10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-K

(Mark One)

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2016

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 000-18805

ELECTRONICS FOR IMAGING, INC.

(Exact name of registrant as specified in its charter)

Delaware	94-3086355
(State or other Jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

6750 Dumbarton Circle, Fremont, CA 94555

(Address of principal executive offices) (Zip Code)

(650) 357-3500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Exchange on which Registered
Common Stock, $.01 Par Value	The NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act:                                                       None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☒    No  ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ☐    No  ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☒    No  ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

The aggregate market value of the voting and non-voting common stock held by non-affiliates computed by reference to the price at which the common stock was last sold on June 30, 2016 was $1,986,886,899 *

The number of shares outstanding of the registrant’s common stock, $.01 par value per share, as of January 26, 2017 was 46,431,857.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement to be delivered to stockholders in connection with the 2017 Annual Meeting of Stockholders are incorporated by reference into Part III hereof.

* Based on the last trade price of the registrant’s common stock reported on The NASDAQ Global Select Market on June 30, 2016, the last business day of the registrant’s second quarter of the 2016 fiscal year.

TABLE OF CONTENTS

PART I
ITEM 1	Business	1
ITEM 1A	Risk Factors	21
ITEM 1B	Unresolved Staff Comments	36
ITEM 2	Properties	37
ITEM 3	Legal Proceedings	38
ITEM 4	Mine Safety Disclosures	38
PART II
ITEM 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	38
ITEM 6	Selected Financial Data	42
ITEM 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	44
ITEM 7A	Quantitative and Qualitative Disclosures about Market Risk	80
ITEM 8	Financial Statements and Supplementary Data	83
ITEM 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	147
ITEM 9A	Controls and Procedures	147
ITEM 9B	Other Information	149
PART III
ITEM 10	Directors, Executive Officers and Corporate Governance	150
ITEM 11	Executive Compensation	150
ITEM 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	150
ITEM 13	Certain Relationships and Related Transactions, and Director Independence	151
ITEM 14	Principal Accountant Fees and Services	151
PART IV
ITEM 15	Exhibits and Financial Statement Schedules	151
ITEM 16	Form 10-K Summary	154
Signatures		156
Exhibit index
EXHIBIT 3.1 EXHIBIT 12.1
EXHIBIT 21 EXHIBIT 23.1
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 101

FORWARD-LOOKING STATEMENTS

Certain of the information contained in this Annual Report on Form 10-K, including, without limitation, statements made under this Part I, Item 1, “Business,” Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Part II Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” which are not historical facts, may include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”), and is subject to risks and uncertainties and actual results or events may differ materially. When used herein, the words “anticipate,” “believe,” “consider,” “continue,” “develop,” “estimate,” “expect,” “goal,” “intend,” “look,” “may,” “plan,” “potential,” “project,” “seek,” “should,” “target,” “will,” variations of such words, and similar expressions as they relate to the Company or its management are intended to identify such statements as “forward-looking statements.” Such statements reflect the current views of the Company and its management with respect to future events and are subject to certain risks, uncertainties, and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, the Company’s actual results, performance, or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. Important factors that could cause the Company’s actual results to differ materially from those included in the forward-looking statements made herein include, without limitation, those factors discussed in Item 1, “Business,” in Item 1A, “Risk Factors,” and elsewhere in this Annual Report on Form 10-K and in the Company’s other filings with the Securities and Exchange Commission (“SEC”), including the Company’s most recent Quarterly Report on Form 10-Q and Current Reports on Form 8-K, and any amendments thereto. The Company assumes no obligation to revise or update these forward-looking statements to reflect actual results, events, or changes in factors or assumptions affecting such forward-looking statements.

PART I

References to “EFI,” the “Company,” “we,” “us,” and “our” mean Electronics For Imaging, Inc. and its subsidiaries, unless the context indicates otherwise.

Item 1: Business

Filings

We file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements, and other documents with the SEC under the Exchange Act. The public may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at Room 1580, 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an internet website that contains reports, proxy statements, information statements, and other information regarding issuers, including EFI, that file electronically with the SEC. The public can obtain any documents that we file with the SEC at http://www.sec.gov.

We also make available free of charge through our internet website (http://www.efi.com) our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements, and if applicable, amendments to those reports filed or furnished pursuant to the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. None of the information on our website is incorporated by reference into our reports filed with, or furnished to, the SEC.

General

EFI was incorporated in Delaware in 1988 and commenced operations in 1989. Our initial public offering of common stock was completed in 1992. Our common stock is traded on The NASDAQ Global Select Market under the symbol EFII. Our corporate headquarters are located at 6750 Dumbarton Circle, Fremont, California 94555.

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We are a world leader in customer-centric digital printing innovation focused on the transformation of the printing, packaging, ceramic tile decoration, and textile industries from the use of traditional analog based printing to digital on-demand printing.

Our products include industrial super-wide and wide format display graphics, label and packaging, textile, and ceramic tile decoration digital inkjet printers that utilize our digital ink, industrial digital inkjet printer parts, and professional services; print production workflow, web-to-print, cross-media marketing, fashion design, and business process automation solutions; and color printing digital front ends (“DFEs”) creating an on-demand digital printing ecosystem. Our ink includes digital ultra-violet (“UV”) curable, light emitting diode (“LED”) curable, ceramic, water-based, and thermoforming ink, as well as a variety of textile ink including dye sublimation, pigmented, reactive dye, acid dye, pure disperse dye, and water-based dispersed printing ink. Our award-winning business process automation solutions are integrated from creation to print and are vertically integrated with our industrial digital inkjet printers and products produced by the leading production digital color page printer manufacturers that are driven by our Fiery DFEs.

Our product portfolio includes industrial super-wide and wide format digital inkjet products (“Industrial Inkjet”) including VUTEk and Matan display graphics super-wide and wide format, Reggiani textile, Jetrion label and packaging, and Cretaprint ceramic tile decoration and construction material industrial digital inkjet printers and ink; print production workflow, web-to-print, cross-media marketing, Optitex textile two-dimensional (“2D”) and three-dimensional (“3D”) computer aided fashion design (“CAD”) applications, and business process automation software (“Productivity Software”), which provides corporate printing, label and packaging, publishing, and mailing and fulfillment solutions for the printing and packaging industry; and Fiery DFEs (“Fiery”). Our integrated solutions and award-winning technologies are designed to automate print and business processes, streamline workflow, provide profitable value-added services, and produce accurate digital output.

Products and Services

Industrial Inkjet

Our Industrial Inkjet products address the high-growth industrial digital inkjet markets where significant conversion of production from analog to digital inkjet printing is occurring. The Industrial Inkjet operating segment consists of our VUTEk and Matan super-wide and wide format display graphics, Reggiani textile, Jetrion label and packaging, and Cretaprint ceramic tile decoration and construction material industrial digital inkjet printers; digital UV curable, LED curable, ceramic, water-based, and thermoforming ink, as well as a variety of textile ink including dye sublimation, pigmented, reactive dye, acid dye, pure disperse dye, and water-based dispersed printing ink; digital inkjet printer parts; and professional services. Printing surfaces include paper, vinyl, corrugated, textile, glass, plastic, aluminum composite, ceramic tile, wood, and many other flexible and rigid substrates.

Customer Base. Our industry-leading VUTEk and Matan super-wide format UV, LED, and thermoforming industrial digital inkjet printers and ink are used by commercial photo labs, large sign shops, graphic screen printers, specialty commercial printers, and digital and billboard graphics providers serving the out-of-home advertising and industrial specialty print segments by printing banners, signage, building wraps, flags, point of purchase and exhibition signage, backlit displays, fleet graphics, photo-quality graphics, art exhibits, customized architectural elements, billboards, thermoplastic decoration, and other large graphic displays. We sell EFI hybrid and roll-to-roll flatbed UV wide format graphics printers and ink to the entry-level and mid-range industrial digital inkjet display graphics printer market. We sell Reggiani textile digital inkjet printers and textile ink to the display graphics soft signage market and contract printers serving major textile brand owners and fashion designers, as well as the global printed textile industry. We sell Cretaprint ceramic tile decoration and construction material digital inkjet printers and ceramic digital ink to the ceramic tile construction materials manufacturing industries. We sell Jetrion label and packaging digital inkjet printing systems, custom high-performance integration solutions, and specialty ink to the converting, packaging, and direct mail industries. The

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Nozomi single-pass industrial digital inkjet platform will be sold to the corrugated, paper packaging, display graphics, and other markets when this product is launched in 2017.

Our VUTEk and Matan super-wide, wide format, and Jetrion label and packaging industrial digital inkjet printers incorporate “cool cure” LED printing technology. LED technology uses less heat than the traditional curing process resulting in increased uptime and greater reliability. Energy assessments conducted by the Fogra Graphic Technology Research Association have shown that our super-wide format printers with LED curing can reduce energy consumption by up to 82% when compared with devices that use conventional mercury arc lamps.

Super-wide Format. We launched next generation models and new finishing modules for our GS and HS series of high-speed, high-resolution super-wide format industrial digital inkjet printers in 2016, 2015, and 2014, as well as the Quantum LXr super-wide format industrial digital inkjet roll-to-roll printer in 2016.

Our HS series of printers are alternatives to analog presses used by high volume graphic producers and are based on pin & cure printing technology. We launched the HS125 Pro digital inkjet printer in 2016, which is a 3.2 meter hybrid flatbed/roll-fed printer that prints on rigid and flexible materials up to two inches thick utilizing UltraFX Technology that enhances the visual impact of the printed image and reduces the appearance of unwanted visual artifacts.

The GS/LX family of super-wide format industrial digital inkjet printers offers the highest quality in a super-wide format. We launched next generation models and new finishing modules for our GS series of high-speed, high-resolution super-wide format industrial digital inkjet printers in 2016, 2015, and 2014. The LX models incorporate LED technology. We launched the 3.2 meter hybrid flatbed/roll-fed LX3 Pro digital inkjet printer in 2015, which prints on rigid and flexible materials up to two inches thick utilizing UltraFX Technology. The LX3 is well suited for the point-of-purchase printing environment. We added ultra-drop capability to our GS3250LX and GS2000LX hybrid printers in 2014. Ultra-drop technology offers smaller drop sizes and more precise control. The five meter roll-to-roll GS5500LXr Pro LED inkjet printer was launched in 2014.

The H/QS family of super-wide format industrial digital inkjet printers offers high quality and productivity for the mid-range market in a super-wide format. In 2014, we launched the two meter H2000 Pro printer, which provides a more affordable entry point into high-end production printing for signage and graphics companies with the option to add features as their business grows. H2000 Pro users can run rigid, sheet and flexible media up to two inches thick.

Matan super-wide format industrial digital inkjet roll-to-roll printers include advanced material handling features such as in-line cutting and slitting. The Quantum super-wide format LED UV-curing industrial digital inkjet printer provides resolution up to 1,200 dpi. The Q Series of super-wide format industrial digital inkjet printers are well suited for high volume requirements and feature print speeds up to 3,800 square feet per hour. The Flex series of super-wide format industrial digital inkjet printers serve the fleet graphics market with flexible UV curable ink and protective coating for high-definition, closely-viewed truck side curtains, car wraps, and floor graphics. In 2016, we launched the Quantum LXr 5.2 and 3.5 meter LED roll-to-roll printer, which is an alternative to latex printers featuring 7-picoliter imaging and resolution up to 1,200 dpi.

Wide Format. Our EFI hybrid flatbed/roll-to-roll and dedicated roll-to-roll entry level, overflow, and specialty production UV wide format digital inkjet printers are developed, manufactured, and marketed to the entry-level and mid-range industrial digital inkjet printer market. We launched our wide format H1625 SD 1.65 meter hybrid roll /flatbed printer in 2015. The H1625 SD utilizes thermoforming ink, which enables sign makers and printing companies to print directly onto thermoplastic sheet materials, which can then be formed into deep draw, high elongation parts while retaining hue and opacity. We launched our wide format H1625 RS printer in 2015, which prints 1.6 meter widths directly to 3M reflective media in roll, sheeted, and mounted to rigid forms. We launched our wide format H1625 hybrid roll / flatbed printer in 2014. The H1625 includes LED technology enabling printing on a broad range of substrates, including media that cannot withstand the high-heat drying or curing methods used in other inkjet platforms.

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Textile. Reggiani industrial digital inkjet textile printers address the full scope of advanced textile printing with versatile printers suitable for pigmented, reactive dye, acid dye, and water-based dispersed printing ink. Reggiani is at the forefront of the emergence of digital printing as an alternative to either analog printing or single color (dyed) garments. Reggiani provides an overall solution for the entire textile printing process from yarn treatment to fabric printing and finishing for a wide variety of substrates and applications (fashion, home textile, sportswear, signage, flooring, automotive, and outdoor).

A significant driver for the adoption of digital textile printing is the growth of “fast fashion,” which is a term used by fashion retailers to express the need for designs to move quickly from the catwalk to the retailer to capture current fashion trends. The digital textile printing market has also benefitted from sports apparel with short run production quantities, closer geographic proximity to end-use markets, and environmental awareness.

Reggiani industrial digital inkjet textile printing systems use water-based inks and advanced streamlined automation that provide a total solution for textile businesses. The TOP digital inkjet textile printer is a fast throughput machine that can be used with reactive, acid, disperse, dye sublimation, and pigmented inks. The Essetex 2 meter wide washing box is the ideal system for knitted and light fabrics, particularly where print washing is beneficial for delicate textiles and for post-dyeing of printed cloth. The ReNOIR NEXT printer prints on fabrics and paper using the same ink set with a 1.8 meter beltless digital printing system and offers simplified material handling, a compact footprint, and a lower acquisition cost, making it an ideal entry-level textile printing production device.

In 2016, we launched the 1.8 and 3.4 meter VUTEk FabriVU super-wide format industrial digital inkjet soft signage printers, which utilize water-based sublimation ink and are manufactured in our Reggiani facility. FabriVU offers print speeds up to 464 square meters per hour at 600 dpi and high resolution up to 2,400 dpi and utilize water-based sublimation ink.

Label and Packaging. In 2016, we introduced the Nozomi single-pass industrial digital inkjet platform, which is expected to be launched in 2017. The Nozomi C18000 is a 1.8 meter, single pass, high speed LED industrial digital inkjet corrugated packaging press for the corrugated, paper packaging, display printing, and other markets that prints up to 75 linear meters (246 linear feet) per minute.

Our Jetrion label and packaging digital inkjet printers provide a wide array of label and packaging digital inkjet systems, custom high-performance integration solutions, and specialty digital UV and LED curable ink to the label and packaging industries. Our Jetrion 4950LX industrial digital inkjet label and packaging printer was launched in 2014. It incorporates full LED curing, image quality greater than 1,000 dpi, and a white printing option. The 4950LX printer features digital printing and inline finishing in one machine.

Ceramic Tile Decoration. Our Cretaprint ceramic tile decoration digital inkjet printers are utilized by the ceramic tile and construction material manufacturing industries. The ceramic tile decoration market is transitioning from analog to digital inkjet printing technology.

We launched the Cretaprint D4 in 2016, which features up to 12 print bars, and gives users the ability to incorporate a full range of ceramic ink and digital print effects. We also launched the Cretaprint M4 and M4 SOL printer platforms in 2016, which allow customers to print on larger tile sizes up to 1,180 mm wide and offers enhanced imaging quality with variable-drop grayscale imaging. The Cretaprint M4 SOL is a soluble salt ink printer.

We launched the Cretaprint C4, which is our next generation ceramic tile decoration digital inkjet printer in 2015. Electronics and ink systems have been upgraded to maximize accuracy in a broad range of production conditions. The Cretaprint C4 printer allows the use of different print heads and digital applications on the same machine.

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Ink. Our ink provides a recurring revenue stream generated from sales to our existing customer base of installed printers.

VUTEk printers primarily use digital UV and LED curable ink, although our solvent ink printers remain in use in the field. We were first to market with digital UV curable ink incorporating “cool cure” LED technology for use in high-end production super-wide, wide format, and label and packaging digital inkjet printing systems. We sell a variety of third party branded textile ink to users of our textile digital inkjet printers, including dye sublimation, pigmented, reactive dye, acid dye, and water-based dispersed printing ink. We launched internal formulation of our ceramic digital ink in 2014, which was expanded to included soluble salt-based ceramic ink in 2016. We launched internal formulation of our reactive dye ink in 2016.

In 2016, we introduced AquaEndure acqueous ink, which is a water-based inkjet ink that will be used across many of our printers in the future.

We acquired Rialco Limited (“Rialco”) in 2016, which supplies dye powders and color products for the textile, digital print, and other decorating industries. Rialco’s pure disperse dyes are particularly important in the manufacture of high-quality dye sublimation inkjet inks for textile applications, which is a key growth area in the global migration from analog to digital print. Rialco’s technical and commercial capabilities benefit the Industrial Inkjet operating segment in the sourcing, specification, and purification of high quality dyes and expand our research, development, and innovation base to develop ink for the signage, ceramic, and packaging markets.

We accelerated our ink development capability with the purchase of technology from Polymeric Imaging, Inc. (“Polymeric”) in 2014. Polymeric has extensive experience developing digital inkjet ink and coatings that address important curing, adhesion, density, and durability issues that are encountered when printing on challenging substrates. We use the technology to enhance capabilities for thermoforming and other high-elongation applications.

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Our industrial digital inkjet printers and their related features are as follows:

Printer Type	Models	Capabilities	Application Examples
VUTEk super-wide format	HS, GS/LX, H/QS, and FabriVU Series printers EFI and 3M(R) co-branded Digital UV and LED, AquaEndure aqueous, and thermoforming UV ink	Printing widths of 2 to 5 meters; up to two inch thickness; 6, 7, and 8 colors, plus white and greyscale; up to 2400 dpi; flexible and rigid substrates; 1.8-meter and 3.4-meter wide aqueous-based soft signage printer models with speeds up to 500 square meters per hour; UV curable, LED “cool cure,” aqueous, and thermoforming digital UV inks.	Super-wide format banners, signage, building wraps, flags, point of purchase and exhibition signage, backlit displays, fleet graphics, photo-quality graphics, art exhibits, customized architectural elements, billboards, and thermoplastic decoration.
Matan super-wide format	Quantum, Q series, and Flex series printers Quantum LED curable ink Matan UV curable ink MatanFlex stretchable ink	Speeds up to 353 square meters per hour Printing widths of 3 to 5 meters; up to two inch thickness; 4, 7, and 8 colors, plus white and greyscale; up to 1200 dpi; flexible and rigid substrates; UV curable and LED “cool cure” ink.	Fleet graphics, traffic signage, labels, tags, decals, membranes, license plates, and sign printing
EFI wide format	R family roll-to-roll H family hybrid printers EFI H1625 LED 3M™ ink SD thermoforming ink	Speeds up to 87.2 square meters per hour (roll-to-roll) and 42.3 square meters per hour (hybrid), up to 1200 dpi, 4 colors plus white and greyscale, up to 2 inch thickness, flexible and rigid substrates, UV curable, and LED “cool cure” ink.	Wide format indoor and outdoor graphics with photographic image quality. Entry-level and mid-range markets. Overflow and specialty markets.
Reggiani textile	Reggiani textile printers Dye sublimation, pigmented, reactive dye, acid dye, and water-based dispersed printing ink	Speeds up to 320 square meters per hour Substrates from ultra-light to heavy, up to 2400 dpi; dye sublimation, pigmented, reactive dye, acid dye, and water-based dispersed printing ink	Contract printers serving major textile brand owners and fashion designers Textile soft signage market Global printed textile industry
Jetrion label & packaging	4950LX 4900M/4900M-330 4900ML Jetrion inks	Print resolutions greater than 720 dpi; 4 colors plus white, printing width up to 13 inches, UV curable, and LED “cool cure.” The 4900 platform enables digital printing and finishing in a single end-to-end system.	Primary and secondary label applications, Industrial label or flexible packaging markets. Custom high performance integration solutions.
Cretaprint ceramic tile decoration	Cretaprint C4, C3, P3 Cretaprint M4 and M4 SOL Cretaprint D4 Cretaplotter Cretaprint ink	Single chassis accommodates up to 8 print bars. 1,000 customizable settings controlling printer widths up to 1.4 meters, speed, direction, and discharge.	Ceramic tile industry Construction materials industry

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Productivity Software

To provide our customers with solutions to manage and streamline their printing operations, we have developed technology that enhances printing workflow and makes printing operations more powerful, productive, cost effective, and easier to manage. Most of our software solutions have been developed with the express goal of automating print processes and streamlining workflow via open, integrated, and interoperable products, services, and solutions.

The Productivity Software operating segment consists of a complete software suite that enables efficient and automated end-to-end business and production workflows for the print and packaging industry. This Productivity Suite also provides tools to enable revenue growth, efficient scheduling, and optimization of processes, equipment, and personnel. Customers are provided the financial and technical flexibility to deploy locally within their business or to be hosted in the cloud. The Productivity Suite addresses all segments of the print industry and consists of the: (i) Packaging Suite, with Radius at its core, for tag & label, cartons, and flexible packaging businesses; (ii) Corrugated Packaging Suite, with CTI at its core, for corrugated packaging businesses; (iii) Enterprise Commercial Print Suite with Monarch at its core, for enterprise print businesses; (iv) Publication Print Suite, with Monarch or Technique at its core, for publication print businesses; (v) Mid-market Print Suite, with Pace at its core, for medium size print businesses; (vi) Quick Print Suite, with PrintSmith at its core, for small printers and in-plant sites; and (vii) Value Added Products, available with the suite and standalone, such as web-to-print, e-commerce, cross media marketing, warehousing, fulfillment, shop floor data collection, and shipping to reduce costs, increase profits, and offer new products and services to their existing and future customers. We also market Optitex fashion CAD software, which facilitates fast fashion increased efficiency in the textile and fashion industries.

Customer Base. We sell the Packaging Suite to the label, cartons, and flexible packaging industry; the Corrugated Packaging Suite to the corrugated packaging industry; the Enterprise Commercial Print Suite to large and multi-national commercial print businesses; the Publication Print Suite to publication and direct mail print businesses; the Mid-market Print Suite to medium size commercial print businesses, display graphics providers, and government printing operations; the Quick Print Suite to small printers and in-plant printing operations; Value Added Products including Digital StoreFront and DirectSmile to customers desiring e-commerce, web-to-print, and cross-media marketing solutions; and Optitex to the leading fashion brands and manufacturers.

