sixteenth consecutive quarter of gross margin improvements.”
Q1 Outlook
The Company currently anticipates Q1 2005 revenues to be even with Q4 2004 levels.
The Company expects pro forma earnings per share of $0.06 and a GAAP loss per share of $0.02. Both the pro forma and GAAP EPS estimates exclude the 9.1 million shares related to the company’s contingently convertible debt. The inclusion of these shares and the add-back to pre-tax income of $1.3 million related to interest and amortization of bond issuance expenses would be accretive to earnings, and as such are not to be included in the EPS calculation.
The Company expects to recognize a charge of approximately $2.5 million related to a previously announced headcount reduction action taken early in the first quarter.
The Company is currently estimating its tax provision at 25% for pro forma results and 23% for GAAP results.
Reconciliation of pro form to GAAP EPS estimates {r}
Pro forma EPS estimate
$
0.06
Amortization of acquisition related intangibles
$
(0.06
)
Headcount reduction costs
$
(0.05
)
Tax effect of pro forma adjustments
$
0.03
GAAP EPS estimates
$
(0.02
)
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.
Safe Harbor for Forward Looking Statements
The statements:“We are continuing to see impressive growth in our software business, including closing several significant deals this quarter with Fortune 500 customers. Our expanding product portfolio has enabled us to serve larger enterprises, where customers appreciate both the breadth of our product line and our commitment to open standards.” and “Despite a challenging quarter, we are pleased that we achieved strong cash flow from operations, and delivered our sixteenth consecutive quarter of gross margin improvements.” and
Q1 Outlook
The Company currently anticipates Q1 2005 revenues to be even with Q4 2004 levels.
The Company expects pro forma earnings per share of $0.06 and a GAAP loss per share of $0.02. Both the pro forma and GAAP EPS estimates exclude the 9.1 million shares related to the company’s contingently convertible debt. The inclusion of these shares and the add-back to pre-tax income of $1.3 million related to interest and amortization of bond issuance expenses would be accretive to earnings, and as such are not to be included in the EPS calculation.
The Company expects to recognize a charge of approximately $2.5 million related to a previously announced headcount reduction action taken early in the first quarter.
The Company is currently estimating its tax provision at 25% for pro forma results and 23% for GAAP results.
Reconciliation of pro form to GAAP EPS estimates {r}
Pro forma EPS estimate
$
0.06
Amortization of acquisition related intangibles
$
(0.06
)
Headcount reduction costs
$
(0.05
)
Tax effect of pro forma adjustments
$
0.03
GAAP EPS estimates
$
(0.02
)
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; (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.
1
Electronics For Imaging, Inc.
Consolidated Statements of Income
(in thousands, except per share data)
(unaudited)
Three Months Ended
Year Ended
December 31,
December 31,
2004
2003
2004
2003
Revenue
$
81,229
$
107,853
$
394,604
$
379,587
Cost of revenue
28,216
38,915
138,382
148,054
Gross profit
53,013
68,938
256,222
231,533
Research and development
27,865
26,890
111,134
96,697
Sales and marketing
17,694
16,938
74,711
61,597
General and administrative
6,645
6,180
27,264
21,690
Real estate related charges
14,394
Amortization of identified intangibles and other acquisition-related charges
3,175
14,462
14,690
19,670
Total operating expenses
55,379
64,470
242,193
199,654
Income (loss) from operations
(2,366
)
4,468
14,029
31,879
Interest income and other income, net
2,211
1,509
7,147
8,603
Litigation settlements and Unimobile assets sale gains
—
840
3,052
2,408
Loss on equity investment
—
(671
)
—
(1,562
)
Income (loss) before income taxes
(155
)
6,146
24,228
41,328
Benefit from (provision for) income taxes
968
(5,080
)
13,791
(14,820
)
Net income
$
813
$
1,066
$
38,019
$
26,508
Dilutive EPS Calculation
Net income
$
813
$
1,066
$
38,019
$
26,508
After tax adjustment of convertible debt related costs
—
—
2,999
1,724
Income for purposes of computing diluted net income per share
$
813
$
1,066
41,018
$
28,232
Shares used in diluted share calculation
54,043
55,671
63,996
60,138
Net income per diluted common share
$
0.02
$
0.02
$
0.64
$
0.47
Reconciliation of Reported GAAP Net Income to Pro Forma Net Income
Three Months Ended
Year Ended
December 31
December 31
2004
2003
2004
2003
Net income
$
813
$
1,066
38,019
$
26,508
Benefit from tax settlement
—
—
(18,935
)
—
Loss on real estate refinancing activities
—
—
11,350
—
Loss on real estate asset impairment charge
—
—
3,044
—
Headcount reduction expense
—
—
1,011
—
Amortization of acquisition related intangibles
3,175
2,462
13,690
6,450
In process research and development expense
—
12,000
1,000
13,220
Loss on equity investment
—
671
—
1,562
Litigation settlements and Unimobile assets sale gains
—
(840
)
(3,052
)
(2,408
)
Tax effect of pro forma adjustments
(889
)
(438
)
(9,253
)
(1,420
)
Pro forma net income
$
3,099
$
14,921
$
36,874
$
43,912
After tax adjustment of convertible debt related interest
—
749
2,999
1,724
Income for purposes of computing diluted pro forma net income per share
$
3,099
$
15,670
39,873
$
45,636
Shares used in per share calculation
54,043
64,755
63,996
60,138
Pro forma net income per diluted common share
$
0.06
$
0.24
$
0.62
$
0.76
Electronics For Imaging, Inc.
Revenue Break-Down
(in thousands)
(unaudited)
Three Months Ended
Year Ended
December 31
December 31
2004
2003
2004
2003
Revenue by product
Servers
$
31,473
$
61,111
$
170,943
$
178,948
Embedded Products
23,332
27,486
121,890
139,936
Professional Printing Applications
18,099
10,956
68,484
21,782
Miscellaneous
8,325
8,300
33,287
38,921
Total
$
81,229
$
107,853
$
394,604
$
379,587
Shipments by geographic area
North America
$
43,782
58,605
$
217,069
$
192,326
Europe
21,243
29,479
105,168
113,914
Japan
12,587
16,595
56,799
57,231
Rest of World
3,617
3,174
15,568
16,116
Total
$
81,229
$
107,853
$
394,604
$
379,587
Electronic for Imaging, Inc.
Consolidated Balance Sheets
(in thousands)
December 31,
December 31,
2004
2003
(unaudited)
ASSETS
Cash, cash equivalents and short-term investments
$
659,559
$
624,112
Restricted short-term investments
—
69,669
Accounts receivable, net
41,128
53,317
Inventories, net
5,529
7,989
Other current assets
22,157
28,718
Total current assets
728,373
783,805
Property and equipment, net
44,324
49,094
Restricted investments
88,580
43,080
Goodwill
73,767
67,166
Intangible assets, net
40,843
51,032
Other assets
41,990
19,484
Total assets
$
1,017,877
$
1,013,661
Accounts payable
$
24,286
$
17,995
Accrued and other liabilities
62,219
67,386
Income taxes payable
23,812
33,231
Total current liabilities
110,317
118,612
Long-term obligations
240,000
240,236
Total liabilities
350,317
358,848
Stockholders’ equity:
Common stock
638
620
Treasury stock
(214,722
)
(159,077
)
Additional paid-in-capital
359,340
326,761
Retained earnings
522,304
486,509
Total stockholders’ equity
667,560
654,813
Total liabilities and stockholders’ equity
$
1,017,877
$
1,013,661
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