Our enterprise resource planning and collaborative supply chain business process automation software solutions are designed to enable printers and print buyers to improve productivity and customer service while reducing costs. Web-to-print applications for print buyers and print producers facilitate web-based collaboration across the print supply chain. Customers recognize that business process automation is essential to improving their business practices and profitability. We are focused on making our business process automation solutions the global industry standard. We provide consulting and support services, as well as warranty support for our software products. We typically sell an annual full service maintenance agreement with each license that provides warranty protection from date of shipment. The sale and renewal of annual maintenance agreements provide a recurring revenue stream.

Optitex markets integrated 2D and 3D CAD software that shortens the design cycle, reduces our customers’ costs, and accelerates the adoption of fast fashion. The acquisition of Optitex Ltd. (“Optitex”) in 2016 expands our presence in the digital inkjet textile printing market through the synergy of Optitex technology with the Reggiani digital inkjet textile printer business.

New Version Releases and Product Offerings. Integration among our software offerings is achieved through the end-to-end automation including certified workflows and synchronized releases across multiple products afforded by our Productivity Suite consisting of the Packaging Suite, Corrugated Packaging Suite, Enterprise Commercial Print Suite, Publication Print Suite, Mid-market Print Suite, Quick Print Suite, and Value Added Products. Integration of our software product offerings provides:

• Out-of-the-box, end-to-end optimized workflows,

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• Certified integration and automation,

• Global visibility that makes effective and proactive decision making possible;

• Solid modular, flexible, and scalable software foundation supporting product and customer profit evolution and diversification.

New versions have been released for each of our significant software components and new product offerings have resulted from strategic business acquisitions. New product offerings that have resulted from strategic business acquisitions are described under “Growth and Expansion Strategies” below.

The 2016 release of the Midmarket Print Suite includes web-to-print, cross-media marketing, estimating, scheduling, accounting, and fulfillment applications. Enhancements include easier access to quotes, improved estimating, and more advanced filtering tools to drive efficiency in job estimating and production. Product-specific applications unique to the super-wide format print space, such as fleet and vehicle wraps, point-of-purchase signage and outdoor graphics. The 2016 release of the Quick Print Suite includes a cloud-based platform for in-plant and quick print operations to reduce the customer deployment and maintenance burden. The 2016 release of the Packaging Suite includes 22 certified workflows that provide unprecedented levels of business and production automation geared toward folding carton, tag and label, and flexible package converting environments. Enhancements integrate Radius software, intelligent estimating and planning with iQuote software, automated planning optimization with Metrix software, and key third party software such as the Esko Automation Engine. The 2016 release of the Enterprise Commercial Print Suite includes improvements in inventory and purchasing, support for Digital StoreFront web-to-print services, stronger customer relationship management tools including the ability to add attachments to forms and expanded reporting capabilities and extended capabilities in dynamic estimating and planning.

The Optitex Collaborate Application was released in early 2017 and is driven by cloud-based textile design technology that enables instant sharing among pattern makers, designers, and print teams for faster and more accurate apparel prototyping.

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Our primary software offerings include:

Product Name	Description	User
Business process automation software: Monarch, PSI, Logic, PrintSmith, PrintFlow, Radius, CTI, SmartLinc, Graphisoft, PC Topp, DiMS!, PrintStream, Prism, IQuote, Technique, Shuttleworth, Lector, GamSys, and Alphagraph	Collect, organize, and present business process information to improve productivity and customer service while reducing costs.	Commercial, publishing, digital, in-plant, print for pay, large format, direct mail, and specialty printing, shipping and logistics, and packaging companies.
Cloud-based business process automation software: Pace	Software modules for estimating, scheduling, print production, accounting, e-commerce, and web-to-print.	Commercial, digital, display graphics, in- plant, and print for pay printing companies. Government printing operations.
Imposition solutions for estimating, planning, and integration into prepress and postpress solutions: Metrix	Imposition solutions for a broad range of product types and sizes and printing processes.	Customers desiring a solution to bridge the gap between business process automation and prepress that are not served by the Fiery and Fiery XF imposition tools.
Cloud-based order entry and order management systems, along with cross-media marketing: Digital StoreFront, DirectSmile, PrinterSite, and PrintSmith Site	Procurement applications for print buyers, print producers, and marketing professionals to facilitate cloud-based collaboration across the supply chain.	Commercial, publishing, digital, in-plant, print for pay, large format, and specialty printers.
Optitex Textile 3D Design Software— O/Dev Pattern Marking Suite, O/Dev 3D Sampling Suite, O/Pro Marker Making Suite, O/Pro Cutting Room Optimization Suite, and O/Sel Digital Collection	Development and production software that builds patterns, visualize in 3D, streamlines marker making and cut order workflow, and cloud-based applications for show case design	Leading fashion brands, fashion retailers, and manufacturers in commercial and apparel industries

Fiery

Our Fiery brand consists of DFEs that transform digital copiers and printers into high performance networked printing devices for the office, commercial, and industrial printing markets. Once networked, Fiery-powered printers and copiers can be shared across workgroups, departments, the enterprise, and the internet to quickly and economically produce high-quality color products. We have direct relationships with several leading printer manufacturers. We work closely together to design, develop, and integrate Fiery DFE and software technology to maximize the capability of each print engine. The printer manufacturers act as distributors and sell Fiery products to end customers through reseller channels. End customer and reseller channel preference for the Fiery DFE and software solutions drives demand for Fiery products through the printer manufacturers.

Fiery products are comprised of (i) stand-alone DFEs connected to digital printers, copiers, and other peripheral devices, (ii) embedded DFEs and design-licensed solutions used in digital copiers and multi-functional devices, (iii) optional software integrated into our DFE solutions such as Fiery Central and Graphics Arts Package, (iv) Fiery Self Serve, our self-service and payment solution, (v) PrintMe, our mobile printing application, and (vi) stand-alone software-based solutions such as our proofing and scanning solutions.

Fiery DFEs. The Fiery XB DFE was released in 2016 incorporating a scalable high-volume blade server technology for high speed inkjet presses processing at 100 meters per minute of 1.8 meter wide corrugated

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boards or in excess of 13,000 sheets per hour, which is the equivalent of approximately 173 cut-sheet toner engines printing simultaneously at 100 pages per minute. The Fiery FS200 Pro DFE was released in 2015 incorporating higher speed processing, expanded color offerings, shop automation, and connectivity. The Fiery FS150 Pro DFE was released in 2014. It simultaneously processes a print job on four processor cores allowing print jobs to be processed up to 55% faster.

Fiery XF is a DFE and color management workflow for super-wide and wide format printing and proofing. Fiery XF 6.0 was released in 2014 featuring real WYSIWYG tiling preview, the Fiery Dynamic Smoothing function, and the Fogra Process Standard Digital. The Fogra Graphic Technology Research Association establishes process standards for the digital printing industry. Fiery proServer is a DFE and color management workflow for the super-wide format and ceramic tile decoration digital inkjet printer market.

Fiery proServer 7.0 was released in 2015 and processes complex vector data up to seven times faster than its predecessor. Fiery proServer 6.0 was released in 2014 featuring Fiery Accelerated System Technology, which processes Adobe PDF files up to seven times faster than previous versions of proServer. Although designed for our super-wide and wide format, Fiery proServer is compatible with 540 super-wide, wide format, and ceramic printers from numerous major manufacturers.

Software Solutions. Fiery Command WorkStation 5.6 job management interface software was released in 2014 featuring automated job presets, faster job searching capabilities, new user interface, advanced tools for printing multi-bank and bleed-edge tabbed documents, and an integrated analytics tool, Fiery Dashboard.

Fiery Workflow Suite is an integrated set of Fiery products, including Fiery Central, Fiery JobFlow, and Fiery JobMaster, among others, to deliver a fully integrated workflow from job submission and business management to scheduling, preparation, and production.

Fiery Navigator is a cloud-based digital printing business intelligence tool for digital production presses that was launched in 2016. Fiery Navigator provides printers with more insight into their production data to optimize resource allocation, ensure compliance with operating procedures, and make equipment decisions by capturing key operational data points and displaying production analytics in a comprehensive, customizable dashboard.

Fiery Self Serve. is a leading provider of self-service and payment solutions that allows service providers to offer access to business machines including printers, copiers, computers/internet access, fax machines, and photo printing kiosks from mobile phones, iPad ^® , USB drives, and cloud accounts such as Google Drive TM Dropbox. The M500 is a flexible and scalable system, which addresses demands for printing from any mobile device as well as from popular cloud storage services, and accepts credit cards, campus cards, and cash cards at the device, thereby eliminating the need for coin-operated machines. In 2014, we announced integration with campus identification card systems and campus card solutions such as CBORD, Odyssey, and Blackboard. We also announced the release of Self-Serve AdminCentral, which is a cloud-based management system for the M500 product.

PrintMe. PrintMe Connect enables direct printing from Apple^® , iPad^® , iPhone^® , iPod touch^® iOS 10-enabled, and other mobile devices to Fiery-driven printers or multi-function peripherals. PrintMe was the world’s first cloud-based printing platform that enabled mobile workers to upload their documents to the PrintMe cloud and securely print them on any PrintMe-enabled printer.

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Our DFE platforms, primary printer manufacturer customers, and end user environments are as follows:

Platform	Printer Manufacturers or Customers	User Environments
Fiery external DFEs	Canon, Fuji Xerox, Konica Minolta, Kyocera Document Solutions, Landa, Ricoh, RISO, Sharp, Toshiba, Xerox	Print for pay, corporate reprographic departments, graphic arts, advertising agencies, and transactional & commercial printers
Fiery embedded DFEs and design-licensed solutions	Canon, Epson, Fuji Xerox, Intec, Kodak, Konica Minolta, Kyocera Document Solutions, Oki Data, Ricoh, Sharp, Toshiba, Xerox	Office, print for pay, and quick turnaround printers
Fiery Central, MicroPress Fiery Navigator Fiery Workflow Suite	Canon, Konica Minolta, Kyocera Document Solutions, Ricoh, Sharp, Xerox	Corporate reprographic departments, commercial printers, and production workflow solutions
Fiery Self Serve	Canon, FedEx Office, Konica Minolta, Ricoh, Staples, Xerox	ExpressPay self-service and payment solutions for retail copy and print stores, hotel business centers, college campuses, and convention centers
PrintMe	Canon, Channel Build Solutions, individual hotels, smaller channel resellers	Mobile printing from any mobile device to any network printer
Production Inkjet and Proofing software: ColorProof XF, Pro, Fiery XF, Fiery proServer,	Digital color proofing and inkjet production print solutions offering fast, flexible workflow, power, and expandability	Digital, commercial and hybrid printers, prepress providers, publishers, creative agencies and photographers, ceramic tile, decoration, and super-wide & wide format print providers

Sales, Marketing, and Distribution

We have assembled, internally and through acquisitions, an experienced team of technical support, sales, and marketing personnel with backgrounds in color reproduction, digital pre-press, image processing, business process automation systems, networking, and software and hardware engineering, as well as market knowledge of enterprise printing, graphic arts, fulfillment systems, cross-media marketing, imposition solutions, textile printing, fashion design, ceramic tile decoration, and commercial printing. We expect to continue to expand the scope and sophistication of our products and gain access to new markets and channels of distribution by applying our expertise in these areas.

Industrial Inkjet

Our Industrial Inkjet products are sold primarily through our direct sales force augmented by some select distributors. Any interruption of either of these distribution channels could negatively impact us in the future. See Item 1A: Risk Factors—We rely on our distribution channels to ensure sales growth.

Textile digital printing is an alternative to either analog printing or single color (dyed) garments. Widespread adoption of digital textile printing depends on the willingness and ability of businesses in the printed textile industry to replace their existing analog printing systems and single color (dyed) garments with digital printing systems.

The adoption of digital textile printing is dependent to some extent on the growth of “fast fashion,” and has also benefitted from sports apparel with shorter production runs, closer geographic proximity to end-use markets, and

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environmental awareness. A key element of our inkjet textile printing growth strategy is to market digital inkjet printing systems to contract printers that serve major textile brand owners and fashion designers.

The ceramic tile industry has undergone a shift from southern Europe (e.g., Spain and Italy) to the emerging markets of China, India, Brazil, and Indonesia. As a result, we operate a Cretaprint sales and support center in Foshan, Guangdong, China, in addition to our facilities in Spain. Foshan is home to the largest concentration of ceramic tile manufacturers in China.

We promote our Industrial Inkjet products through public relations, direct mail, advertising, promotional material, trade shows, and ongoing customer communication programs. The majority of sales leads for our inkjet printer sales are generated from trade shows. There were approximately 1,500 attendees from 25 countries at our 2016 EFI Connect trade show, which generates leads for the Industrial Inkjet and Productivity Software operating segments and generates end user demand for the Fiery segment. We also participated in Drupa, which is the largest printing equipment trade show in the world and is held once every four years. Drupa was attended by over 260,000 attendees from more than 180 countries in 2016.

We have established a new e-commerce platform specifically for fabric soft signage production operations. The soft signage on-line ordering technology offers a new level of turnkey flexibility for increasingly popular fabric graphics applications, including outdoor, trade show, and point-of-purchase displays.

In 2016, we entered into an agreement with a third party that facilitates our European customers’ equipment financing. The agreement will provide customers with new leasing opportunities for EFI’s industrial digital inkjet printers in many European countries.

Productivity Software

Our enterprise resource planning and collaborative supply chain business process automation software solutions within our Productivity Software portfolio are primarily sold directly to end users by our direct sales force. An additional distribution channel for our Productivity Software products is through sales to a mix of distribution channels consisting of authorized distributors, dealers, and resellers who in turn sell the software solutions to end users either stand-alone or bundled with other solutions they offer.

We have distribution agreements with some customers, including Canon, Konica Minolta, Ricoh, Xerox, Esko, and Veritiv (formerly xpedx). There are a number of small private resellers of our business process automation software in different geographic regions throughout the world where a direct sales force is not cost-effective.

We sell Optitex directly to the leading fashion brands and manufacturers through a direct sales force and distribution channels consisting of authorized distributors, dealers, and resellers.

Fiery

The primary distribution channel for our Fiery products is through our direct relationships with several leading printer manufacturers. We work closely together to design, develop, and integrate Fiery DFE and software technology to maximize the capability of each print engine. The printer manufacturers act as distributors and sell Fiery products to end customers through reseller channels. End customer and reseller channel preference for our Fiery DFE and software solutions drives demand for Fiery products through the printer manufacturers.

Although end customer and reseller channel preference for Fiery products drives demand, most Fiery revenue relies on these significant printer manufacturers/distributors to integrate Fiery technology into the design and development of their print engine as described above. See Item 1A: Risk Factors—We do not typically have long-term purchase commitments with the printer manufacturer customers that purchase our Fiery DFE and software solutions. They have in the past reduced or ceased, and could at any time in the future reduce or cease, to purchase products from us, thereby harming our operating results and business.

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Our relationships with the leading printer and copier industry companies are one of our most important assets. We have established relationships with leading printer and copier industry companies, including Canon, Seiko Epson, Fuji Xerox, Kodak, Konica Minolta, Kyocera Document Solutions, Landa, OKI Data, Ricoh, Sharp, Toshiba, and Xerox. These relationships are based on business relationships that have been established over time. Our agreements generally do not require them to make any future purchases from us as of December 31, 2016. They are generally free to purchase and offer products from our competitors, or build their own products for sale to the end customer, or cease purchasing our products at any time, for any reason, or no reason.

Fiery Self Serve is our self-service and payment solution that is sold to Canon, FedEx Office, Konica Minolta, Ricoh, Staples,, and Xerox. Fiery Self Serve is also marketed to college campuses and libraries.

Our proofing products are sold primarily to authorized distributors, dealers, and resellers who in turn sell the solutions to end users either stand-alone or bundled with other solutions they offer. Primary customers with whom we have established distribution agreements include Canon, Xerox, and Heidelberg. There can be no assurance that we will continue to successfully distribute our products through these channels.

Growth and Expansion Strategies

The growth and expansion of our revenue will be derived from (i) product innovation through internal development efforts or business acquisition, (ii) increasing market coverage through internal efforts or business acquisition, (iii) expanding the addressable market, and (iv) establishing enterprise coherence and leveraging industry standardization.

Product Innovation. We achieve product innovation through internal research and development efforts, as well as by acquiring businesses with technology that is synergistic with our product lines and may be attractive to our customers. We expect to expand and improve our offerings of new generations of Industrial Inkjet products, including super-wide and wide format, textile, label and packaging, and ceramic tile decoration industrial digital inkjet printers. We expect to expand and improve our Productivity Software offerings, including new product lines related to digital printing, graphic arts, fulfillment systems, cross-media marketing, image personalization, workflow, packaging, 3D textile design, and print management.

We have established relationships with many leading distribution companies in the graphic arts and commercial print industries such as Nazdar, 3M, and Veritiv, as well as significant printer manufacturing companies including Xerox, Ricoh, Canon, and Konica Minolta. We have also established global relationships with many of the leading print providers, such as R.R. Donnelley, Donnelley Financial Solutions, FedEx Office, and Staples. These direct sales relationships, along with dealer arrangements, are important for our understanding of the end markets for our products and serve as a source of future product development ideas. In many cases, our products are customized for the needs of large customers, yet maintain the common intuitive interfaces that we are known for around the world.

The development of our Productivity Suite also provides tools to facilitate customer revenue growth, efficient scheduling, and optimization of processes, equipment, and personnel. Customers are provided the financial and technical flexibility to deploy locally within their business or to be hosted in the cloud.

Increasing Market Coverage. We are increasing our market coverage through penetration of our sales and distribution networks, expansion into emerging markets in China, India, Latin America and Asia Pacific (“APAC”), and acquisitions that are synergistic with our other businesses such as the Rialco and Optitex acquisitions.

Expanding the Addressable Market. We are expanding our addressable market by extending into new markets within each of our operating segments such as textile digital inkjet printing, textile 3D design, ceramic tile decoration, thermoplastic pre-decoration, image personalization, imposition solutions, various cloud-based

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software solutions, self-service and payment solutions, and mobile printing. Further growth in the addressable markets for Industrial Inkjet, Productivity Software, and Fiery has been driven by our development of an integrated VUTEk / Fiery / Productivity Software production workflow.

Establish Enterprise Coherence and Leverage Industry Standardization. Our goal is to offer best of breed solutions that are interoperable and conform to open standards, which will allow customers to configure the most efficient solution for their business by establishing enterprise coherence and leveraging industry standardization.

We establish coherence across our product lines by designing products and platforms that provide a consistent “look and feel” to the end user. Cross-product coherence creates higher productivity levels as a result of shortened learning curves. The integrated coherence that end users can achieve using our products for all of their digital printing and imaging needs leads to a lower total cost of ownership. Open architecture utilizing industry-established standards to provide interoperability across a range of digital printing devices and software applications ultimately provides end users with more choice and flexibility in their selection of products. For example, integration between our cloud-based Digital StoreFront application, our Pace business process automation application, and our Fiery XF Production Color RIP including integration to our Fiery or VUTEk product lines, is achieved by leveraging the industry standard Job Definition Format. Our Productivity Suite has taken this integration further through end-to-end automation including certified workflows and synchronized releases across multiple products consisting of our Packaging Suite, Corrugated Packaging Suite, Enterprise Commercial Print Suite, Publication Print Suite, Mid-market Print Suite, Quick Print Suite, and Value Added Products.

Recent Business Acquisitions. We achieve product innovation through internal research and development efforts, as well as by acquiring businesses with technology that is synergistic with our product lines and may be attractive to our customers. We also acquire businesses to expand our market coverage and customer base. The impact of our business acquisitions on product innovation, market coverage, and addressable market during 2016, 2015, and 2014 is summarized as follows:

Year	Acquired Business	Acquired Product Line or Customer Base
2016	Rialco Limited (“Rialco”)	Dye powders and color products for digital printing and industrial manufacturing
	Optitex Ltd. (“Optitex”)	Integrated 3D CAD software
2015	Reggiani Macchine SpA (“Reggiani”)	Textile digital inkjet printers
	Matan Digital Printers (2001) Ltd. (“Matan”)	Super-wide format digital inkjet printers
	Corrugated Technologies, Inc. (“CTI”)	Corrugated packaging software
	Shuttleworth Business Systems Limited and CDM Solutions Limited (collectively, “Shuttleworth”)	European customer base
2014	SmartLinc, Inc. (“SmartLinc”)	Shipping and logistics automation software
	Rhapso S.A. (“Rhapso”)	French customer base and corrugated packaging software
	DirectSmile GmbH (“DirectSmile”)	Image personalization, cross media marketing, variable data printing
	DiMS! organizing print BV (“DIMS”)	Multilingual, and multi-national print and packaging companies with a large European installed base

We will continue to be acquisitive in the future in an opportunistic way supporting our product innovation, market coverage, and total addressable market expansion strategy.

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Backlog

Although we obtain firm purchase orders from our significant printer manufacturer customers in our Fiery operating segment, these customers typically do not issue such purchase orders until 30 to 90 days before shipment. The non-linear nature of our Industrial Inkjet and Productivity Software operating segments results in customer contracts and purchase orders that are not shipped at the end of the year, which are not material and are not a meaningful indicator of future business prospects.

Significant Relationships

We have established and continue to build and expand relationships with the leading printer manufacturers and distributors of digital printing technology to benefit from their products, distribution channels, and marketing resources. Our customers include domestic and international manufacturers, distributors, and sellers of digital copiers. We work closely with the leading printer manufacturers to develop solutions that incorporate leading technology and work optimally in conjunction with their products. The top revenue-generating printer manufacturers, in alphabetical order, that we sold products to in 2016 were Canon, Seiko Epson, Fuji Xerox, Konica Minolta, Kyocera Document Solutions, Landa, OKI Data, Ricoh, RISO Global Network, Sharp, Toshiba, and Xerox. Because sales of our printer and copier-related products constitute a significant portion of our Fiery revenue and there are a limited number of printer manufacturers producing copiers and printers in sufficient volume to be attractive customers for us, we expect to continue to depend on a relatively small number of printer manufacturers for a significant portion of our revenue in future periods. Revenue from the leading printer manufacturers was 28%, 33%, and 33% during 2016, 2015, and 2014, respectively. Although end customer and reseller channel preference for Fiery products drives demand, most Fiery revenue relies on the leading printer manufacturer / distributors to integrate Fiery technology into the design and development of their print engines. Accordingly, if we experience reduced sales or lose an important printer manufacturing customer, we will have difficulty replacing the revenue with sales to new or existing customers.

We customarily enter into development and distribution agreements with our significant printer manufacturer customers. These agreements can be terminated under a range of circumstances and often on relatively short notice. The circumstances under which an agreement can be terminated vary from agreement to agreement and there can be no assurance that these significant printer manufacturers will continue to purchase products from us in the future, despite such agreements. Our agreements generally do not commit such customers to make future purchases from us. They could decline to purchase products from us in the future and could purchase and offer products from our competitors, or develop their own products for sale to the end customer. We recognize the importance of, and strive to maintain, our relationships with the leading printer manufacturers. Relationships with these companies are affected by a number of factors including, among others: competition from other suppliers, competition from their own internal development efforts, and changes in general economic, competitive, or market conditions including changes in demand for our products, changes in demand for the printer manufacturers’ products, industry consolidation, or fluctuations in currency exchange rates. There can be no assurance that we will continue to maintain or build the relationships we have developed to date. See Item 1A: Risk Factors—We do not typically have long-term purchase commitments with the printer manufacturer customers that purchase our Fiery DFE and software solutions. They have in the past reduced or ceased, and could at any time in the future reduce or cease, to purchase products from us, thereby harming our operating results and business.

We have a continuing relationship pursuant to a license agreement with Adobe Systems, Inc. (“Adobe”). We license PostScript^® software from Adobe for use in many of our Fiery solutions under the OEM Distribution and License Agreement entered into in September 2005, as amended from time to time. Under our agreement with Adobe, we have a non-exclusive, non-transferable license to use the Adobe deliverables (including any software, development tools, utilities, software development kits, fonts, drivers, documentation, or related materials). The scope of additional licensing terms varies depending on the type of Adobe deliverable. Our current agreement with Adobe was renewed on April 1, 2013 through March 31, 2018. The agreement can be terminated by either

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party upon 120 days prior written notice. All royalties due to Adobe under the agreement are payable within 45 days after the end of each calendar quarter.

Each Fiery solution requires page description language software provided by Adobe, which is a leader in providing page description software. Adobe’s PostScript^® software is widely used to manage the geometry, shape, and typography of hard copy documents. Adobe can terminate our current PostScript^® software license agreement without cause. Although to date we have successfully obtained licenses to use Adobe’s PostScript^® software when required, Adobe is not required to, and we cannot be certain that Adobe will, grant future licenses to Adobe PostScript^® software on reasonable terms, in a timely manner, or at all. In addition, to obtain licenses from Adobe, Adobe requires that we obtain quality assurance approvals from them for our products that use Adobe software. If Adobe does not grant us such licenses or approvals, if the Adobe licenses are terminated, or if our relationship with Adobe is otherwise materially impaired, we would likely be unable to sell products that incorporate Adobe PostScript^® software. If that occurred, we would have to license, acquire, develop, or re-establish our own competing software as a viable alternative for Adobe PostScript ^® software and our financial condition and results of operations could be significantly harmed for a period of time. See Item 1A: Risk Factors—We license software used in most of our Fiery products and certain Productivity Software products from Adobe and the loss of these licenses would prevent shipment of these products.

Our industrial inkjet printers require inkjet print heads that are manufactured by a limited number of suppliers. If we experience difficulty obtaining print heads, our inkjet printer production would be limited. In addition, we manufacture UV curable and ceramic digital ink for use in our printers and rely on a limited number of suppliers for certain pigments used in our ink. Our ink sales would decline significantly if we were unable to obtain the pigments when needed. See Item 1A: Risk Factors—We depend on a limited group of suppliers for key components in our products. The loss of any of these suppliers, the inability of any of these suppliers to meet our requirements, or delays or shortages of supply of these components could adversely affect our business.

Human Resources

As of December 31, 2016, we employed 3,235 full time employees. Approximately 950 were in sales and marketing (including 398 in customer service), 418 were in general and administrative, 658 were in manufacturing, and 1,209 were in research and development. Of the total number of employees, 1,531 employees were located in the Americas (primarily the U.S. and Brazil) and 1,704 were located outside of the Americas.

Research and Development

Research and development expense was $151.2, $141.4, and $134.7 million for the years ended December 31, 2016, 2015, and 2014, respectively. As of December 31, 2016, 1,209 of our 3,235 full-time employees were involved in research and development. We believe that development of new products and enhancement of existing products are essential to our continued success. We intend to continue to devote substantial resources to research and new product development. We expect to continue to make significant expenditures to support research and development in the foreseeable future.

New platforms and ink formulations will continue to be developed for Industrial Inkjet print technologies and ceramic tile decoration as the industry accelerates its transition from analog to digital technology, from solvent-based printing to UV curable ink printing, and adopts digital textile printing due to the growth of “fast fashion.” We are developing new software applications designed to maximize work flow efficiencies and meet the needs of graphic arts and commercial print professions, including business process automation, web-to-print, e-commerce, cross-media marketing, imposition, proofing solutions, and 3D textile CAD applications. We are developing products to support additional printing devices including high-end color copiers and multi-functional devices. We have research and development sites in 15 U.S. locations, as well as in India, Europe, Israel, the United Kingdom (“U.K.”), Brazil, Canada, New Zealand, China, Australia, and Japan. Substantial additional expense is required to complete and bring to market products that are currently under development.

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Manufacturing

We are leveraging efficiencies in our worldwide digital inkjet printer manufacturing operations by centralizing super wide-format textile digital inkjet printer production in Italy and transferring production of super wide-format roll-to-roll digital inkjet printers to Israel to leverage the lower cost platform that Matan provides.

We utilize subcontractors to manufacture our Fiery products and, to a lesser extent, our super-wide and wide format industrial digital inkjet printers. These subcontractors work closely with us to promote low cost and high quality while manufacturing our products. Subcontractors purchase components needed for our products from third parties. We are dependent on the ability of our subcontractors to produce the products we sell. Although we supervise our subcontractors, there can be no assurance that such subcontractors will perform efficiently or effectively. We have outsourced our Fiery production with Avnet, Inc. (“Avnet”), label and packaging digital inkjet printer production to Roberts Tool Company (“Roberts”), and formulation of textile ink to third party branded suppliers, with the exception of reactive dye ink.

Should our subcontractors experience inability or unwillingness to manufacture or deliver our products, then our business, financial condition, and operations could be harmed. Since we generally do not maintain long-term agreements with our subcontractors and such agreements may be terminated with relatively short notice, any of our subcontractors could terminate their relationship with us and/or enter into agreements with our competitors that might restrict or prohibit them from manufacturing our products or could otherwise lead to an inability or unwillingness to fill our orders in a timely manner or at all. See Item 1A: Risk Factors—We are dependent on a limited number of subcontractors, with whom we do not have long-term contracts, to manufacture and deliver products to our customers. The loss of any of these subcontractors could adversely affect our business.

Our VUTEk super-wide format industrial digital inkjet printers are primarily manufactured in a single location in our Meredith, New Hampshire facility. In 2016, we transferred VUTEk roll-to-roll printer production to our Rosh Ha’Ayin, Israel, facility, our FabriVu textile digital inkjet printer production to our Bergamo, Italy, facility, and certain wide format industrial digital inkjet printers to our Castellon, Spain, facility.

We have encountered difficulties in hiring and retaining adequate skilled labor and management because Meredith is not located in a major metropolitan area. In 2016, we entered into a six-year lease with Bank of Tokyo—Mitsubishi UFJ Leasing & Finance LLC (“BTMU”) whereby a 225,000 square foot manufacturing and warehouse facility is under construction in Manchester, New Hampshire, related to our super-wide and wide format industrial digital inkjet printer business in the Industrial Inkjet operating segment, which is scheduled to be completed in early 2018. The new manufacturing center will allow consolidation of operations into a single facility and include research & development, manufacturing, warehousing, training, and service for super-wide and wide format printers, along with worldwide sales and marketing management for our broader portfolio of industrial digital inkjet printers and presses.

Our Matan super-wide format industrial digital inkjet printers are manufactured in a single location in our Rosh Ha’Ayin, Israel facility. Our Reggiani textile industrial digital inkjet printers are manufactured in a single location in our Bergamo, Italy facility. Our Cretaprint ceramic tile decoration digital inkjet printers are manufactured in a single location in our Castellon, Spain facility. Our ceramic digital ink that is used in our ceramic tile decoration digital inkjet printers is formulated in a single location in our Ypsilanti, Michigan facility. Our reactive dye ink that is used in our textile digital inkjet printers is formulated in a single location in our Bedford, U.K., facility.

Most components used to manufacture our printers and ink are available from multiple suppliers, except for inkjet print heads, branded textile ink, and certain key ingredients (primarily pigments and photoinitiators) for our digital UV curable ink. Although typically in low volumes, many key components are sourced from single vendors. If we were unable to obtain the print heads currently used, we would be required to redesign our printers to use different print heads. If we were unable to obtain the branded textile ink or the pigments required for our digital UV curable ink, we would have to qualify other sources, if possible, or reformulate and test the new ink

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formulations. In our Industrial Inkjet facilities, we use hazardous materials to formulate digital UV curable and ceramic digital ink, as well as store internally formulated and third party ink. The storage, use, and disposal of those materials must meet the requirements of various environmental regulations.

See Item 1A: Risk Factors—If we are not able to hire and retain skilled employees, we may not be able to develop and manufacture products, or meet demand for our products, in a timely fashion; We manufacture our super-wide format industrial digital inkjet printers and formulate our ceramic digital ink primarily in single locations. Any significant interruption in the manufacturing process at these facilities could adversely affect our business; We depend on a limited group of suppliers for key components in our products. The loss of any of these suppliers, the inability of any of these suppliers to meet our requirements, or delays or shortages of supply of these components, could adversely affect our business; and We may be subject to environmental-related liabilities due to our use of hazardous materials and solvents.

Significant components necessary for manufacturing our products are obtained from a sole supplier or a limited group of suppliers. We depend largely on the following sole and limited source suppliers for our components and manufacturing services:

Supplier	Components
Intel	Central processing units (“CPUs”); chip sets
Toshiba	Application-specific integrated circuits (“ASIC”) & inkjet print heads
Open Silicon	ASICs
Altera	ASICs & programmable devices
Tundra	Chip sets
Avnet	Contract manufacturing (Fiery)
Controls for Automation Third party branded	Inkjet RFID (radio frequency identification) Textile ink
(DuPont, Huntsman, Sensient)
Ink pigment suppliers	UV curable ink pigments and photoinitiators
Columbia Tech	Inkjet sub-assemblies
Schneider Electric	Inkjet electrical sub-assemblies
Roberts	Contract manufacturing (digital inkjet printers)
SEI, S.p.A	Laser finishing and winders
Phoseon	LED lamps
Shenzhen Runtianzhi Tech	Inkjet sub-assemblies
Seiko	Inkjet print heads
Toshiba Tek	Inkjet print heads
Xaar	Inkjet print heads
Ricoh	Inkjet print heads
Kyocera Mita	Inkjet print heads
Progress Software	Monarch and Radius operating system
Printable	Digital StoreFront modular offering

We generally do not maintain long-term agreements with our component suppliers. We primarily conduct business with such suppliers largely on a purchase order basis. If any of our sole or limited source suppliers were unwilling or unable to supply us with the components for which we rely on them, we may be unable to continue manufacturing our products utilizing such components.

The absence of agreements with many of our suppliers also subjects us to pricing fluctuations, which is a factor we believe is partially offset by the desire of our suppliers to sell a high quantity of components. Many of our components are similar to those used in personal computers; consequently, the demand and price fluctuations of personal computer components could affect our component costs. In the event of unanticipated volatility in

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demand for our products, we may be unable to manufacture certain products in quantities sufficient to meet end user demand or we may hold excess quantities of inventory due to their long lead times. We maintain an inventory of components for which we are dependent on sole or limited source suppliers and of components with prices that fluctuate significantly. We cannot ensure that at any given time we will have sufficient inventory to enable us to meet demand for our products, which would harm our financial results. See Item 1A: Risk Factors—We depend on a limited group of suppliers for key components in our products. The loss of any of these suppliers, the inability of any of these suppliers to meet our requirements, or delays or shortages of supply of these components could adversely affect our business.

Competition

Competition in our markets is significant and involves rapidly changing technologies and frequent new product introductions. To maintain and improve our competitive position, we must continue to develop and introduce new products and features on a timely and cost effective basis to keep pace with the evolving needs of our customers. We believe the principal competitive factor affecting our markets is the market acceptance rates for new printing technology.

Industrial Inkjet

Our super-wide and wide format industrial digital inkjet printers compete with printers produced by Agfa, Domino, Durst, Canon, Hewlett-Packard (“HP”), Inca, Mimaki, Roland, and Mutoh throughout most of the world. There are Chinese and Korean printer manufacturers in the marketplace, but their products are typically sold in their domestic markets and are not perceived as viable alternatives in most other markets. Our UV curable ink is sold to users of our UV industrial inkjet printers, which have advanced quality control systems to ensure that correct color and non-expired ink is used to prevent damage to the printer. This results in most ink used in our printers being sold by us. While third party ink is available, its use may compromise the printer’s quality control system and also voids most provisions of our printer warranty and service contracts.

Our Reggiani industrial digital inkjet textile printers compete with Dover, Durst, Mimaki, Roland, Epson, Konica Minolta, Robustelli, Atexco, Shenzhen Homer Textile, Kornit, Brother Industries, and Digital Graphics. Competitive digital inkjet textile printers are manufactured in Italy, Japan, China, and smaller emerging markets such as Indonesia. Key competitors driving digitalization of the textile printer market include Dover, Kornit, and Brother Industries. Reggiani also competes with other digital inkjet textile printing technologies including pre-washing and post-washing printing techniques.

Our Cretaprint ceramic tile decoration digital inkjet printer competes with ceramic tile decoration printers manufactured in Spain (KERAjet), Austria (Durst), Italy (Technoferrari, Projecta, Intesa, and System), China (Flora, Hope, Meijia, and Teckwin), and smaller emerging competition in other markets such as Indonesia. The ceramic tile industry is experiencing an ongoing relocation from southern Europe to the emerging markets of China, India, Brazil, and Indonesia. Competition in the Chinese market consists of small Chinese ceramic tile decoration digital inkjet printers and European manufacturers that are reducing prices to gain market share. In addition to our facility in Spain, we operate a Cretaprint sales and support center in Foshan, Guangdong, China, which is home to the largest concentration of ceramic tile manufacturers in China.

Productivity Software

Our Productivity Software operating segment, which includes our business process automation, cloud-based order entry and order management systems, cross media marketing, and imposition solution systems faces competition from software application vendors that specifically target the printing industry. These vendors are typically small, privately-owned companies. We also face competition from larger vendors that currently offer, or are seeking to develop, business process automation printing products including HP, Epicor, and SAP. We face competition from Oracle, SAP, Kiwiplan, and Heidelberg in the packaging software market.

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Our Optitex 3D CAD software competes with Lectra, Assyst, CLO, Browzwear, and Gerber. Optitex provides 2D CAD design and 3D CAD visualization in the same application. Therefore, the CAD information and the 3D information are tightly integrated. Furthermore, the incremental learning curve from using 2D to using 3D is minimal.

Fiery

The principal competitive factors affecting the market for our Fiery solutions include customer service and support, product reputation, quality, performance, price, and product features such as functionality, scalability, ease of use, and ability to interface with products produced by the significant printer manufacturers.

Although we have direct relationships with each of the leading printer manufacturers and work closely with them to integrate Fiery DFE and software technology into the design and development of their print engines to maximize their quality and capability, our primary competitors for stand-alone color DFEs, embedded DFEs, and design-licensed solutions are these same leading printer manufacturing companies. They each maintain substantial investments in research and development. Some of this investment is targeted at integrating products and technology that we have designed and some of this investment is targeted at developing products and technology that compete with our Fiery brand. We are the largest third party DFE developer, although our market compared with DFEs developed internally by the leading printer manufacturers is small. We believe that our advantages include continuously advancing technology, short time-to-market, brand recognition, end user loyalty, sizable installed base, number of products supported, price driven by lower development costs, and market knowledge. We intend to continue to develop new DFEs with capabilities that meet the changing needs of the printer manufacturers’ product development roadmaps. Although we do not directly control the distribution channels, we provide a variety of features as well as unique “look and feel” to the printer manufacturers’ products to differentiate our customers’ products from those of their competitors. Ultimately, we believe that end customer and reseller channel preference for the Fiery DFE and software solutions drives demand for Fiery products through the printer manufacturers.

Intellectual Property Rights

We rely on a combination of patent, copyright, trademark, and trade secret laws; non-disclosure agreements; and other contractual provisions to establish, maintain, and protect our intellectual property rights. Although we believe that our intellectual property rights are important to our business, no single patent, copyright, trademark, or trade secret is solely responsible for the development and manufacturing of our products.

We are currently pursuing patent applications in the U.S. and certain foreign jurisdictions to protect various inventions. Over time, we have accumulated a portfolio of patents issued in these jurisdictions. We own or have rights to the copyrights to the software code in our products and the rights to the trademarks under which our products are marketed. We have registered certain trademarks in the U.S. and certain foreign jurisdictions and will continue to evaluate the registration of additional trademarks as appropriate.

Certain of our products include intellectual property licensed from our customers. We have also granted and may continue to grant licenses to our intellectual property, when and as we deem appropriate. For a discussion of risks relating to our intellectual property, see Item 1A: Risk Factors—We may be unable to adequately protect our proprietary information and may incur expenses to defend our proprietary information.

Financial Information about Foreign and Domestic Operations and Export Sales

See Note 14—Segment Information, Geographic Regions, and Major Customers and Note 11—Income Taxes of the Notes to Consolidated Financial Statements. See also Item 1A: Risk Factors—We face risks from our international operations and We face risks from currency fluctuations.

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Item 1A: Risk Factors

The market for our super-wide and wide format industrial digital inkjet printers is extremely competitive.

Our super-wide and wide format industrial digital inkjet products compete against several companies that market industrial digital inkjet printing systems based on electrostatic, drop-on-demand, and continuous drop-on-demand inkjet, and other technologies and printers utilizing UV curable ink including Agfa, Domino, Durst, Canon, HP, Inca, Mimaki, Roland, and Mutoh. Certain competitors have greater resources to develop new products and technologies and market those products, as well as acquire or develop critical components at lower costs, which would provide them with a competitive advantage. They could also exert downward pressure on product pricing to gain market share.

Reggiani industrial digital inkjet textile printers address the full scope of advanced textile printing with versatile printers suitable for water-based dispersed, acid, pigment, and reactive dye printing inks. Our Reggiani textile printers compete with Dover, Durst, Mimaki, Roland, Epson, Konica Minolta, Robustelli, Atexco, Shenzhen Homer Textile, Kornit, Brother Industries, and Digital Graphics. Competitive digital inkjet textile printers are manufactured in Italy, Japan, China, and smaller emerging markets such as Indonesia. Reggiani also competes with other digital inkjet textile printing technologies including pre-washing and post-washing printing techniques.

The local competitors in the Chinese and Korean markets are developing, manufacturing, and selling inexpensive printers mainly to the local markets. Our ability to compete depends on factors both within and outside of our control, including the price, performance, and acceptance of our current printers and any products we develop in the future.

We also face competition from existing conventional super-wide and wide format digital inkjet printing methods, including screen printing and offset printing. Our competitors could develop new products, with existing or new technology, that could be more competitive in our market than our printers.

The market for our ceramic tile decoration digital inkjet printers is very competitive.

Our Cretaprint ceramic tile decoration digital inkjet printer competes with ceramic tile decoration printers manufactured in Spain, Austria, Italy, Brazil, China, and smaller emerging competitors in other markets such as Indonesia. The ceramic tile industry is experiencing an ongoing relocation from southern Europe to the emerging markets of China, India, Brazil, and Indonesia. Competition in the Chinese market consists of small Chinese ceramic tile decoration digital inkjet printers and European manufacturers that are reducing prices to gain market share. In addition to our facility in Spain, we operate a Cretaprint sales and support center in Foshan, Guangdong, China, which is home to the largest concentration of ceramic tile manufacturers in China.

Most ceramic tile decoration digital inkjet printer manufacturers have a background in analog equipment for ceramic tile plants and tile manufacturing facilities, while Durst and Flora entered the ceramic tile decoration market from the digital graphic arts business. Our ceramic tile decoration imaging competitors are a mix of large, medium, and small ceramic tile decoration printer manufacturers, which are primarily privately-owned. Our competitors could develop new products, with existing or new technology, that could be more competitive in our market than our ceramic tile decoration digital inkjet printers.

We face strong competition for printing supplies such as ink.

We compete with independent manufacturers in the ink market consisting of smaller vendors, as well as larger vendors such as DuPont Digital Printing.

Our UV curable ink is sold to users of our super-wide and wide format UV industrial inkjet printers, which have advanced quality control systems to ensure that correct color and non-expired ink is used to prevent damage to

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the printer. This results in most ink used in our super-wide and wide format printers being sold by us. While third party ink is available, its use compromises the printer’s quality control system and also voids most provisions of our printer warranty and service contracts. Nevertheless, we cannot guarantee we will be able to remain the principal ink supplier for our printers. We could experience an overall price reduction within the ink market, which would also adversely affect our gross profit.

We sell third party branded textile ink to users of our textile digital inkjet printer. We offer a strong value proposition with our third party branded inks, but cannot guarantee that we will be the primary supplier of textile digital ink to the users of our printers.

Our solvent-based ceramic digital ink is sold to users of our ceramic tile decoration digital inkjet printers. The ceramic ink market is generally an open system for inks and therefore customers may change between suppliers. Although we are focused on developing this recurring revenue stream, we cannot guarantee that we will become the primary supplier of ceramic digital ink to the users of our printers.

If the market for digital textile printing does not develop as we anticipate, we may not be able to grow our inkjet textile printing business.

If the global printed textile industry does not broadly accept digital printing as an alternative to either analog printing or single color (dyed) garments, our revenue may not grow as quickly as expected. Widespread adoption of digital textile printing depends on the willingness and ability of businesses in the printed textile industry to replace their existing analog printing systems and single color (dyed) garments with digital printing systems. The adoption of digital textile printing is dependent to some extent on the growth of “fast fashion.”

A key element of our digital inkjet textile printing growth strategy is to market digital inkjet printing systems to contract printers that serve major textile brand owners and fashion designers. If leading textile brand owners and fashion designers are not convinced of the benefits of digital inkjet textile printing or if there is a significant reduction in the popularity of printed textiles, especially those that are customized or personalized, among the consumers to whom such brand owners and fashion designers cater, or if these businesses decide that digital inkjet printing processes are less reliable, less cost-effective, lower quality, or otherwise less suitable for their commercial needs than analog printing processes and single color (dyed) garments, then the market for digital textile printing may not develop as we anticipate and we may not be able to grow our inkjet textile printing business.

We face strong competition in our Productivity Software operating segment.

Our Productivity Software operating segment, which includes our business process automation, cloud-based order entry and order management, cross media marketing, and imposition solution systems faces competition from software application vendors that specifically target the printing industry. These vendors are typically small, privately-owned companies. We also face competition from larger vendors that currently offer, or are seeking to develop, business process automation printing products including HP, Epicor, and SAP. We face competition from Oracle, SAP, SolarSoft, and Heidelberg in the packaging software market. Our Optitex 3D CAD software competes with Lectra, Assyst, CLO, Browzwear, and Gerber. There can be no assurance that we will continue to advance our technology and products or compete effectively against other companies’ product offerings.

We do not typically have long-term purchase commitments with the printer manufacturer customers that purchase our Fiery DFE and software solutions. They have in the past reduced or ceased, and could at any time in the future reduce or cease, to purchase products from us, thereby harming our operating results and business.

Although end customer and reseller channel preference for Fiery DFE and software solutions drives demand, most Fiery revenue relies on printer manufacturers to integrate Fiery technology into the design and development

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of their print engines. We have established direct relationships with several leading printer manufacturers and work closely with them to design, develop, and integrate Fiery DFE and software technology to maximize the capability of their print engines. These manufacturers act as distributors and sell Fiery products to end customers through reseller channels. A significant portion of our revenue is, and has been, generated by sales of our Fiery DFE and software solutions to a relatively small number of leading printer manufacturers. Our reliance on revenue from the leading printer manufacturers was 28%, 33%, and 33% during 2016, 2015, and 2014, respectively. Because sales of our Fiery products constitute a significant portion of our revenue and there are a limited number of printer manufacturers producing printers in sufficient volume to be attractive customers for us, we expect that we will continue to depend on a relatively small number of printer manufacturers for a significant portion of our Fiery revenue in future periods. Accordingly, if we lose or experience reduced sales to one of these printer manufacturer customers, we will have difficulty replacing that revenue with sales to new or existing customers.

With the exception of certain minimum purchase obligations, we typically do not have long-term volume purchase contracts with our significant printer manufacturer customers, including Konica Minolta, Ricoh, and Canon, and they are not obligated to purchase products from us. Accordingly, our printer manufacturer customers could at any time reduce their purchases from us or cease purchasing our products altogether. For example, in 2016, one of our significant printer manufactures purchased less inventory from us and this reduction may continue into 2017, which could impact revenue from our Fiery segment. In the past, these printer manufacturer customers have elected to develop products on their own for sale to end customers, incorporated technologies developed by other companies into their products, and have directly sold third party competitive products, rather than rely solely or partially on our products. We expect that these printer manufacturer customers will continue to make such elections in the future.

Many of the products and technologies we are developing require that we coordinate development, quality testing, marketing, and other tasks with these printer manufacturers. We cannot control their development efforts or the timing of these efforts. We rely on these printer manufacturers to develop new printer and copier solutions, applications, and product enhancements that utilize our Fiery DFE technologies and software solutions in a timely and cost-effective manner. Our success in the DFE industry depends on the ability of these printer manufacturers to utilize our technologies to develop the right solutions with the right features to meet ever changing customer requirements and responding to emerging industry standards and other technological changes.

Because our printer manufacturer customers incorporate our products into products they manufacture and sell, any decline in demand for copiers or laser printers or any other negative developments affecting our major customers or the computer industry in general, including reduced end user demand, would likely harm our results of operations. Certain printer manufacturer customers have experienced serious financial difficulties in the past, which led to a decline in sales of our products. If any significant customers face such difficulties in the future, our operating results could be harmed through, among other things, decreased sales volume, write-off of accounts receivable, and write-off of inventories related to products we have manufactured for these customers’ products.

Entry into new markets or distribution channels could result in higher operating expenses that may not be offset by increased revenue.

We continue to explore opportunities to develop or acquire additional product lines in new markets, such as print management business process automation software, document scanning solutions, textile digital ink, and industrial inkjet printers. We expect to continue to invest funds to develop new markets or distribution channels for these and additional new products and services, which will increase our operating expenses.

We do not know if we will be successful in developing these channels, or whether the market will accept any of our new products or services, or if we will generate sufficient revenue from these activities to offset the additional operating expenses we incur. Even if we are able to introduce new products or services, if customers do not accept these new products or services, or if we are not able to price such products or services competitively, our results of operations will likely be adversely affected.

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Economic uncertainty has negatively affected our business in the past and may negatively affect our business in the future.

Our revenue and profitability depend significantly on the overall demand for information technology products that enable printing of digital data, which in turn depends on a variety of macro- and micro-economic conditions. In addition, revenue growth and profitability in our Industrial Inkjet operating segment depends on demand and spending for advertising and marketing products and programs, which also depends on a variety of macro-and micro-economic conditions.

Uncertainty about current global economic conditions, including Europe, poses a risk as our customers may delay purchases of our products in response to tighter credit, negative financial news, and/or declines in income or asset values. Any financial turmoil affecting the banking system and financial markets and the possibility that financial institutions may consolidate or terminate their activities have resulted in a tightening in the credit market, a low level of liquidity in many financial markets, and extreme volatility in fixed income, credit, currency, and equity markets. There could be a number of follow-on effects from a credit crisis on our business, including insolvency of key suppliers resulting in product delays; inability of customers and distributors to obtain credit to finance purchases of our products and/or customer and distributor insolvencies; increased difficulty in managing inventories; and other financial institutions negatively impacting our treasury operations.

Economic uncertainty is particularly acute in Europe and especially the “southern European” countries (i.e., Spain, Portugal, Italy, and Greece) and Ireland. We have no European sovereign debt investments. Our European debt investments consist of non-sovereign corporate debt securities of $28.0 million, which represents 14% of our corporate debt instruments (9% of our short-term investments) at December 31, 2016. European debt investments are with corporations domiciled in the northern and central European countries of Sweden, Netherlands, Norway, France, Switzerland, and the U.K. We do not have any short-term investments with corporations domiciled in the higher risk “southern European” countries (i.e., Italy, Spain, Greece, and Portugal) or Ireland. We believe that we do not have significant exposure with respect to our money market and corporate debt investments in Europe, although we do have some exposure due to the interdependencies among the European Union countries.

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), which are adequately reserved.

Our business, results of operations and financial condition may be negatively impacted by conditions abroad, including local economies, political environments, fluctuating foreign currencies and shifting regulatory schemes.

A significant amount of our revenue is generated from operations outside the U.S. Approximately $491.7 (50%), $408.9 (46%), and $352.0 (45%) million of revenue for the years ended December 31, 2016, 2015, and 2014, respectively, shipped to locations outside the Americas, primarily to Europe, Middle East, and Africa (“EMEA”) and APAC. We expect that sales outside of the U.S. will continue to represent a significant portion of our total revenue. We maintain significant operations and acquire or manufacture many of our products and/or their components outside the U.S. Our future revenue, costs, and results of operations could be significantly affected by changes in each country’s economic conditions, foreign currency exchange rates relative to the U.S. dollar, political conditions, trade protection measures, licensing requirements, local tax issues, capitalization, and other related legal matters. If our future revenue, costs, and results of operations are significantly affected by economic conditions abroad, our results of operations and financial condition could be negatively impacted. Specifically, the slowdown in China and other developing economies have negatively impacted, and may continue to negatively impact, our results of operations.

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We face risks from currency fluctuations.

Given the significance of non-U.S. sales to our total revenue, we face a continuing risk from the fluctuation of the U.S. dollar versus foreign currencies. Although the majority of our receivables are invoiced and collected in U.S. dollars, we have exposure from non-U.S. dollar-denominated sales (consisting of the Euro, British pound sterling, Brazilian real, Chinese renminbi, Israeli shekel, Australian dollar, and New Zealand dollar). We have a substantial number of international employees, resulting in material operating expenses denominated in foreign currencies. We have exposure from non-U.S. dollar-denominated operating expenses in foreign countries (primarily the Euro, British pound sterling, Chinese renminbi, Israeli shekel, Japanese yen, Indian rupee, Brazilian real, and Australian dollar).

We can benefit from or be adversely affected by either a weaker or stronger U.S. dollar relative to major currencies worldwide with respect to our consolidated financial statements. Accordingly, we can benefit from a stronger U.S. dollar due to the corresponding reduction in our foreign operating expenses translated in U.S. dollars and at the same time we can be adversely affected by a stronger U.S. dollar due to the corresponding reduction in foreign revenue translated in U.S. dollars. We hedge our operating expense exposure in Indian rupees. The notional amount of our Indian rupee cash flow hedge was $3.2 million at December 31, 2016.

Forward contracts not designated as hedging instruments consist of hedges of Brazilian real, British pound sterling, Israeli shekel, Australian dollar, Japanese yen, Chinese renminbi, and Euro-denominated intercompany balances with notional amounts of $90.7 million; Brazilian real, British pound sterling, Australian dollar, Israeli shekel, and Euro-denominated trade receivables with notional amounts of $39.8 million; and hedges of British pounds sterling, Indian rupee, and Euro-denominated other net monetary assets with notional amounts of $28.2 million at December 31, 2016. These forward contracts 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.

As of December 31, 2016, we had not entered into hedges against any other currency exposures, but we may consider hedging against movements in other currencies in the future. Our efforts to reduce risk from our international operations and from fluctuations in foreign currencies or interest rates may not be successful, which could harm our financial condition and operating results.

We face risks from our international operations.

We are subject to certain risks because of our international operations as follows:

• restrictions on our ability to access cash generated by international operations, especially in China and Brazil, due to restrictions on the repatriation of dividends, distribution of cash to shareholders outside of such countries, foreign exchange control, and other restrictions,

• security concerns, such as armed conflict and civil or military unrest, crime, political instability, and terrorist activity;

• customer credit risk, especially in emerging or economically challenged regions, with accompanying challenges to enforce our legal rights should collection issues arise.

• changes in governmental regulation, including labor regulations, and our inability or failure to obtain required approvals, permits, or registrations could harm our international and domestic sales and adversely affect our revenue, business, and operations,

• violations of governmental regulation, including labor regulations, could result in fines and penalties, including prohibiting us from exporting our products to one or more countries, and could materially adversely affect our business,

• international labor regulations may be substantially different than the regulations we are accustomed to in the U.S., which may negatively impact labor efficiency and workforce relations,

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• trade legislation in either the U.S. or other countries, such as a change in the current tariff structures, export compliance laws, or other trade policies, could adversely affect our ability to sell or manufacture in international markets,

• adverse tax consequences, including imposition of withholding or other taxes on payments by subsidiaries, and

• some of our sales to international customers are made under export licenses that must be obtained from the U.S. Department of Commerce (“DOC”) and certain transactions require prior approval of the DOC or other governmental agencies.

We incur additional legal compliance costs associated with our international operations and could become subject to legal penalties in foreign countries if we do not comply with local laws and regulations, which may be substantially different from those in the U.S. In many foreign countries, particularly those with developing economies, it may be common to engage in business practices that are prohibited by U.S. regulations such as the Foreign Corrupt Practices Act of 1977, as amended. Although we implement policies and procedures designed to ensure compliance with these laws, there can be no assurance that all of our employees, contractors, and agents, as well as outsourced business operations, including those based in or from countries where practices that violate such U.S. laws may be customary, will not take actions in violation of our policies. Furthermore, there can be no assurance that employees, contractors, and agents of acquired companies did not take actions in violation of such laws and regulations prior to the date they were acquired by us, although we perform due diligence procedures to endeavor to discover any such actions prior to the acquisition date.

We license software used in most of our Fiery products and certain Productivity Software products from Adobe and the loss of these licenses would prevent shipment of these products.

We are required to obtain separate licenses from Adobe for the right to use Adobe PostScript^® software in each copier or printer model that uses a Fiery DFE, and other Adobe software for certain Productivity Software products. Although to date we have successfully obtained licenses to use Adobe PostScript^® and other Adobe software when required, Adobe is not required to, and we cannot be certain that Adobe will, grant future licenses to Adobe PostScript^® and other Adobe software on reasonable terms, in a timely manner, or at all. To obtain licenses from Adobe, Adobe requires that we obtain quality assurance approvals from them for our products that use Adobe software. Although to date we have successfully obtained such quality assurance approvals from Adobe, we cannot be certain they will grant us such approvals in the future. If Adobe does not grant us such licenses or approvals, if the Adobe licenses are terminated, or if our relationship is otherwise materially impaired, we would likely be unable to sell products that incorporate Adobe PostScript^® or other Adobe software and our financial condition and results of operations would be significantly harmed.

We manufacture our super-wide and wide format industrial digital inkjet printers and formulate our ceramic digital ink primarily in single locations. Any significant interruption in the manufacturing process at these facilities could adversely affect our business.

Our VUTEk super-wide and wide format industrial digital inkjet printers are primarily manufactured in a single location in our Meredith, New Hampshire facility. In 2016, we transferred VUTEk roll-to-roll printer production to our Rosh Ha’Ayin, Israel, facility, our FabriVu textile digital inkjet printer production to our Bergamo, Italy, facility, and certain wide format industrial digital inkjet printers to our Castellon, Spain, facility.

Our Matan super-wide format industrial digital inkjet printers are manufactured in a single location in our Rosh Ha’Ayin, Israel facility. Our Reggiani industrial digital inkjet textile printers are manufactured in a single location in our Bergamo, Italy facility. Our Cretaprint ceramic tile decoration digital inkjet printers are manufactured in a single location in our Castellon, Spain facility. Our ceramic digital ink that is used in our ceramic tile decoration digital inkjet printers is formulated in a single location in our Ypsilanti, Michigan facility. We formulate our reactive dye ink that is used in our textile digital inkjet printers is formulated in a single

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location in our Bedford, U.K., facility. Any significant interruption in the manufacturing process at any of these facilities could affect the supply of our product, our ability to meet customer demand, and our ability to maintain market share.

We are developing contingency plans utilizing our manufacturing facilities in multiple locations and the capabilities of certain contract manufacturers in the event of a significant interruption in the manufacturing process at any of the aforementioned facilities. Until those plans are complete, disruptions in the manufacturing process at any of our sole source internal facilities could adversely affect our business.

We depend on a limited group of suppliers for key components in our products. The loss of any of these suppliers, the inability of any of these suppliers to meet our requirements, or delays or shortages of supply of these components, could adversely affect our business.

Certain components necessary for the manufacture of our products are obtained from a sole supplier or a limited group of suppliers. These include CPUs, chip sets, ASICs, and other related semiconductor components; inkjet print heads for our super-wide and wide format, textile, label and packaging, and ceramic tile decoration industrial digital inkjet printers; branded textile ink; and certain key ingredients (primarily pigments and photoinitiators) for our digital UV curable ink. We generally do not maintain long-term agreements with our component suppliers and conduct business with such suppliers largely on a purchase order basis. If we are unable to continue to procure these sole or limited sourced components from our current suppliers in the required quantities, we will have to qualify other sources, if possible, or redesign our products. If we were unable to obtain the branded textile ink or the pigments required for our digital UV curable ink, we would have to qualify other sources, if possible, or reformulate and test the new ink formulations. These suppliers may be concentrated within similar industries or geographic locations, which could potentially exacerbate these risks. We cannot provide assurance that other sources of these components exist or will be willing to supply us on reasonable terms or at all, or that we will be able to design around these components. Any unavailability, delays, or shortages of these components or any inability of our suppliers to meet our requirements, could harm our business.

Because the purchase of certain key components involves long lead times, in the event of unanticipated volatility in demand for our products, we have in the past been, and may in the future be, unable to manufacture certain products in a quantity sufficient to meet demand. Further, as has occurred in the past, in the event that anticipated demand does not materialize, we may hold excess quantities of inventory that could become obsolete. To meet projected demand, we maintain an inventory of components for which we are dependent on sole or limited source suppliers and components with prices that fluctuate significantly. As a result, we are subject to risk of inventory obsolescence, which could adversely affect our operating results and financial condition.

Market prices and availability of certain components, particularly memory subsystems and Intel-designed components, which collectively represent a substantial portion of the total manufactured cost of our products, have fluctuated significantly in the past. Such fluctuations could have a material adverse effect on our operating results and financial condition including reduced gross profit.

We are dependent on a limited number of subcontractors, with whom we generally do not have long-term contracts, to manufacture and deliver products to our customers. The loss of any of these subcontractors could adversely affect our business.

We subcontract with other companies to manufacture certain of our products and we generally do not have long-term agreements with these subcontractors. While we closely monitor our subcontractors’ performance, we cannot be assured that such subcontractors will continue to manufacture our products in a timely and effective manner. In the past, a weakened economy led to the dissolution, bankruptcy, or consolidation of some of our subcontractors, which decreased the available number of subcontractors. If the available number of subcontractors were to decrease in the future, it is possible that we would not be able to secure appropriate subcontractors to fulfill our demand in a timely manner, or at all, particularly if demand for our products increases.

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The existence of fewer subcontractors may reduce our negotiating leverage, thereby potentially resulting in higher product costs. Financial problems resulting in the inability of our subcontractors to make or ship our products, could harm our business, operating results, and financial condition. If we change subcontractors, we could experience delays in finding, qualifying, and commencing business with new subcontractors, which would result in delayed delivery of our products and potentially the cancellation of orders for our products.

We have outsourced our Fiery production with Avnet, label and packaging digital inkjet printer production with Roberts, and formulation of certain textile ink with third party branded suppliers. Certain Industrial Inkjet sub-assemblies are manufactured by subcontractors. Should our subcontractors experience any inability, or unwillingness, to manufacture or deliver our products, then our business, financial condition, and operations could be harmed. Since we generally do not maintain long-term agreements with our subcontractors, any of our subcontractors could enter into agreements with our competitors that might restrict or prohibit them from manufacturing our products or could otherwise lead to an inability to fill our orders in a timely manner. In such event, we may not be able to find suitable replacement subcontractors, in which case our financial condition and operations would likely be harmed.

We may face increased risk of inventory obsolescence, excess, or shortages related to our Industrial Inkjet printers and ink.

We procure raw materials and internally manufacture our super-wide and wide format, textile, and ceramic tile decoration industrial digital inkjet printers and formulate digital UV curable and ceramic digital ink based on our sales forecasts. If we do not accurately forecast demand for our products, we may produce or purchase excess inventory, which may result in our inventory becoming obsolete. We might not produce the correct mix of products to match actual demand if our sales forecast is not accurate, resulting in lost sales. If we have excess printers, ink, or other products, we may need to lower prices to stimulate demand.

Our ink products have a defined shelf life. If we do not sell the ink before the end of its shelf life, it will have to be written off. We have also experienced UV curable ink shortages in the past and may continue to experience such shortages in the future. UV curable ink shortages may require that we incur additional costs to respond to increased demand and overcome such shortages.

If we are not able to hire and retain skilled employees, we may not be able to develop and manufacture products, or meet demand for our products, in a timely fashion.

We depend on skilled employees, such as software and hardware engineers, quality assurance engineers, chemists, chemical engineers, and other technical professionals with specialized skills. We are headquartered in the Silicon Valley and have research and development employees in facilities in 15 U.S. locations. We also have research and development employees in facilities in India, Europe, Israel, the U.K., Brazil, Canada, New Zealand, China, Australia, and Japan. Competition has historically been intense among companies hiring engineering and technical professionals. In times of professional labor imbalances, it has in the past and is likely in the future, to be difficult to locate and hire qualified engineers and technical professionals and to retain these employees. There are many technology companies located near our corporate offices in the Silicon Valley and our operations in India that may attempt to hire our employees.

Our VUTEk printers are manufactured at our Meredith, New Hampshire facility, which is not located in a major metropolitan area. We have encountered difficulties in hiring and retaining adequately skilled labor and management at this location. We have entered into a six-year lease with Bank of Tokyo—Mitsubishi UFJ Leasing & Finance LLC (“BTMU”) whereby a 225,000 square foot manufacturing and warehouse facility is under construction in Manchester, New Hampshire, related to our super-wide and wide format industrial digital inkjet printer business in the Industrial Inkjet operating segment, which is scheduled to be completed in early 2018.

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The movement of our stock price may also impact our ability to hire and retain employees. If we do not offer competitive compensation, we may not be able to recruit or retain employees, which may have an adverse effect on our ability to develop products in a timely fashion, which could harm our business, financial condition, and operating results.

We rely on our distribution channels to ensure sales growth.

The leading printer manufacturers, which comprise the majority of the customer base in our Fiery operating segment, are typically large profitable customers with little credit risk to us. Our Productivity Software and Industrial Inkjet operating segments sell primarily through a direct sales force, augmented by some select distributors, to a broader base of customers than Fiery. Any interruption of of these distribution channels could negatively impact us in the future.

Growing market share in the Productivity Software and Industrial Inkjet operating segments increases the possibility that we will experience increased bad debt expense and increased accounts receivable.

Many of the Productivity Software and Industrial Inkjet customers are smaller and potentially less creditworthy. Our ceramic tile decoration digital inkjet customer base is primarily located in geographic regions, which have recently been subject to economic challenges including southern Europe (primarily Spain, Italy, and Portugal) and emerging markets in APAC. Furthermore, if we increase the percentage of Productivity Software and Industrial Inkjet products that are sold internationally, it may be challenging to enforce our legal rights should collection issues arise. Due to these and other factors, growing Industrial Inkjet and Productivity Software market share may cause us to experience an increase in bad debt expense and an increase in days sales outstanding (“DSOs”).

DSOs increased during the year ended December 31, 2016, compared with December 31, 2015, primarily due to increased Industrial Inkjet and Productivity Software revenue as a percentage of consolidated revenue, sales with extended payment terms, and a non-linear sales cycle resulting in significant billings at the end of the quarter. Industrial Inkjet and Productivity Software were 72% of consolidated revenue during the year ended December 31, 2016, compared with 66% and 65% of consolidated revenue during the years ended December 31, 2015 and 2014, respectively. We calculate DSO by dividing net accounts receivable at the end of the quarter by revenue recognized during the quarter, multiplied by the total days in the quarter, which is a measure of the relationship between sales and accounts receivable.

Acquisitions may result in unanticipated accounting charges or otherwise adversely affect our results of operations and result in difficulties assimilating and integrating operations, personnel, technologies, products, and information systems of acquired businesses.

We seek to develop new technologies and products from both internal and external sources. We have also purchased companies and businesses for the primary purpose of acquiring their customer base. As part of this effort, we have in the past made, and will likely continue to make, acquisitions of other businesses.

Acquisitions involve numerous risks, such as:

• difficulties integrating operations, employees, technologies, or products, and the required focus of management attention, time, and effort to accomplish successful integration;

• risk of entering markets in which we have little or no prior experience, or entering markets where competitors have stronger market positions;

• possible write-downs of impaired assets;

• changes in the fair value of contingent consideration;

• possible restructuring of personnel or leased facilities;

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• potential loss of key employees of the acquired company;

• possible overruns (compared to expectations) relative to the expense levels and cash outflows of the acquired business;

• adverse reactions by customers, suppliers, or parties transacting business with the acquired company or us;

• risk of negatively impacting stock analyst ratings;

• potential litigation or any administrative proceedings arising from prior transactions or prior actions of the acquired company;

• inability to protect or secure technology rights;

• possible overruns of direct acquisition and integration costs; and

• equity securities issued in connection with acquisitions will be dilutive to our existing stockholders unless mitigating actions are taken such as treasury stock purchases; alternatively, acquisitions made entirely or partially for cash will reduce cash reserves.

Mergers and acquisitions of companies are inherently risky. We cannot provide assurance that previous or future acquisitions will be successful or will not harm our business, operating results, financial condition, or stock price.

We face risks relating to the potential impairment of goodwill and long-lived assets.

We complete a review of the carrying value of our goodwill and long-lived assets annually and, based on a combination of factors (i.e., triggering events), we may be required to perform an interim analysis.

Given the uncertainty of the economic environment and its potential impact on our business, there can be no assurance that our estimates and assumptions regarding the duration of any economic downturn, or the period or strength of any subsequent recovery, made for purposes of our goodwill impairment testing at December 31, 2016 will prove to be accurate predictions of the future. If our assumptions regarding forecasted revenue or gross profit rates are not achieved, we may be required to record additional goodwill impairment charges in future periods relating to any of our reporting units, whether in connection with the next annual impairment testing in the fourth quarter of 2017 or prior to that, if an interim triggering event were to occur. It is not possible to determine if any such future impairment charge would result or, if it does, whether such charge would be material. No foreshadowing events have occurred as of December 31, 2016.

We are subject to numerous federal, state, and foreign employment laws and may face claims in the future under such laws.

We are subject to numerous federal, state, and foreign employment laws and from time to time face claims by our employees and former employees under such laws. There are no material claims pending or threatened against us under federal, state, or foreign employment laws, but we cannot be sure that material claims under such laws will not be made in the future against us, nor can we predict the likely impact of any such claims on us, or that, if asserted, we would be able to successfully resolve any such claims without incurring significant expense.

We may be unable to adequately protect our proprietary information and may incur expenses to defend our proprietary information.

We rely on copyright, patent, trademark, and trade secret protection, in addition to nondisclosure agreements, licensing, and cross-licensing arrangements to establish, maintain, and protect our intellectual property rights, all of which afford only limited protection. We have patents and pending patent applications in the U.S. and various

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foreign countries. There can be no assurance that patents will issue from our pending applications or from any future applications, or that, if issued, any claims allowed will be sufficiently broad to protect our technology. Any failure to adequately protect our proprietary information could harm our financial condition and operating results. We cannot be certain that any patents that have been, or may in the future be issued to us, or which we license from third parties, or any other proprietary rights will not be challenged, invalidated, or circumvented. In addition, we cannot be certain that any rights granted to us under any patents, licenses, or other proprietary rights will provide adequate protection of our proprietary information.

Many countries in which we derive revenue do not have comprehensive and highly developed legal systems, particularly with respect to the protection of intellectual property rights, which, among other things, can result in a prevalence of infringing products and counterfeit goods in certain countries, which could harm our business and reputation.

As different areas of our business change or mature, from time to time we evaluate our patent portfolio and decide to either pursue or not pursue specific patents and patent applications related to such areas. Choosing not to pursue certain patents, patentable applications, and failing to file applications for potentially patentable inventions, may harm our business by, among other things, enabling our competitors to more effectively compete with us, reducing potential claims we can bring against third parties for patent infringement, and limiting our potential defenses to intellectual property claims brought by third parties.

Litigation has been, and may continue to be, necessary to defend and enforce our proprietary rights. Such litigation, whether or not concluded successfully, could involve significant expense and the diversion of our attention and other resources, which could harm our financial condition and operating results.

We face risks from third party claims of infringement and potential litigation.

Third parties have claimed in the past, and may claim in the future, that our products infringe, or may infringe, their proprietary rights. Such claims have resulted in lengthy and expensive litigation in the past and could have a similar result in the future. Such claims and any related litigation, whether or not we are successful in the litigation, could result in substantial costs and diversion of our resources, which could harm our financial condition and operating results. Although we may seek licenses from third parties covering intellectual property that we are allegedly infringing, we cannot assure that any such licenses could be obtained on acceptable terms, if at all.

We may be subject to risk of loss due to fire because certain materials we use in our ink formulation process are flammable.

We use flammable materials in the digital UV curable and ceramic digital ink formulation process; therefore, we may be subject to risk of loss resulting from fire. The risk of fire associated with these materials cannot be completely eliminated. We own certain facilities that manufacture or warehouse our ink, which increases our exposure to such risk. We maintain insurance policies to cover losses caused by fire, including business interruption insurance. If one or more of these facilities is damaged or otherwise ceases operations as a result of fire, it would reduce our digital UV curable and ceramic digital ink manufacturing capacity, which may reduce revenue and adversely affect our business.

The location and concentration of our facilities subjects us to risk of earthquakes, floods, or other natural disasters.

Our corporate headquarters, including a significant portion of our research and development facilities, are located in the San Francisco Bay Area, which is known for seismic activity. This area has also experienced flooding in the past. Many of the components necessary for our products are purchased from suppliers based in areas that are subject to risk from natural disasters including the San Francisco Bay Area, China, and Japan.

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A significant natural disaster, such as an earthquake, flood, tsunami, hurricane, typhoon, or other business interruptions due, for example, to power shortages and other interruptions could harm our business, financial condition, and operating results.

We may be subject to environmental-related liabilities due to our use of hazardous materials and solvents.

Our business operations involve the use of certain hazardous materials at eight locations. We formulate UV curable, reactive dye, and ceramic ink at four locations and store UV curable, ceramic, solvent, and thermoforming ink, as well as a variety of textile ink including dye sublimation, pigmented, reactive dye, acid dye, and water-based dispersed printing ink at eight locations. We launched internal formulation and marketing of ceramic solvent-based ink during 2014 at our facility in Ypsilanti, Michigan. The solvents used in ceramic digital ink formulation have low volatility by design. As a result, ceramic digital ink poses less environmental risk compared with true solvent ink. We launched internal formulation of reactive dye ink during 2016 at our facility in Bedford, U.K. Reactive dye is a water-based dye.

The hazardous materials and solvents that we use are subject to various governmental regulations relating to their transfer, handling, packaging, use, and disposal. We store ink at warehouses worldwide, including Europe, China, Israel, the U.K., and the U.S., and shipping companies distribute ink at our direction. We face potential liability for problems such as large spills or fires that may arise at ink manufacturing locations. While we customarily obtain insurance coverage typical for this kind of risk, such insurance may not be sufficient. If we fail to comply with these laws or an accident involving our ink waste or chemicals occurs, or if our insurance coverage is not sufficient, then our business and financial results could be harmed.

Future sales of our products could be limited if we do not comply with current and future environmental and chemical content regulations.

We believe that our products are currently compliant with RoHS, WEEE, REACH, and other regulations for the European Union as well as with China RoHS and other applicable international, U.S., state, and local environmental regulations. We monitor environmental compliance regulations to ensure that our products are fully compliant prior to the implementation of any potential new requirements. However, new unforeseen legislation could require us to re-engineer our products, complete costly analyses, or perform supplier surveys, which could harm our business and negatively impact our financial results. We could also incur additional costs, sanctions, and liabilities in connection with non-compliant product recalls, regulatory fines, and exclusion of non-compliant products from certain markets.

Our products may contain defects, which are not discovered until after shipping, which could subject us to warranty claims in excess of our warranty reserves.

Our products consist of hardware and software developed by ourselves and others, which may contain undetected defects. We have in the past discovered software and hardware defects in certain of our products after their introduction, resulting in warranty expense and other expenses incurred in connection with rectifying such defects or, in certain circumstances, replacing the defective product, which may damage our relationships with our customers. Defects could be found in new versions of our products after commencement of commercial shipment and any such defects could result in a loss or delay in market acceptance of such products and thus harm our reputation and revenue. Defects in our products (including defects in licensed third party software) detected prior to new product releases could result in delays in the introduction of new products and the incurrence of additional expense, which could harm our operating results. We generally provide a twelve-month hardware limited warranty for certain Industrial Inkjet printers, which may cover both parts and labor. Our Fiery DFE limited warranty is 12 to 15 months.

Our standard warranties contain limits on damages and exclusions, including but not limited to alteration, modification, misuse, mishandling, and storage or operation in improper environments. While we recorded an

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accrual of $10.3 million at December 31, 2016, for estimated warranty costs that are estimable and probable, based on historical experience, we may incur additional costs of revenue and operating expenses if our warranty provision does not reflect adequately the cost to resolve or repair defects in our products or if our liability limitations are declared enforceable, which could harm our business, financial condition, and operating results.

Actual or perceived security vulnerabilities in our products could adversely affect our revenue.

Maintaining the security of our software and hardware products is an issue of critical importance to our customers and for us. There are individuals and groups who develop and deploy viruses, worms, and other malicious software programs that could attack our products. Although we take preventive measures to protect our products, and we have a response team that is notified of high risk malicious events, these procedures may not be sufficient to mitigate damage to our products. Actual or perceived security vulnerabilities in our products could lead some customers to seek to return products, reduce or delay future purchases, or purchase competitive products. Customers may also increase their expenditures to protect their computer systems from attack, which could delay or reduce purchases of our products. Any of these actions or responses by customers could adversely affect our revenue.

System failures, or system unavailability, could harm our business.

We rely on our network infrastructure, internal technology systems, and internal and external websites for our development, marketing, operational, support, and sales activities. Our hardware and software systems related to such activities are subject to damage from malicious code released into the internet through vulnerabilities in popular software programs. These systems are also subject to acts of vandalism and potential disruption by actions or inactions of third parties. Any event that causes failures or interruption in our hardware or software systems could harm our business, financial condition, and operating results.

Our stock price has been volatile historically and may continue to be volatile.

The market price for our common stock has been and may continue to be volatile. During the twelve months ended December 31, 2016, the price of our common stock as reported on The NASDAQ Global Select Market ranged from a low of $35.88 to a high of $50.09. We expect our stock price to be subject to fluctuations as a result of a variety of factors, including factors beyond our control. These factors include:

• actual or anticipated variations in our quarterly or annual operating results;

• ability to initiate or complete stock repurchase programs;

• announcements of technological innovations or new products or services by our competitors or by us;

• announcements relating to strategic relationships, acquisitions, or investments;

• announcements by our customers regarding their businesses or the products in which our products are included;

• changes in financial estimates or other statements by securities analysts;

• any failure to meet security analyst expectations;

• changes in the securities analysts’ rating of our securities;

• terrorist attacks and the affects of military engagements or natural disasters;

• commencement of litigation or adverse results of pending litigation;

• changes in the financial performance and/or market valuations of other software and high technology companies; and

• changes in general economic conditions.

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Because of this volatility, we may fail to meet the expectations of our stockholders or of securities analysts from time to time and the trading price of our securities could decline as a result. The stock market has experienced significant price and volume fluctuations that have particularly affected the trading prices of equity securities of many high technology companies, impacted by the continuing uncertainty in our economy. These fluctuations have often been unrelated or disproportionate to the operating performance of these companies. Any negative change in the public’s perception of high technology companies could depress our stock price regardless of our operating results.

The value of our investment portfolio is subject to interest rate volatility.

We maintain an investment portfolio of fixed income debt securities classified as available-for-sale securities. As a result, our investment portfolio is subject to counterparty risk and volatility if market interest rates fluctuate.

We attempt to limit our exposure to interest rate risk by investing in securities with maturities of less than three years; however, we may be unable to successfully limit our risk to interest rate fluctuations. This may cause volatility in our investment portfolio value.

We are partially self-insured for certain losses related to employee medical and dental coverage. Our self-insurance reserves may not be adequate to cover our medical and dental claim liabilities.

We are partially self-insured for certain losses related to employee medical and dental coverage, excluding employees covered by health maintenance organizations. We generally have an individual stop loss deductible of $125 thousand per enrollee unless specific exposures are separately insured. We have accrued a contingent liability of $1.5 million as of December 31, 2016, which is not discounted, based upon examination of historical trends, historical actuarial analysis, our claims experience, total plan enrollment (including employee contributions), population demographics, and other various estimates. Although we do not expect that we will ultimately pay claims significantly different from our estimates, self-insurance reserves, net income, and cash flows could be materially affected if future claims differ significantly from our historical trends and assumptions.

Our stock repurchase program could affect our stock price and add volatility.

In November 2015, our board of directors authorized $150 million for the repurchase of our outstanding common stock. This authorization expires December 31, 2018.

Any repurchases pursuant to our stock repurchase program could affect our stock price and add volatility. There can be no assurance that repurchases will be made at the best possible price. Potential risks and uncertainties also include, but are not necessarily limited to, the amount and timing of future stock repurchases and the origin of funds used for such repurchases. The existence of a stock repurchase program could also cause our stock price to be higher than it would be in the absence of such a program and could potentially reduce the market liquidity for our stock. Depending on market conditions and other factors, these repurchases may be commenced or suspended from time to time. Any such suspension could cause the market price of our stock to decline.

Our profitability may be affected by unanticipated changes in our tax provisions, the adoption of new U.S. or foreign tax legislation, or exposure to additional income tax liabilities.

We are subject to income taxes in the U.S. and many foreign countries. Intercompany transaction pricing can impact our tax liabilities. We are potentially subject to tax audits in various countries and tax authorities may disagree with our tax treatments, including intercompany pricing or other matters, and assess additional taxes. We regularly review the likely outcomes of these audits to determine whether our tax provisions are sufficient. However, there can be no assurance that we will accurately predict the outcomes of these audits, and the final assessments of these audits can have a material impact on our net income.

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Our effective tax rate in the future may be impacted by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in tax laws, new information discovered during the preparation of our tax returns, and enactment of U.S. and foreign tax legislative initiatives, such as proposals for fundamental tax reform in the United States (“U.S.”) or multi-jurisdictional actions to address “base erosion and profit-shifting” by multinational companies. The Organisation for Economic Co-operation and Development, or OECD, issued a series of reports on October 5, 2015 recommending changes to numerous well-established tax principles. These recommendations, if adopted by various OECD countries in which we do business, could adversely affect our effective tax rate.

We may not have the ability to raise the funds necessary to settle conversions of our 0.75% Convertible Senior Notes due 2019 (“Notes”) in cash, repay the Notes at maturity, or repurchase the Notes upon a fundamental change.

In September 2014, we completed a private placement of $345 million principal amount of Notes. Holders of the Notes will have the right to require us to repurchase all or a portion of their Notes upon the occurrence of a fundamental change at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, as described in Note 7—Convertible Senior Notes, Note Hedges, and Warrants of the Notes to Consolidated Financial Statements.

Upon conversion of the Notes, we will be required to make conversion payments in cash, unless we elect to deliver solely shares of our common stock to settle such conversion, as described in Note 7—Convertible Senior Notes, Note Hedges, and Warrants of the Notes to Consolidated Financial Statements. Moreover, we will be required to repay the Notes in cash at their maturity, unless earlier converted or repurchased. However, we may not have enough available cash or be able to obtain financing when the Notes are to be repurchased, converted, or at their maturity.

The conditional conversion feature of the Notes, if triggered, may adversely affect our financial condition and results of operations.

In the event the conditional conversion feature of the Notes is triggered, holders of Notes will be entitled to convert the Notes at any time during specified periods at their option. If one or more holders elect to convert their Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock, we would be required to settle all or a portion of the conversion obligation through the payment of cash, which could adversely affect our liquidity. Even if holders do not elect to convert their Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Notes as a current liability, which would result in a material reduction of our net working capital.

The accounting method for convertible debt securities that may be settled in cash (such as the Notes) could have a material effect on our reported financial results.

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 470-20, Debt with Conversion and Other Options, requires us to separately account for the liability and equity components of the Notes that may be settled entirely or partially in cash upon conversion in a manner that reflects our non-convertible debt interest rate. Accordingly, the equity component of the Notes is included in additional paid-in capital within stockholders’ equity in our Consolidated Balance Sheet and the value of the equity component is treated as original issue discount for purposes of accounting for the debt component of the Notes. As a result, we are required to recognize non-cash interest expense in our Consolidated Statement of Operations in current and future periods as a result of the amortization of the discounted carrying value of the Notes to their principal amount over their term. We will report lower net income because ASC 470-20 requires interest to include both the current period’s amortization of the original issue discount and the Notes’ non-convertible interest rate. This could adversely affect our future consolidated financial results, the trading price of our common stock, and the trading price of the Notes.

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Under certain circumstances, in calculating earnings per share, convertible debt instruments (such as the Notes) that may be settled entirely or partially in cash are accounted for utilizing the treasury stock method. The effect of the treasury stock method is that the shares of common stock issuable upon conversion of the Notes, if any, are not included in the calculation of diluted earnings per share except to the extent that the conversion value of the Notes exceeds their principal amount. Under the treasury stock method, diluted earnings per share is calculated as if the number of shares of common stock that would be necessary to settle such excess were issued, if we elected to settle such excess in shares. We cannot be sure that accounting standards will continue to permit the use of the treasury stock method in the future. If we are unable to use the treasury stock method in accounting for the shares issuable upon conversion of the Notes, if any, then our diluted consolidated earnings per share would be adversely affected.

Certain provisions contained in our amended and restated certificate of incorporation, our amended and restated bylaws, and under Delaware law could delay or impair a change in control.

Certain provisions in our amended and restated certificate of incorporation and amended and restated bylaws could have the effect of rendering more difficult or discouraging an acquisition of the Company deemed undesirable by our board of directors. Our amended and restated certificate of incorporation allows the board of directors to issue preferred stock, which may include powers, preferences, privileges, and other rights superior to our common stock, thereby limiting our stockholders’ ability to transfer their shares and may affect the price they are able to obtain. Our amended and restated bylaws do not allow stockholders to call special meetings and include, among other things, procedures for advance notification of stockholder nominations and proposals, which may have the effect of delaying or impairing attempts by our stockholders to remove or replace management, to commence proxy contests, or to effect changes in control or hostile takeovers of the Company.

As a Delaware corporation, we are subject to Delaware law, including Section 203 of the Delaware General Corporation Law, which imposes restrictions on certain transactions between a corporation and certain significant stockholders. These provisions could also have the effect of delaying or impairing the removal or replacement of management, proxy contests, or changes in control. Any provision of our amended and restated certificate of incorporation and amended and restated bylaws that has the effect of delaying or impairing a change in control of the Company could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could affect the price that certain investors may be willing to pay for our common stock.

Item 1B: Unresolved Staff Comments

None.

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Item 2: Properties

As of December 31, 2016, we owned or leased a total of approximately 1.6 million square feet worldwide. The following table sets forth the location, size, and use of our principal facilities (square footage in thousands):

Location	Square Footage		Leased or Owned	Operating Segment	Principal Uses
Fremont, California (6750 Dumbarton Circle)		119	Owned	Corporate & Fiery	Corporate offices, design engineering, product testing, sales, marketing, customer service
Fremont, California (6700 Dumbarton Circle)		59	Leased	Fiery	Administrative offices, design engineering, product testing
Manchester, New Hampshire		225	Leased*	Industrial Inkjet	Manufacturing (VUTEK), design engineering, sales, customer service
Bergamo, Italy		168	Leased	Industrial Inkjet	Manufacturing (Reggiani textile printers), design engineering, sales, customer service
Meredith, New Hampshire		163	Owned	Industrial Inkjet	Manufacturing (Industrial Inkjet printers), design engineering, sales, customer service
Castellon, Spain		127	Leased**	Industrial Inkjet	Manufacturing, (Cretaprint), administrative, design engineering, sales, customer service
Bangalore, India		107	Leased	All	Administrative, design engineering, customer service, software engineering
Ypsilanti, Michigan		106	Leased	Industrial Inkjet	Manufacturing (digital UV & ceramic ink), design engineering, sales, customer service
Eagan, Minnesota		44	Owned	Fiery & Productivity Software	Administrative, design engineering, customer service, software engineering
Belmont, New Hampshire		40	Leased	Industrial Inkjet	Warehouse
Brussels, Belgium		39	Leased	Industrial Inkjet	Sales, Industrial Inkjet demonstration center
Laconia, New Hampshire		34	Leased	Industrial Inkjet	Warehouse
Tempe, Arizona		32	Leased	Fiery & Productivity Software	Manufacturing, (Fiery), distribution, customer service
Bradford, UK		32	Owned	Industrial Inkjet	Manufacturing (dye powders and color products for Industrial Inkjet printers), design engineering, sales, customer service
Rosh Ha’Ayin, Israel		31	Leased	Industrial Inkjet	Manufacturing (Industrial Inkjet printers), design engineering, sales, customer service
Norcross, Georgia		29	Leased	Fiery & Productivity Software	Design engineering, sales, customer service, quality assurance, and software engineering
Ratingen, Germany		27	Leased	Fiery & Productivity Software	Software engineering, sales, customer service
Schiphol-Rijk, The Netherlands		19	Leased	Industrial Inkjet	EMEA corporate offices, sales, support services
Pittsburgh, Pennsylvania		18	Leased	Productivity Software	EPS corporate offices, design engineering, sales
Shanghai, China		16	Leased	Industrial Inkjet	APAC corporate offices, Industrial Inkjet demonstration center
Rosh Ha’Ayin, Israel		13	Leased	Productivity Software	3D textile design and production
San Diego, California		12	Leased	Productivity Software	Software engineering, sales, customer service
Foshan, China		10	Leased	Industrial Inkjet	Administrative, sales, customer service
Richmond Hill, Ontario, Canada		10	Leased	Fiery	Design engineering, sales, customer service

* We entered into a six-year lease with BTMU whereby a 225,000 square foot manufacturing and warehouse facility is under construction in Manchester, New Hampshire, related to our super-wide and wide format industrial digital inkjet printer business in the Industrial Inkjet operating segment, which is scheduled to be completed in early 2018.

The lease commenced on August 26, 2016. We leased 16.9 acres of land related to this manufacturing and warehouse lease. See Note 8—Commitments and Contingencies of the Notes to Consolidated Financial Statements.

** Includes an additional 65,000 square feet expansion of our ceramic tile decoration industrial digital inkjet printer manufacturing and warehouse facility in Castellon, Spain, which is scheduled to be completed during 2017. The expansion is being built and fully financed by the lessor. We do not have any obligations related to this additional space other than rent payments that commence upon completion of construction.

In addition to the facilities listed above, we leased 44 additional domestic and international regional operations and sales offices, excluding facilities that have been fully reserved and subleased, and we own an additional international sales office building. We believe that our facilities, in general, are adequate for our present needs. We do not expect that we would experience difficulties in obtaining additional space at fair market rates, if the need arose.

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Item 3: Legal Proceedings

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.

As of December 31, 2016, we are subject to the matter discussed below.

Matan Digital Printing (“MDG”) Matter

EFI acquired Matan Digital Printers (“Matan”) in 2015 from sellers (the “2015 Sellers”) that acquired Matan Digital Printing Ltd. from other sellers in 2001 (the “2001 Sellers”). The 2001 Sellers have asserted a claim against the 2015 Sellers and Matan asserting that they are entitled to a portion of the 2015 Sellers’ proceeds from EFI’s acquisition. The 2015 Sellers dispute this claim and have agreed to indemnify EFI against the 2001 Sellers’ claim.

Although we are fully indemnified and we do not believe that it is probable that we will incur a loss, it is reasonably possible that our financial statements could be materially affected by the unfavorable resolution of this matter. Accordingly, it is reasonably possible that we could incur a material loss in this matter. We estimate the range of loss to be between one dollar and $10.1 million. If we incur a loss in this matter, it will be offset by a receivable of an equal amount representing a claim for indemnification against the escrow account established in connection with the Matan acquisition.

Other Matters

As of December 31, 2016, we were subject to various other claims, lawsuits, investigations, and proceedings in addition to the matter discussed above. There is at least a reasonable possibility that additional losses may be incurred in excess of the amounts that we have accrued. However, we believe that these claims are not material to our financial statements or the range of reasonably possible losses is not reasonably estimable. Litigation is inherently unpredictable, and while we believe that we have valid defenses with respect to legal matters pending against us, our financial statements could be materially affected in any particular period by the unfavorable resolution of one or more of these contingencies or because of the diversion of management’s attention and the incurrence of significant expenses.

Item 4: Mine Safety Disclosures

Not applicable.

PART II

Item 5: Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock has traded on The NASDAQ Global Select Market (formerly The NASDAQ National Market) under the symbol EFII since October 2, 1992. The table below lists the high and low sales price during each quarter the stock was traded in 2016 and 2015.

	2016								2015
	Q1		Q2		Q3		Q4		Q1		Q2		Q3		Q4
High	$	46.17	$	46.26	$	50.09	$	49.72	$	43.03	$	46.20	$	48.36	$	49.82
Low	$	35.88	$	38.00	$	40.34	$	40.72	$	35.45	$	40.90	$	41.33	$	42.20

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As of January 26, 2017, there were 110 stockholders of record, excluding a substantially greater number of “street name” holders or beneficial holders of our common stock, whose shares are held of record by banks, brokers, and other financial institutions.

We did not declare or pay cash dividends on our common stock in either 2016 or 2015. We currently anticipate that we will retain all available funds for the operation of our business and do not plan to pay any cash dividends in the foreseeable future. We believe that the most strategic uses of our cash resources include business acquisitions, strategic investments to gain access to new technologies, repurchases of shares of our common stock, and working capital.

Equity Compensation Plan Information

Information regarding our equity compensation plans may be found in Note 12—Employee Benefit Plans of the Notes to Consolidated Financial Statements and Item 12—Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters of this Annual Report on Form 10-K and is incorporated herein by reference.

Repurchases of Equity Securities

Repurchases of equity securities during the year ended December 31, 2016 were as follows (in thousands except per share amounts):

Fiscal month	Total number of shares purchased (2)		Average price paid per share		Total number of shares purchased as part of publicly announced plans		Approximate dollar value of shares that may yet be purchased under the plans (1)
January 2016		211	$	42.14		210	$	141,148
February 2016		338		39.09		258		131,004
March 2016		25		39.53		25		130,008
April 2016		175		41.27		174		122,814
May 2016		302		40.03		275		111,781
June 2016		34		44.02		34		110,275
July 2016		142		43.60		142		104,084
August 2016		267		43.95		216		94,596
September 2016		75		46.97		50		92,282
October 2016		160		45.10		150		85,493
November 2016		240		42.65		228		75,785
December 2016		11		43.83		—		75,785
Total		1,980	$	42.06		1,762	$	75,785

⁽¹⁾  In November 2015, our board of directors authorized $150 million for the repurchase of our outstanding common stock commencing January 1, 2016. This authorization expires December 31, 2018. Under this publicly announced plan, we repurchased 1.8 million shares for an aggregate purchase price of $74.2 million during the year ended December 31, 2016.

⁽²⁾  Includes 0.2 million shares purchased from employees to satisfy the exercise price of certain stock options and any tax withholding obligations incurred in connection with such exercises and minimum tax withholding obligations that arose on the vesting of restricted stock units (“RSUs”).

Sales of Unregistered Securities

On October 6, 2015, we issued 0.2 million shares of common stock to the shareholders of CTI in connection with the acquisition of CTI. The shares of common stock were offered and sold in accordance with the terms and

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subject to the conditions set forth in the purchase agreement for the acquisition in reliance on the private offering exemption of Section 4(a)(2) of the Securities Act of 1933, as amended.

On July 1, 2015, the Company and a subsidiary and the shareholders (the “Sellers”) of Reggiani entered into a Securities Purchase Agreement relating to the acquisition of the equity securities of Reggiani. During the three months ended March 31, 2016, in connection with the release from escrow of certain funds, the Company issued 29,589 shares of its Common Stock to the Sellers. Each Seller has previously agreed that, prior to the end of the eighteen-month period following the closing of the Reggiani acquisition, such Seller will not, directly or indirectly, (a) offer, sell, offer to sell, contract to sell, pledge, grant any option to purchase or otherwise dispose of or transfer (or announce any offer, sale, offer of sale, contract of sale or grant of any option to purchase or other disposition or transfer of) any shares of Common Stock; provided that, after the end of the six-month period following the closing, each Seller is permitted, subject to certain restrictions, to transfer shares of Common Stock to a permitted transferee of such Seller, or (b) other than as permitted in clause (a) above, reduce its beneficial ownership of, interest in, or risk relating to, any of such Seller’s shares of Common Stock.

The shares of Common Stock were offered and sold in accordance with the terms and subject to the conditions set forth in the Securities Purchase Agreement and in reliance on the private offering exemption of Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), the private offering safe harbor provisions of Rule 506 of Regulation D under the Securities Act and/or the safe harbor provisions of Regulation S under the Securities Act based on the following factors: (i) the absence of general solicitation; (ii) the investment representations obtained from the Sellers, including with respect to the sophistication and status as an accredited investor or non-U.S. person; (iii) the provision of appropriate disclosures related to the Sellers’ investment decision; and (iv) the placement of restrictive legends on the certificates reflecting the securities.

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Comparison of Cumulative Total Return among Electronics For Imaging, Inc., NASDAQ Composite, and NASDAQ Computer Manufacturers Index

The stock price performance graph below includes information required by the SEC and shall not be deemed incorporated by reference by any general statement incorporating by reference in this Annual Report on Form 10-K into any filing under the Securities Act or under the Exchange Act, except to the extent the Company specifically incorporates this information by reference, and shall not otherwise be deemed soliciting material or filed under the Securities Act or the Exchange Act, or subject to the liabilities of Section 18 of the Exchange Act.

The following graph compares cumulative total returns based on an initial investment of $100 in our common stock to the NASDAQ Composite and the NASDAQ Computer Manufacturers Index. The stock price performance shown on the graph below is not indicative of future price performance and only reflects the Company’s relative stock price for the five-year period ending on December 31, 2016. All values assume reinvestment of dividends and are calculated at December 31 of each year.

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Item 6: Selected Financial Data

The following table summarizes selected consolidated financial data as of and for the five years ended December 31, 2016. This information should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the audited consolidated financial statements and related notes thereto. For a more detailed description, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

	For the years ended December 31,
(in thousands, except per share amounts)	2016		2015		2014		2013		2012
Operations (1)
Revenue	$	992,065	$	882,513	$	790,427	$	727,693	$	652,137
Gross profit		508,690		459,384		429,737		395,166		354,821
Income from operations (2)		56,553		56,643		53,439		174,648		33,886
Net income (2)(3)	$	45,546	$	33,540	$	33,714	$	109,107	$	83,269
Earnings per share
Net income per basic common share	$	0.97	$	0.71	$	0.72	$	2.34	$	1.79
Net income per diluted common share	$	0.95	$	0.70	$	0.70	$	2.26	$	1.74
Shares used in basic per-share calculation		46,900		47,217		46,866		46,643		46,453
Shares used in diluted per-share calculation		47,797		48,150		48,406		48,359		47,734
	December 31,
(in thousands)	2016		2015		2014		2013		2012
Financial Position
Cash, cash equivalents, and short-term investments	$	459,741	$	497,367	$	616,732	$	355,041	$	364,962
Working capital (4) (5)		552,405		586,687		666,405		378,763		209,017
Total assets (4)		1,481,496		1,450,151		1,297,422		1,026,384		1,074,971
Convertible senior notes, net (4) (6)		304,484		290,734		277,670		—		—
Stockholders’ equity		827,832		824,194		788,689		767,450		650,793

⁽¹⁾ Includes acquired company results of operations beginning on the date of each acquisition. See Note 3—Business Acquisitions of the Notes to Consolidated Financial Statements for a summary of recent acquisitions during the years ended December 31, 2016, 2015, and 2014.

⁽²⁾ Income from operations includes the following:

	December 31,
(in thousands)	2016		2015			2014			2013			2012
Amortization of acquisition-related intangibles	$	39,560	$	26,510		$	20,673		$	19,438		$	18,594
Stock-based compensation expense		31,826		34,071			36,061			25,770			19,721
Restructuring and other costs		6,729		5,731			6,578			4,834			5,803
Litigation settlement expenses (recoveries)		1,027		584			897			(3,081	)		256
Change in fair value of contingent consideration		6,939		(2,135	)		(3,810	)		(5,742	)		(1,360	)
Acquisition-related transaction costs		2,241		5,494			1,501			1,434			2,200
Gain on sale of building and land (7)		—		—			—			(117,216	)		—
Total charges, net of recoveries	$	88,322	$	70,255		$	61,900		$	(74,563	)	$	45,214

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⁽³⁾  Net income includes the following:

• Tax benefit from the release of previously unrecognized tax benefits of $16.6, $7.4, $2.9, $5.8, and $11.8 million for the years ended December 31, 2016, 2015, 2014, 2013, and 2012, respectively, resulting from the release of previously unrecognized tax benefits due to the expiration of U.S. federal, state, and foreign statutes of limitations.

• Tax benefit of $3.1 million during the year ended December 31, 2014 resulting from the increased valuation of intangible assets for Brazilian tax reporting.

• Tax provision of $19.4 million during the year ended December 31, 2013 to establish a valuation allowance related to the realization of tax benefits from existing California deferred tax assets.

• Tax benefit of $3.2 million during the year ended December 31, 2013, resulting from the renewal of the U.S. federal research and development tax credit on January 2, 2013, retroactive to 2012, pursuant to the American Taxpayer Relief Act of 2012. ASC 740-10-45-15, Income Taxes, requires the effects of a change in tax law or rates be recognized in the period that includes the enactment date.

• Tax benefit of $43.6 million during the year ended December 31, 2012 resulting from a capital loss related to the liquidation of a wholly-owned subsidiary.

• Tax benefit of $6.5 million during the year ended December 31, 2012 resulting from the increased valuation of acquired intangibles for tax purposes due to an operational restructuring in Spain.

⁽⁴⁾ In April 2015, the FASB issued Accounting Standards Update (“ASU”) 2015-03, Simplifying the Presentation of Debt Issuance Costs, which became effective in the first quarter of 2016. ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt, which is consistent with the presentation of debt discounts and premiums. Retrospective application is required, which resulted in the reclassification of $5.8 and $7.1 million of debt issuance costs from other current assets and other assets to a direct reduction of our 0.75% Convertible Senior Notes, net, due 2019 (“Notes”) in our Consolidated Balance Sheet as of December 31, 2015 and 2014, respectively.

⁽⁵⁾ ASU 2015-17, Balance Sheet Classification of Deferred Taxes, issued in November 2015 and effective in the first quarter of 2016, removes the requirement to classify the current and noncurrent amounts of deferred income tax assets and liabilities and requires noncurrent classification. Under prior guidance, the current and noncurrent classification of deferred income tax assets and liabilities was generally determined by reference to the classification of the related asset or liability unless there is no associated asset or liability that will cause the temporary timing difference to reverse. In that situation, the expected reversal date of the timing difference is used for classification purposes. We have elected to apply this guidance retrospectively to all prior periods to maintain the comparability of presentation between periods. We elected to early adopt this standard in 2015, which retroactively reduced working capital by $17.1, $20.9, and $53.8 million as of December 31, 2014, 2013, and 2012, respectively.

⁽⁶⁾ In September 2014, we completed a private placement of $345 million principal amount of 0.75% Convertible Senior Notes due 2019 (“Notes”). Holders of the Notes will have the right to require us to repurchase all or a portion of their Notes upon the occurrence of a fundamental change at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, as described in Note 7—Convertible Senior Notes, Note Hedges, and Warrants of the Notes to Consolidated Financial Statements.

⁽⁷⁾ On November 1, 2012, we sold the 294,000 square foot building located in Foster City, California, which at that time served as our corporate headquarters, along with approximately four acres of land and certain other assets related to the property, for $179.7 million. We used the facility until October 31, 2013, while searching for a new facility, building it out, and relocating our corporate headquarters, for which period rent was not required to be paid. Because we vacated the facility on October 31, 2013, we have no continuing involvement with the property and have accounted for the transaction as a property sale during the fourth quarter of 2013, thereby recognizing a gain of approximately $117.2 million on the sale of the property.

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Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the audited consolidated financial statements and related notes thereto included in this Annual Report on Form 10-K.

All assumptions, anticipations, expectations, and forecasts contained herein are forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act that involve risks and uncertainties. Forward-looking statements include, among others, those statements including the words “anticipate,” “believe,” “consider,” “continue,” “develop,” “estimate,” “expect,” “goal,” “intend,” “may,” “look,” “plan,” “potential,” “project,” “seek,” “should,” “target,” “will,” variations of such words, and similar expressions. Our actual results could differ materially from those discussed here. For a discussion of the factors that could impact our results, readers are referred to Item 1A, “Risk Factors,” in Part I of this Annual Report on Form 10-K and to our other reports filed with the SEC, including the Company’s most recent Quarterly Report on Form 10-Q and Current Reports on Form 8-K, and any amendments thereto. We do not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made.

Overview

Key financial results for the year ended December 31, 2016 were as follows:

• Our results of operations for the year ended December 31, 2016 compared with the prior year reflect revenue growth, gross profit improvement, comparable operating expenses as a percentage of revenue, increased interest expense related to our Notes, and increased investment income resulting from increased interest rates. We completed our acquisitions of Rialco and Optitex in 2016. Post-acquisition revenue was $19.8 million in 2016 related to these two acquisitions. We completed our acquisitions of Reggiani, Matan, CTI, and Shuttleworth in 2015. Post-acquisition revenue was $88.4 million in 2015 related to these four acquisitions. We completed our acquisitions of DIMS, DirectSmile, Rhapso, and SmartLinc in 2014. Their results are included in our results of operations commencing on their respective acquisition dates.

• Our consolidated revenue increased by 12%, or $109.5 million, to $992.1 million for the year ended December 31, 2016 from $882.5 million for the year ended December 31, 2015. Industrial Inkjet and Productivity Software revenue increased by $114.9 and $16.4 million, respectively, partially offset by decreased Fiery revenue of $21.7 million in 2016 compared with 2015. Recurring ink and maintenance revenue increased by 21% during the year ended December 31, 2016 compared with the same period in the prior year and represented 31% of consolidated revenue.

• Our gross profit percentage decreased to 51% during the year ended December 31, 2016, from 52% during the year ended December 31, 2015, primarily due to increased Industrial Inkjet revenue at a lower gross profit percentage (35%) compared with Productivity Software (75%) and Fiery (71%). The gross profit percentages increased in each of our operating segments compared with the same periods in the prior year.

• Operating expenses increased by $49.4 million to $452.1 million during the year ended December 31, 2016, from $402.7 million during the year ended December 31, 2015, but was comparable as a percentage of revenue at 46% to the year ended December 31, 2015. The increase in operating expenses was primarily due to head count increases related to our business acquisitions, prototype and non-recurring engineering expenses related to future product launches, trade show and marketing program expenses, amortization of intangible assets, increased expenses related to litigation and uncollectible accounts, restructuring and other charges, and increased fair value of contingent consideration.

• Interest expense increased by $0.3 million, to $17.7 million for the year ended December 31, 2016 from $17.4 million for the year ended December 31, 2015 primarily due to interest accretion on our Notes.

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• Interest income and other income (expense), net, was a gain of $0.5 million during the year ended December 31, 2016, compared with a loss of $1.8 million during the year ended December 31, 2015, primarily because the foreign exchange loss decreased by $0.4 million resulting primarily from revaluation of foreign currency denominated net assets (mainly denominated in Euros and British pounds sterling, and Chinese renminbi), and investment income increased by $1.7 million due to increased interest rates.

• We recorded a tax benefit of $6.2 million in 2016 on pre-tax income of $39.4 million compared to a tax provision of $4.0 million in 2015 on pre-tax income of $37.5 million. We recognized $16.6 million of previously unrecognized tax benefits in 2016 as compared to $7.4 million in 2015.

Results of Operations

The following table presents items in our consolidated statements of operations as a percentage of total revenue for 2016, 2015, and 2014. These operating results are not necessarily indicative of results for any future period.

	For the years ended December 31,
	2016			2015			2014
Revenue		100	%		100	%		100	%
Gross profit		51			52			54
Operating expenses (gains):
Research and development		15			16			17
Sales and marketing		17			18			19
General and administrative		9			8			8
Amortization of identified intangibles		4			3			3
Restructuring and other		1			1			1
Total operating expenses		46			46			48
Income from operations		5			6			6
Interest expense		(1	)		(2	)		(1	)
Interest income and other income (expense), net		—			—			—
Income before income taxes		4			4			5
Benefit from (provision for) income taxes		1			—			(1	)
Net income		5	%		4	%		4	%

Revenue

We classify our revenue, gross profit, assets, and liabilities in accordance with our three operating segments as follows:

Industrial Inkjet, which consists of our VUTEk and Matan super-wide and wide format display graphics, Reggiani textile, Jetrion label and packaging, and Cretaprint ceramic tile decoration and construction material industrial digital inkjet printers; UV curable, LED, ceramic, water-based, and thermoforming ink, as well as a variety of textile ink including dye sublimation, pigmented, reactive dye, acid dye, pure disperse dye, and water-based dispersed printing ink; digital inkjet printer parts; and professional services. Printing surfaces include paper, vinyl, corrugated, textile, glass, plastic, aluminum composite, ceramic tile, wood, and many other flexible and rigid substrates.

Productivity Software, which consists of a complete software suite that enables efficient and automated end-to-end business and production workflows for the print and packaging industry. This Productivity Suite also provides tools to enable revenue growth, efficient scheduling, and optimization of processes, equipment, and personnel. Customers are provided the financial and technical flexibility to deploy locally within their business or

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to be hosted in the cloud. The Productivity Suite addresses all segments of the print industry and consists of the: (i) Packaging Suite, with Radius at its core, for tag & label, cartons, and flexible packaging businesses; (ii) Corrugated Packaging Suite, with CTI at its core, for corrugated packaging businesses; (iii) Enterprise Commercial Print Suite, with Monarch at its core, for enterprise print businesses; (iv) Publication Print Suite, with Monarch or Technique at its core, for publication print businesses; (v) Mid-market Print Suite, with Pace at its core, for medium size print businesses; (vi) Quick Print Suite, with PrintSmith at its core, for small printers and in-plant sites; and (vii) Value Added Products, available with the suite and standalone, such as web-to-print, e-commerce, cross media marketing, warehousing, fulfillment, shop floor data collection, and shipping to reduce costs, increase profits, and offer new products and services to their existing and future customers. We also market Optitex fashion CAD software, which facilitates fast fashion and increased efficiency in the fashion and textile industries.

Fiery, which consists of DFEs that transform digital copiers and printers into high performance networked printing devices for the office, industrial, and commercial printing markets. This operating segment is comprised of (i) stand-alone DFEs connected to digital printers, copiers, and other peripheral devices, (ii) embedded DFEs and design-licensed solutions used in digital copiers and multi-functional devices, (iii) optional software integrated into our DFE solutions such as Fiery Central and Graphics Arts Package, (iv) Fiery Self Serve, our self-service and payment solution, (v) PrintMe, our mobile printing application, and (vi) stand-alone software-based solutions such as our proofing and scanning solutions.

Ex-Currency. To better understand trends in our business, we believe it is helpful to adjust our statement of operations to exclude the impact of year-over-year changes in the translation of foreign currencies into U.S. dollars. This is a non-GAAP measure that is calculated by adjusting revenue, gross profit, and operating expenses by using historical exchange rates in effect during the comparable prior period and removing the balance sheet currency remeasurement impact from interest income and other income (expense), net, including removal of any hedging gains and losses. We refer to these adjustments as “ex-currency.” The year-over-year currency impact can be determined as the difference between year-over-year actual growth rates and year-over-year ex-currency growth rates.

Management believes the ex-currency measures provide investors with an additional perspective on year-over-year financial trends and enables investors to analyze our operating results in the same way management does. A reconciliation of the ex-currency adjustments to GAAP results for the years ended December 31, 2016 and 2015 and an explanation of how management uses non-GAAP financial information to evaluate its business, the substance behind management’s decision to use this non-GAAP financial information, the material limitations associated with the use of non-GAAP financial information, the manner in which management compensates for those limitations, and the substantive reasons management believes that this non-GAAP financial information provides useful information to investors is included under “Non-GAAP Financial Information” below.

Please refer to the section entitled “Unaudited Non-GAAP Financial Information” for these non-GAAP measures a reconciliation of these measures to the most comparable GAAP measures.

Revenue by Operating Segment

Our revenue by operating segment for the years ended December 31, 2016, 2015, and 2014 was as follows (in thousands):

	For the years ended December 31,												% change
	2016				2015				2014				2016 over 2015			2015 over 2014
Industrial Inkjet	$	562,583	57	%	$	447,705	51	%	$	379,170	48	%		26	%		18	%
Productivity Software		151,737	15			135,350	15			130,743	17			12			4
Fiery		277,745	28			299,458	34			280,514	35			(7	)		7
Total revenue	$	992,065	100	%	$	882,513	100	%	$	790,427	100	%		12	%		12	%

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Overview

Revenue was $992.1, $882.5, and $790.4, million for the years ended December 31, 2016, 2015, and 2014, respectively, resulting in a 12% increase (14% ex-currency) in 2016 compared with 2015 and a 12% increase (17% ex-currency) in 2015 compared with 2014.

The $109.5 million increase in 2016 compared with 2015 was primarily due to increased Reggiani textile, Matan super-wide format, and Cretaprint ceramic tile decoration digital inkjet printer revenue, increased ink revenue, and post-acquisition Rialco revenue in the Industrial Inkjet operating segment and post-acquisition Optitex, CTI, and Shuttleworth revenue in the Productivity Software operating segment, partially offset by decreased Fiery revenue.

The $92.1 million increase in 2015 was primarily driven by the post-acquisition performance of Reggiani and Matan in our Industrial Inkjet operating segment, our acquisition strategy in the Productivity Software operating segment, and product launches by the leading printer manufacturers in the Fiery operating segment.

Industrial Inkjet

Industrial Inkjet revenue increased by $114.9 million, or 26% in 2016 compared with 2015 (27% ex-currency). Industrial Inkjet revenue is benefiting from the ongoing analog to digital technology and solvent to UV curable ink migration primarily due to:

• the complementary impact of the Industrial Inkjet business acquisitions,

• increased revenue resulted from a full year of Reggiani textile and Matan super-wide format industrial digital inkjet printer revenue in 2016 compared with six months in 2015,

• post-acquisition Rialco ink products revenue,

• the FabriVu 180/340 soft signage super wide-format roll-to-roll digital inkjet graphics printer manufactured in our Reggiani facility,

• increased revenue from the C4 ceramic tile decoration digital inkjet printer, the launch of the M4 ceramic digital inkjet printer that can use a variety of print heads,

• increased ceramic ink revenue as our internally formulated ceramic ink gains market share, and

• increased UV and LED curable ink revenue as a result of the high utilization that our UV printers are experiencing in the field,

• partially offset by decreased solvent printer installed base demand measured by solvent ink usage.

Industrial Inkjet revenue increased by $68.5 million, or 18% in 2015 compared with 2014 (27% ex-currency). Industrial Inkjet revenue is benefiting from the ongoing analog to digital technology and solvent to UV curable ink migration primarily due to:

• the complementary impact of the Reggiani and Matan business acquisitions,

• increased UV and LED curable ink revenue as a result of the high utilization that our UV printers are experiencing in the field, partially offset by decreased solvent printer installed base demand measured by solvent ink usage,

• strong demand for our newly launched products incorporating LED technology such as the LX3 Pro digital inkjet printer, which is a 3.2 meter hybrid flatbed/roll-fed printer that prints on rigid and flexible materials up to two inches thick,

• the HS 100 digital UV inkjet press representing an alternative to analog presses utilizing pin & cure technology,

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• the H1625 digital UV inkjet wide format printer, and

• the launch of the C4, our next generation ceramic tile decoration digital inkjet printer.

Productivity Software

Productivity Software revenue increased by $16.4 million, or 12%, in 2016 compared with 2015 (14% ex-currency), primarily due to post-acquisition Optitex revenue, a full year of CTI and Shuttleworth revenue in 2016 compared with three and two months, respectively, in 2015; increased license revenue; and annual price increases related to our maintenance contracts.

Productivity Software revenue increased by $4.6 million, or 4%, in 2015 compared with 2014 (9% ex-currency), primarily due to increased license revenue from our 2015 acquisitions of CTI and Shuttleworth and professional services and recurring maintenance revenue primarily resulting from our 2014 acquisition of DIMS and DirectSmile. We also implemented annual price increases, which marginally increased revenue.

Fiery

Fiery revenue decreased by $21.7 million, or 7%, in 2016 compared with 2015 (also 7% ex-currency). Although end customer and reseller preference for Fiery products drives demand, most Fiery revenue relies on printer manufacturers to integrate Fiery technology into the design and development of their print engines. Fiery revenue decreased primarily due to

• reduced end user demand associated with the Drupa trade show in June 2016, which occurs every four years, caused by end users delaying purchasing decisions until new printer models are available,

• one significant printer manufacturer purchasing less inventory, and

• weak APAC demand.

Fiery revenue increased by $18.9 million, or 7%, in 2015 compared with 2014 (also 7% ex-currency). Fiery revenue increased primarily due to:

• consistent product launches by these printer manufacturers with increased speed, quality, and versatility have made the DFE a more significant consideration for the customer resulting in increased stand-alone Fiery DFE revenue,

• the release of the Fiery FS200 Pro DFE incorporating higher speed processing, expanded color offerings, shop automation, and connectivity, and

• integration of Fiery DFEs with certain Productivity Software products.

Revenue by Geographic Area

Shipments to some of our significant printer manufacturer customers are made to centralized purchasing and manufacturing locations, which in turn ship to other locations, making it difficult to obtain accurate geographical shipment data. Accordingly, we believe that export sales of our products into each region may differ from what is reported.

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Our revenue by geographic region for the years ended December 31, 2016, 2015, and 2014 was as follows (in thousands):

	For the years ended December 31,												% change
	2016				2015				2014				2016 over 2015			2015 over 2014
Americas	$	500,411	50	%	$	473,599	54	%	$	438,421	55	%		6	%		8	%
EMEA		360,305	37			291,103	33			244,545	31			24			19
APAC		131,349	13			117,811	13			107,461	14			11			10
Total revenue	$	992,065	100	%	$	882,513	100	%	$	790,427	100	%		12	%		12	%

Overview

Our consolidated revenue increase of $109.5 million, or 12% in 2016 compared with 2015 (14% ex-currency), resulted from increased revenue in the Americas, EMEA, and APAC. Our consolidated revenue increase of $92.1 million, or 12% in 2015 compared with 2014 (17% ex-currency), resulted from increased revenue in the Americas, EMEA, and APAC.

Americas

Americas revenue increased by $26.8 million, or 6%, in 2016 compared with 2015 (also 6% ex-currency) resulting from increased UV and LED curable ink revenue; increased Reggiani textile, Vutek and Matan super-wide format, label and packaging, and ceramic tile decoration digital inkjet printer revenue; and increased Productivity Software revenue; partially offset by decreased Fiery revenue. Increased Productivity Software revenue resulted primarily from our 2016 acquisition of Optitex; our 2015 acquisition of CTI, and increased Radius and Metrics license revenue. Fiery revenue decreased primarily due to reduced end user demand associated with the Drupa trade show in June 2016, which occurs every four years, caused by end users delaying purchasing decisions until new printer models are available and one significant printer manufacturer purchasing less inventory.

Americas revenue increased by $35.2 million, or 8%, in 2015 compared with 2014 (9% ex-currency) resulting from increased revenue in all three of our operating segments resulting from increased UV and LED curable ink revenue, incremental revenue from Reggiani industrial digital inkjet textile printers and Matan industrial digital inkjet super-wide format printers, Fiery revenue, professional services revenue resulting from progress on major development projects, and increased license revenue from our 2015 acquisition of CTI.

EMEA

EMEA revenue increased by $69.2 million, or 24%, in 2016 compared with 2015 (26% ex-currency) primarily due to increased Reggiani textile, Matan super-wide format, and ceramic tile decoration digital inkjet printer revenue; post-acquisition revenue from our 2016 acquisitions of Rialco and Optitex; revenue from our 2015 acquisition of Shuttleworth; and increased Pace license revenue; partially offset by decreased Fiery revenue due to reduced end user demand associated with the Drupa trade show in June 2016, which occurs every four years, caused by end users delaying purchasing decisions until new printer models are available and one significant printer manufacturer purchasing less inventory.

EMEA revenue increased by $46.6 million, or 19%, in 2015 compared with 2014 (32% ex-currency) primarily due to increased Fiery and Industrial Inkjet revenue. The increase in Industrial Inkjet revenue is primarily due to sales of Reggiani industrial digital inkjet textile printers, Matan industrial digital inkjet super-wide format printers, and increased Fiery revenue.

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APAC

APAC revenue increased by $13.5 million, or 11%, in 2016 compared with 2015 (13% ex-currency) primarily due to increased Matan super-wide format, ceramic tile decoration, and Reggiani digital inkjet printer revenue; and Optitex post-acquisition revenue; partially offset by decreased Fiery revenue primarily due to weak APAC demand.

APAC revenue increased by $10.4 million, or 10%, in 2015 compared with 2014 (15% ex-currency) primarily due to increased Industrial Inkjet revenue. We achieved revenue increases in each of our industrial inkjet printers in this region, including super-wide and wide format, label & packaging, textile, and ceramic tile decoration digital inkjet printers.

Revenue Concentration

A substantial portion of our revenue over the years has been attributable to sales of products through the leading printer manufacturers and independent distributor channels. We have a direct relationship with several leading printer manufacturers and work closely to facilitate integration of Fiery technology into the design and development of their print engines. The printer manufacturers act as distributors and sell Fiery products to end customers through reseller channels. End customer and reseller channel preference for the Fiery DFE and software solutions drive demand for Fiery products through the printer manufacturers.

Although end customer and reseller channel preference for Fiery products drives demand, most Fiery revenue relies on printer manufacturers to integrate Fiery technology into the design and development of their print engines. A significant portion of our revenue is, and has been, generated by sales of our Fiery DFE products to a relatively small number of leading printer manufacturers. However, none of these printer manufacturers accounted for more than 10% of our revenue for the year ended December 31, 2016.

Our reliance on revenue from the leading printer manufacturers was 28%, 33%, and 33% during 2016, 2015, and 2014, respectively. Over time, we expect our revenue from the leading printer manufacturers to decline. Because sales of our printer and copier-related products constitute a significant portion of our revenue and there are a limited number of printer manufacturers producing copiers and printers in sufficient volume to be attractive customers for us, we expect that we will continue to depend on a relatively small number of printer manufacturers for a significant portion of our Fiery DFE revenue in future periods. Accordingly, if we lose or experience reduced sales to one of these printer manufacturer/distributors, we will have difficulty replacing that revenue with sales to new or existing customers.

Gross Profit

Gross profit by operating segment, excluding stock-based compensation, for the years ended December 31, 2016, 2015, and 2014 was as follows (in thousands):

	2016			2015			2014
Industrial Inkjet
Revenue	$	562,583		$	447,705		$	379,170
Gross profit		199,448			152,918			143,981
Gross profit percentages		35.5	%		34.2	%		38.0	%
Productivity Software
Revenue	$	151,737		$	135,350		$	130,743
Gross profit		114,179			99,278			94,733
Gross profit percentages		75.2	%		73.3	%		72.5	%
Fiery
Revenue	$	277,745		$	299,458		$	280,514
Gross profit		198,322			210,140			193,585
Gross profit percentages		71.4	%		70.2	%		69.0	%

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A reconciliation of operating segment gross profit to the consolidated statements of operations for the years ended December 31, 2016, 2015, and 2014 is as follows (in thousands):

	2016			2015			2014
Segment gross profit	$	511,949		$	462,336		$	432,299
Stock-based compensation expense		(2,784	)		(2,837	)		(2,562	)
Other items excluded from segment profit		(475	)		(115	)		—
Gross profit	$	508,690		$	459,384		$	429,737

Overview

Our gross profit percentage decreased to 51% (52% ex-currency using 2015 exchange rates) during the year ended December 31, 2016, compared to 52% (also 52% ex-currency using 2014 exchange rates) during the year ended December 31, 2015, and 54% during the year ended December 31, 2014, primarily due to increased Industrial Inkjet revenue at a gross profit percentage of 35.5% compared with Productivity Software and Fiery gross profit percentages of 75.2% and 71.4%, respectively. Industrial Inkjet revenue increased as a percentage of revenue to 56.7% during the year ended December 31, 2016, from 50.7% and 48.0%, during the years ended December 31, 2015 and 2014, respectively.

Industrial Inkjet Gross Profit

The Industrial Inkjet gross profit percentage increased to 35.5% in 2016 (35.7% ex-currency using 2015 exchange rates) from 34.2% in 2015. Gross profit percentages improved by leveraging efficiencies in our worldwide digital inkjet printer manufacturing operations, centralizing super wide-format textile digital inkjet printer production in Italy, transferring production of super wide-format roll-to-roll digital inkjet printers to Israel to leverage the lower cost platform that Matan provides, reducing warranty expense as a percentage of revenue due to engineering and quality improvements, and increasing ink revenue as a percentage of consolidated Industrial Inkjet revenue. Our ink business generates a higher gross profit percentage than other elements of our Industrial Inkjet operating segment.

The Industrial Inkjet gross profit percentage decreased to 34.2% in 2015 (35.8% ex-currency using 2014 exchange rates) from 38.0% in 2014 primarily due to lower gross margin percentages realized from Reggiani and the foreign currency impact of international sales of super-wide and wide format industrial digital inkjet printers for which the cost was denominated in U.S. dollars, partially offset by increased gross margin percentages realized from the next generation C4 ceramic tile decoration digital inkjet printer, which has experienced improving margins subsequent to product launch.

Productivity Software Gross Profit

The Productivity Software gross profit percentage increased to 75.2% in 2016 (75.0% ex-currency using 2015 exchange rates) from 73.3% in 2015 primarily due to efficiencies gained through increased revenue on a relatively fixed cost base, achievement of certain post-acquisition cost synergies, and price increases on annual maintenance renewal contracts.

The Productivity Software gross profit percentage increased to 73.3% in 2015 (73.2% ex-currency using 2014 exchange rates) from 72.5% in 2014 primarily due to increased professional services revenue at a higher margin, achievement of certain post-acquisition cost synergies, and price increases on annual maintenance renewal contracts.

Fiery Gross Profit

The Fiery gross profit percentage increased to 71.4% in 2016 (also 71.4% ex-currency using 2015 exchange rates) from 70.2% in 2015. The revenue mix between lower margin DFEs and software solutions compared with higher margin professional services for this margin fluctuation between the periods.

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The Fiery gross profit percentage increased to 70.2% in 2015 (also 70.2% ex-currency using 2014 exchange rates) from 69.0% in 2014 primarily due to higher margin professional services revenue and reduced costs related to DFEs and other products required for newly launched printers by the leading printer manufacturers.

Operating Expenses

Operating expenses for the years ended December 31, 2016, 2015, and 2014 were as follows (in thousands):

	For the years ended December 31,						% change
	2016		2015		2014		2016 over 2015			2015 over 2014
Research and development	$	151,192	$	141,364	$	134,732		7	%		5	%
Sales and marketing		169,042		156,339		147,383		8			6
General and administrative		85,614		72,797		66,932		18			9
Amortization of identified intangibles		39,560		26,510		20,673		49			28
Restructuring and other		6,729		5,731		6,578		17			(13	)
Total operating expenses	$	452,137	$	402,741	$	376,298		12	%		7	%

Operating expenses increased by $49.4 million, or 12%, in 2016 (13% ex-currency) as compared with 2015, and increased by $26.4 million, or 7%, in 2015 (12% ex-currency) as compared with 2014.

Operating expenses increased by $49.4 million to $452.1 million during the year ended December 31, 2016, from $402.7 million during the year ended December 31, 2015, but was comparable as a percentage of revenue at 46% to the year ended December 31, 2015. The increase in operating expenses was primarily due to head count increases related to our business acquisitions, prototype and non-recurring engineering expenses related to future product launches, trade show and marketing program expenses, amortization of intangible assets, increased expenses related to litigation and uncollectible accounts, restructuring and other charges, and increased fair value of contingent consideration.

Operating expenses increased by $26.4 million, to $402.7 million during the year ended December 31, 2015 from $376.3 million during the year ended December 31, 2014, but decreased as a percentage of revenue to 46% during the year ended December 31, 2015 from 48% during the year ended December 31, 2014. The increase in operating expenses was primarily due to head count increases related to our business acquisitions, prototype and non-recurring engineering expenses related to future product launches, trade show and marketing program expenses, transaction expenses related to our business acquisitions, amortization of intangible assets, and increased expenses related to litigation and uncollectible accounts, partially offset by reduced legal fees.

Research and Development

Research and development expenses include personnel, consulting, travel, research and development facilities, prototype materials, and non-recurring engineering expenses.

Research and development expenses for the years ended December 31, 2016, 2015, and 2014 were $151.2 million, or 15% of revenue, $141.4 million, or 16% of revenue, and $134.7 million, or 17% of revenue, respectively.

Research and development expenses increased by $9.8 million, or 7%, in 2016 as compared with 2015 (8% ex-currency). Personnel-related expenses increased by $9.9 million primarily due to head count increases related to our business acquisitions and variable compensation expense. Prototypes and non-recurring engineering, consulting, contractor, freight, and related travel expenses decreased by $0.2 million. Stock-based compensation expense decreased by $0.4 million because actual forfeitures were greater than the previous forfeiture estimate

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that was used prior to implementation of ASU 2016-09 as more fully explained in Note 1—Basis of Presentation and Significant Accounting Policies, reduced probability of achieving performance awards, and decreased Employee Stock Purchase Plan (“ESPP”) participation by employees compared to the prior year. The remaining increase of $0.5 million is primarily due to facility and information technology expenses related to our research and development activities.

Research and development expenses increased by $6.6 million, or 5%, in 2015 as compared with 2014 (8% ex-currency). Personnel-related expenses increased by $3.4 million primarily due to head count increases related to our business acquisitions and increased variable compensation due to improved profitability. Prototypes and non-recurring engineering, consulting, contractor, freight, and related travel expenses increased by $2.8 million primarily due to product development efforts in advance of product launches. Stock-based compensation expense increased by $0.6 million primarily due to bonus program vesting and increased ESPP expense, which is due to the appreciating stock price and increased employee participation compared to the prior year.

Research and development head count was 1,209, 1,196, and 1,067 as of December 31, 2016, 2015, and 2014, respectively.

We expect that if the U.S. dollar remains volatile against the Indian rupee, Euro, British pound sterling, Israeli shekel, Canadian dollar, or Brazilian real, research and development expenses reported in U.S. dollars could fluctuate, although we hedge our operating expense exposure to the Indian rupee, which partially mitigates this risk.

Sales and Marketing

Sales and marketing expenses include personnel, trade shows, marketing programs and promotional materials, sales commissions, travel and entertainment, depreciation, and worldwide sales office expenses.

Sales and marketing expenses for the years ended December 31, 2016, 2015, and 2014 were $169.0 million, or 17% of revenue, $156.3 million, or 18% of revenue, and $147.4 million, or 19% of revenue, respectively.

Sales and marketing expenses increased by $12.7 million, or 8%, in 2016 as compared with 2015 (9% ex-currency). Personnel-related expenses increased by $8.0 million primarily due to head count increases related to our business acquisitions and increased commissions due to increased revenue. Trade show and marketing program spending, including consulting, contractor, travel, and freight, increased by $4.8 million primarily due to the Drupa trade show, which is an international printing trade show that is held every four years.

Sales and marketing expenses increased by $9.0 million, or 6%, in 2015 as compared with 2014 (13% ex-currency). Personnel-related expenses increased by $4.1 million primarily due to head count increases related to our business acquisitions, partially offset by reduced commissions and variable compensation. Trade show and marketing program spending, including consulting, contractor, travel, and freight, has increased by $3.6 million. Stock-based compensation expense increased by $0.5 million primarily due to bonus program vesting and increased ESPP expense, which is due to the appreciating stock price and increased employee participation compared to the prior year. The remaining increase of $0.8 million is primarily due to facility and information technology expenses related to our sales and marketing activities.

Sales and marketing head count was 950, 892, and 762 as of December 31, 2016, 2015, and 2014, respectively, including 398, 360, and 304 in customer service head count for each of the years presented.

Over time, our sales and marketing expenses may increase in absolute terms if revenue increases in future periods as we continue to actively promote our products and introduce new services and products. We expect that if the U.S. dollar remains volatile against the Euro, British pound sterling, Brazilian real, Israeli shekel, Australian dollar, and other currencies, sales and marketing expenses reported in U.S. dollars could fluctuate.

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General and Administrative

General and administrative expenses consist primarily of human resources, legal, and finance expenses. General and administrative expenses for the years ended December 31, 2016, 2015, and 2014 were $85.6 million, or 9% of revenue, $72.8 million, or 8% of revenue, and $66.9 million, or 8% of revenue, respectively.

General and administrative expenses increased by $12.8 million, or 18%, in 2016 as compared with 2015 (19% ex-currency). Personnel-related expenses increased by $2.6 million primarily due to head count increases related to our business acquisitions. Acquisition costs decreased by $3.2 million primarily due to lower expenses in 2016 related to the Optitex, Rialco, and anticipated acquisitions compared with acquisition costs related to the Reggiani, Matan, CTI, and Shuttleworth acquisitions, which closed in 2015. Expenses related to litigation and uncollectible accounts increased by $2.8 million. Stock-based compensation expense decreased by $1.8 million because actual forfeitures were greater than the previous forfeiture estimate that was used prior to implementation of ASU 2016-09 as more fully explained in Note 1—Basis of Presentation and Significant Accounting Policies, reduced probability of achieving performance awards, and decreased ESPP participation by employees compared to the prior year. The remaining increase of $3.5 million is primarily due to facilities and information technology expenses.

The estimated probability of achieving the Rialco, Optitex, Reggiani, DirectSmile, and CTI earnout performance targets increased during the year ended December 31, 2016, partially offset by a reduced probability of achieving the DIMS and Shuttleworth earnout performance targets, resulting in an increase in the associated liability and general and administrative expense of $6.8 million, including earnout interest accretion. A similar change in the estimated probability or actual achievement of several earnout performance targets during the year ended December 31, 2015 resulted in a reduction of the associated liability and general and administrative expense of $2.1 million in the prior year, net of earnout interest accretion.

General and administrative expenses increased by $5.9 million, or 9%, in 2015 as compared with 2014 (14% ex-currency). Personnel-related expenses increased by $0.8 million primarily due to head count increases related to our business acquisitions. Acquisition costs increased by $4.0 million primarily related to the acquisitions of Reggiani, Matan, Shuttleworth, and CTI. Expenses related to litigation and uncollectible accounts increased by $1.4 million. Legal expenses decreased by $1.9 million due to a decrease in significant litigation and settlement activity from the prior year. Stock-based compensation expense decreased by $3.4 million primarily due to forfeitures resulting from the resignation of our chief financial officer in January 2015 and decreased bonus program vesting, partially offset by increased ESPP expense due to our appreciating stock price, increased employee participation compared to the prior year, and the post-acquisition settlement of pre-acquisition stock options issued by an acquired business. The remaining increase of $3.3 million is primarily due to facilities and information technology expenses.

The estimated probability or actual achievement of several earnout performance targets was reduced during the year ended December 31, 2015, net of earnout interest accretion, resulting in a reduction of the associated liability and general and administrative expense of $2.1 million, net of earnout interest accretion. A similar change in the estimated probability or actual achievement of several earnout performance targets during the year ended December 31, 2014, net of earnout interest accretion, resulted in a reduction of the associated liability and general and administrative expense of $3.8 million.

We expect that if the U.S. dollar remains volatile against the Euro, British pound sterling, Indian rupee, Israeli shekel, Brazilian real, or other currencies, general and administrative expenses reported in U.S. dollars could fluctuate.

Stock-based Compensation

Stock-based compensation expense for the years ended December 31, 2016, 2015, and 2014 were $31.8 million, or 3% of revenue, $34.1 million, or 4% of revenue, and $36.1 million, or 5% of revenue, respectively.

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We account for stock-based payment awards in accordance with ASC 718, Stock Compensation, which requires stock-based compensation expense to be recognized based on the fair value of such awards on the date of grant. We amortize compensation cost on a graded vesting basis over the vesting period, after assessing the probability of achieving requisite performance criteria with respect to performance-based awards. Stock-based compensation cost is recognized over the requisite service period for each separately vesting tranche of the award as though the award were, in substance, multiple awards. This has the impact of greater stock-based compensation expense during the initial years of the vesting period.

Stock-based compensation expense decreased by $2.2 million, or 7% in 2016 as compared with 2015 because forfeitures were greater than the previous forfeiture estimate that was used prior to implementation of ASU 2016-09 as more fully explained in Note 1—Basis of Presentation and Significant Accounting Policies, prior year forfeitures resulting from the resignation of our chief financial officer in January 2015, reduced probability of achieving performance awards, and decreased ESPP participation by employees compared to the prior year.

Stock-based compensation expense decreased by $2.0 million, or 6% in 2015 as compared with 2014 primarily due to forfeitures resulting from the resignation of our chief financial officer in January 2015 and decreased bonus program vesting, partially offset by increased ESPP expense due to our appreciating stock price, increased employee participation compared to the prior year, and the post-acquisition settlement of pre-acquisition stock options issued by an acquired business.

Amortization of Identified Intangibles

Amortization of identified intangibles for the years ended December 31, 2016, 2015, and 2014 were $39.6 million, or 4% of revenue, $26.5 million, or 3% of revenue, and $20.7 million, or 3% of revenue, respectively.

Amortization of identified intangibles increased by $13.0 million, or 49% in 2016 as compared with 2015 primarily due to intangible amortization of identified intangibles resulting from the Reggiani, Matan, CTI, Shuttleworth, Rialco, and Optitex acquisitions, partially offset by decreased amortization due to certain intangible assets from prior year acquisitions becoming fully amortized.

Amortization of identified intangibles increased by $5.8 million, or 28% in 2015 as compared with 2014 primarily due to intangible amortization of identified intangibles resulting from the Reggiani, Matan, CTI, and Shuttleworth acquisitions, partially offset by decreased amortization due to certain Radius Solutions Incorporated (“Radius”) and Raster Printers, Inc. (“Raster”) intangible assets becoming fully amortized during 2015.

Restructuring and Other

Restructuring and other costs for the years ended December 31, 2016, 2015, and 2014 were $6.7, $5.7, and $6.6 million, respectively. Restructuring and other charges include severance costs of $4.1, $3.0, and $3.2 million related to head count reductions of 128, 99, and 130 for the years ended December 31, 2016, 2015, and 2014, respectively. Severance costs include severance payments, related employee benefits, retention bonuses, outplacement fees, and relocation costs.

Facilities relocation and downsizing costs for the years ended December 31, 2016, 2015, and 2014 were $0.5, $0.9, and $2.0 million, respectively. Facilities restructuring and other costs are primarily related to the relocation of certain manufacturing and administrative locations to accommodate additional space requirements in 2016 and 2015, and consolidation of our German operations in 2014. Integration expenses for the years ended December 31, 2016, 2015, and 2014 of $2.1, $1.8, and $1.4 million, respectively, were required to integrate our business acquisitions.

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Interest Expense

Interest expense for the years ended December 31, 2016, 2015, and 2014 was $17.7, $17.4, and $5.9 million, respectively.

Interest expense increased by $0.3 million in 2016 compared with 2015 primarily due to increased interest accretion on our Notes. Interest expense increased by $11.5 million in 2015 compared with 2014 primarily due to interest expense related to our Notes. Please refer to Note 7—Convertible Senior Notes, Note Hedges, and Warrants of the Notes to Consolidated Financial Statements for the terms and conditions of our Notes.

Interest Income and Other Income (Expense), Net

Interest income and other income (expense), net, includes interest and investment income, gains and losses from sales of our cash equivalents and short-term investments, and net foreign currency transaction gains and losses. Interest income and other income (expense), net, for the years ended December 31, 2016, 2015, and 2014 was $0.5, $(1.8), and $(5.5) million, respectively.

Interest income and other income (expense), net, was a gain of $0.5 million in 2016 compared with a loss of $1.8 million in 2015 primarily due to increased investment income of $1.7 million in 2016 due to increased interest rates and decreased foreign exchange losses of $0.4 million during 2016 resulting primarily from revaluation of foreign currency denominated net assets (mainly denominated in Euros, British pounds sterling, and Chinese renminbi).

Interest income and other income (expense), net, decreased by $3.7 million from a loss of $5.5 million in 2014 to a loss of $1.8 million in 2015 primarily because the foreign exchange loss decreased by $2.6 million resulting from revaluation of foreign currency denominated net assets (mainly denominated in Euros, British pounds sterling, Chinese renminbi, and Brazilian reais), partially offset by hedging gains. Investment income increased by $1.1 million from $1.4 million in 2014 to $2.5 million in 2015 primarily resulting from increased investments throughout 2015, which were made possible by the proceeds from the Notes.

Goodwill Assessment

We perform our annual goodwill impairment analysis in the fourth quarter of each year according to the provisions of ASC 350-20-35, Goodwill—Subsequent Measurement. A two-step impairment test of goodwill is required, unless the simplified method is elected. In the first step, the fair value of each reporting unit is compared to its carrying value. If the fair value exceeds carrying value, goodwill is not impaired and further testing is not required. If the carrying value exceeds fair value, then the second step of the impairment test is required to determine the implied fair value of the reporting unit’s goodwill. The implied fair value of goodwill is calculated by deducting the fair value of all tangible and intangible net assets of the reporting unit, excluding goodwill, from the fair value of the reporting unit as determined in the first step. If the carrying value of the reporting unit’s goodwill exceeds its implied fair value, then an impairment loss must be recorded equal to the difference.

Our goodwill valuation analysis is based on our respective reporting units (Industrial Inkjet, Productivity Software, and Fiery), which are consistent with our operating segments identified in Note 14—Segment Information, Geographic Regions, and Major Customers of the Notes to Consolidated Financial Statements. We determined the fair value of our reporting units as of December 31, 2016 by equally weighting the market and income approaches. Under the market approach, we estimated fair value based on market multiples of revenue or earnings of comparable companies. Under the income approach, we estimated fair value based on a projected cash flow method using a discount rate determined by our management to be commensurate with the risk inherent in our current business model. Based on our valuation results, we have determined that the fair values of our Industrial Inkjet, Productivity Software, and Fiery reporting units exceed their carrying values by $575, $444, and $515 million, respectively, or 151%, 267%, and 533%, respectively.

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Since fair values were determined using a weighting of the market and income approaches, we reviewed the sensitivity of the market multiple and discount rate to evaluate the sensitivity of the Industrial Inkjet, Productivity Software, and Fiery valuations. The impact of a change in the market multiple of 10% results in an increase or decrease in Industrial Inkjet, Productivity Software, and Fiery fair values of 5.0%. Likewise, the impact of a change in the discount rate of one percentage point results in an increase in the Industrial Inkjet, Productivity Software, and Fiery fair values of 12%, 10%, and 8%, respectively, or a decrease of 8%, 7%, and 6%, respectively. Consequently, we have concluded that no reasonably possible changes would reduce the fair value of the reporting units to such a level that it would cause a failure in step one of the impairment analysis.

Income before Income Taxes

Income before income taxes for the years ended December 31, 2016, 2015, and 2014 were as follows (in thousands):

	2016		2015		2014
U.S.	$	8,254	$	9,311	$	15,090
Foreign		31,128		28,211		26,997
Total	$	39,382	$	37,522	$	42,087

For the year ended December 31, 2016, pretax net income of $39.4 million consisted of U.S. and foreign pretax net income of $8.3 and $31.1 million, respectively. The pretax net income attributable to U.S. operations included amortization of identified intangibles of $7.6 million, stock-based compensation of $31.8 million, restructuring and other costs of $3.8 million, acquisition-related costs of $0.6 million, litigation settlement expense of $1.0 million, and interest expense and amortization of debt issuance costs related to our Notes of $16.3 million, and the change in fair value of contingent consideration of $0.6 million. The pretax net income attributable to foreign operations included amortization of identified intangibles of $31.9 million, restructuring and other costs of $2.9 million, acquisition-related costs of $1.6 million, earnout interest accretion of $2.7 million, and the change in fair value of contingent consideration of $3.7 million. The exclusion of these items from net income would result in a U.S. and foreign pretax net income of $70.0 and $73.9 million, respectively, for the year ended December 31, 2016.

For the year ended December 31, 2015, pretax net income of $37.5 million consisted of U.S. and foreign pretax net income of $9.3 and $28.2 million, respectively. The pretax net income attributable to U.S. operations included amortization of identified intangibles of $7.8 million, stock-based compensation of $34.1 million, restructuring and other costs of $2.4 million, acquisition-related costs of $1.0 million, litigation settlement expense of $0.6 million, and interest expense and amortization of debt issuance costs related to our Notes of $15.7 million, partially offset by the change in fair value of contingent consideration of $0.2 million. The pretax net income attributable to foreign operations included amortization of identified intangibles of $18.7 million, restructuring and other costs of $3.3 million, acquisition-related costs of $4.5 million, and earnout interest accretion of $1.4 million, partially offset by the change in fair value of contingent consideration of $3.3 million. The exclusion of these items from net income would result in a U.S. and foreign pretax net income of $70.7 and $52.8 million, respectively, for the year ended December 31, 2015.

For the year ended December 31, 2014, pretax net income of $42.1 million consisted of U.S. and foreign pretax net income of $15.1 and $27.0 million, respectively. The pretax net income attributable to U.S. operations included amortization of identified intangibles of $7.1 million, stock-based compensation of $36.1 million, restructuring and other costs of $2.2 million, acquisition-related costs of $1.1 million, litigation settlement expense of $0.9 million, and interest expense and amortization of debt issuance costs related to our Notes of $4.7 million, partially offset by the change in fair value of contingent consideration of $0.4 million. The pretax net income attributable to foreign operations included amortization of identified intangibles of $13.6 million,

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restructuring and other costs of $4.4 million, acquisition-related costs of $0.4 million, and earnout interest accretion of $0.6 million, partially offset by the change in fair value of contingent consideration of $4.1 million. The exclusion of these items from net income would result in a U.S. and foreign pretax net income of $66.8 and $41.9 million, respectively, for the year ended December 31, 2014.

Provision for (Benefit from) Income Taxes

We recorded a tax benefit of $6.2 million in 2016 on pre-tax income of $39.4 million and tax provisions of $4.0 and $8.4 million on pre-tax income of $37.5 and $42.1 million in 2015, and 2014, respectively.

The provisions for income taxes before significant items were $12.0, $10.3, and $14.7 million for the years ended December 31, 2016, 2015, and 2014 respectively. Primary differences between our recorded tax provision rate and the U.S. statutory rate of 35% include tax benefits related to credits for research and development costs, lower taxes on permanently reinvested foreign earnings, tax effects of stock-based compensation expense pursuant to ASC 718-740, Stock Compensation—Income Taxes, and changes in the valuation allowance for financial reporting purposes.

Our provision for income taxes before significant items is reconciled to our provision for (benefit from) income taxes for the years ended December 31, 2016, 2015, and 2014 as follows (in millions):

	2016			2015			2014
Provision for income taxes before significant items	$	12.0		$	10.3		$	14.7
Interest related to unrecognized tax benefits		0.4			0.3			0.4
Benefit related to increased value of intangibles		—			—			(3.1	)
Benefit related to stock based compensation, including ESPP dispositions		(2.5	)		(0.5	)		(0.6	)
Benefit related to reversals of uncertain tax positions		(15.7	)		(5.5	)		(2.6	)
Benefit from reversals of accrued interest related to uncertain tax positions		(0.4	)		(0.6	)		(0.2	)
Other significant items		—			—			(0.2	)
Provision for (benefit from) income taxes	$	(6.2	)	$	4.0		$	8.4

During the year ended December 31, 2016, we recognized a $16.6 million tax benefit (including state tax benefit) from the release of previously unrecognized tax benefits due to the expiration of U.S. federal, state, and foreign statutes of limitations, of which $10.3 million related to the 2012 sale of our Foster City building and land. During the year ended December 31, 2014, we recognized a $3.1 million tax benefit related to the increased valuation of intangible assets for Brazilian tax reporting resulting from the merger of our Brazilian subsidiaries.

We earn a significant amount of our operating income outside the U.S., which is permanently reinvested in foreign jurisdictions. Of the income generated in jurisdictions with tax rates materially lower than the statutory U.S. tax rate of 35%, most is earned in the Netherlands, Spain, U.K., Italy, and Cayman Islands. In 2016, 2015 and 2014, we realigned the ownership of certain Productivity Software intellectual property to augment operational synergies and parallel both our worldwide intellectual property ownership and our worldwide supply chain. Our effective tax rate could fluctuate significantly and be adversely impacted if anticipated earnings in the Netherlands, Spain, Italy, U.K., and the Cayman Islands are proportionally lower than current projections and earnings in all other jurisdictions are proportionally higher than current projections.

While we currently do not foresee a need to repatriate the earnings of foreign operations, should we require more capital in the U.S. than is generated by our U.S. operations, we may elect to repatriate funds held in our foreign jurisdictions or raise capital in the U.S. through debt or equity issuances. These alternatives could result in higher effective tax rates, the cash payments of taxes and/or increased interest expense. As of December 31, 2016, we have permanently reinvested $164.6 million of unremitted foreign earnings. Should these earnings be remitted to the U.S., the tax on these earnings would be $34.6 million.

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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. To the extent we increase a valuation allowance, we will include an expense within the tax provision in the Consolidated Statement of Operations in the period in which such determination is made.

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. A significant piece of objective positive evidence evaluated for jurisdictions in a net deferred tax asset position was cumulative pre-tax income during the three years ended December 31, 2016. In addition, we considered that loss and credit carryforwards have not expired unused and a majority of our loss and credit carryforwards will not expire prior to 2022.

As of December 31, 2016, we have determined that it is more likely than not that we will realize the benefit related to our deferred tax assets, except for a valuation allowance related to the realization of existing California, Luxembourg, Israel, Netherlands, and Turkey deferred tax assets.

Unaudited Non-GAAP Financial Information

To supplement our consolidated financial results prepared in accordance with GAAP, we use non-GAAP measures of net income and earnings per diluted share that are GAAP net income and earnings per diluted share adjusted to exclude certain costs, expenses, and gains.

We believe the presentation of non-GAAP net income and non-GAAP earnings per diluted share provides important supplemental information regarding certain costs, expenses, gains, and significant items that we believe are important to understanding financial and business trends relating to our financial condition and results of operations. Non-GAAP net income and non-GAAP earnings per diluted share are among the primary indicators used by management as a basis for planning and forecasting future periods and by management and our Board of Directors to determine whether our operating performance has met specified targets and thresholds. Management uses non-GAAP net income and non-GAAP earnings per diluted share when evaluating operating performance because it believes the exclusion of the items described below, for which the amounts and/or timing may vary significantly depending on our activities and other factors, facilitates comparability of our operating performance from period to period. We have chosen to provide this information to investors so they can analyze our operating results in the same way that management does and use this information in their assessment of our business and the valuation of our Company.

Use and Economic Substance of Non-GAAP Financial Measures

We compute non-GAAP net income and non-GAAP earnings per diluted share by adjusting GAAP net income and GAAP earnings per diluted share to remove the impact of the amortization of acquisition-related intangibles, stock-based compensation expense, non-cash settlement of vacation liabilities, restructuring and other expense, acquisition-related transaction expenses, costs to integrate such acquisitions into our business, changes in the fair value of contingent consideration including the related foreign exchange fluctuation impact, litigation settlement charges, and non-cash interest expense related to our Notes. We use a static non-GAAP tax rate of 19%, which we believe reflects the long-term average tax rate based on our international structure and geographic distribution of revenue and profit.

Ex-Currency. To better understand trends in our business, we believe it is helpful to adjust our Consolidated Statements of Operations to exclude the impact of year-over-year changes in the translation of foreign currencies into U.S. dollars. This is a non-GAAP measure that is calculated by adjusting revenue, gross profit, and operating

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expenses by using historical exchange rates in effect during the comparable prior period and removing the balance sheet currency remeasurement impact from interest income and other income (expense), net, including removal of any hedging gains and losses. We refer to these adjustments as “ex-currency.” Management believes the ex-currency measures provide investors with an additional perspective on year-over-year financial trends and enables investors to analyze our operating results in the same way management does. The year-over-year currency impact can be determined as the difference between year-over-year actual growth rates and year-over-year ex-currency growth rates.

These excluded items are described below:

• Intangible assets acquired to date are being amortized on a straight-line basis.

• Stock-based compensation expense recognized in accordance with ASC 718.

• Non-cash settlement of vacation liabilities through the issuance of RSUs, which is not included in the GAAP presentation of our stock-based compensation expense.

• Restructuring and other consists of:

^¡   Restructuring charges incurred as we consolidate the number and size of our facilities and, as a result, reduce the size of our workforce.

^¡   Expenses incurred to integrate businesses acquired of $2.1, $1.8, and $1.4 million during the years ended December 31, 2016, 2015, and 2014, respectively.

• Acquisition-related transaction costs associated with businesses acquired during the periods reported and anticipated transactions of $2.2, $5.5, and $1.5 million during the years ended December 31, 2016, 2015, and 2014, respectively.

• Changes in fair value of contingent consideration. Our management determined that we should analyze the total return provided by the investment when evaluating operating results of an acquired entity. The total return consists of operating profit generated from the acquired entity compared to the purchase price paid, including the final amounts paid for contingent consideration without considering any post-acquisition adjustments related to changes in the fair value of the contingent consideration. Because our management believes the final purchase price paid for the acquisition reflects the accounting value assigned to both contingent consideration and to the intangible assets, we exclude the GAAP impact of any adjustments to the fair value of acquisition-related contingent consideration from the operating results of an acquisition in subsequent periods, including the related foreign exchange fluctuation impact. We believe this approach is useful in understanding the long-term return provided by our acquisitions and that investors benefit from a supplemental non-GAAP financial measure that excludes the impact of this adjustment.

• Non-cash interest expense on our Notes. Our Notes may be settled in cash on conversion. We are required to separately account for the liability (debt) and equity (conversion option) components of the Notes in a manner that reflects our non-convertible debt borrowing rate. Accordingly, for GAAP purposes, we are required to amortize a debt discount equal to the fair value of the conversion option as interest expense on our $345 million of 0.75% convertible senior notes that were issued in a private placement in September 2014 over the term of the Notes.

• Litigation settlements.

In addition, we settled or accrued reserves related to several unrelated litigation claims in 2016, 2015, and 2014 in aggregate amounts of $1.0, $0.6, and $0.9 million, respectively.

• Tax effect of non-GAAP adjustments. We use a constant non-GAAP tax rate of 19%, which we believe reflects the long-term average tax rate based on our international structure and geographic distribution of revenue and profit. The long-term average tax rate is calculated in accordance with the principles of ASC 740 to estimate the non-GAAP income tax provision in each jurisdiction in which we operate,

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after excluding the tax effect of the non-GAAP items described above and $10.3 million of previously unrecognized tax benefits associated with the 2012 sale of our Foster City building and land which we recognized in the year ended December 31, 2016.

Usefulness of Non-GAAP Financial Information to Investors

These non-GAAP measures, including ex-currency, are not in accordance with or an alternative to GAAP and may be materially different from other non-GAAP measures, including similarly titled non-GAAP measures, used by other companies. The presentation of this additional information should not be considered in isolation from, as a substitute for, or superior to, revenue, gross profit, operating expenses, net income, or earnings per diluted share prepared in accordance with GAAP. Non-GAAP financial measures have limitations in that they do not reflect certain items that may have a material impact upon our reported financial results. We expect to continue to incur expenses of a nature similar to the non-GAAP adjustments described above, and exclusion of these items from our non-GAAP net income and non-GAAP earnings per diluted share should not be construed as an inference that these costs are unusual, infrequent, or non-recurring.

Reconciliation of GAAP Net Income to Non-GAAP Net Income

(unaudited)

	For the years ended December 31,
	2016			2015			2014			Ex-Currency
(in millions, except per share data)										2016
Net income	$	45.5		$	33.5		$	33.7		$	45.5
Amortization of identified intangible assets		39.6			26.5			20.7			39.6
Ex-currency adjustment		—			—			—			1.7
Stock-based compensation expense		31.8			34.1			36.1			31.8
Non-cash settlement of vacation liabilities by issuing RSUs		3.1			1.3			—			3.1
Restructuring and other		6.7			5.7			6.6			6.7
General and administrative:
Acquisition-related transaction costs		2.2			5.5			1.5			2.2
Change in fair value of contingent consideration		6.9			(2.1	)		(3.8	)		6.9
Litigation reserve provisions, net of releases		1.0			0.6			0.9			1.0
Interest income and other income (expense), net:
Non-cash interest expense related to our Notes		12.4			11.8			3.5			12.4
Foreign exchange fluctuation related to contingent consideration		1.1			—			—			1.1
Balance sheet currency remeasurement impact		—			—			—			2.8
Tax effect of non-GAAP net income		(33.6	)		(19.0	)		(12.1	)		(34.4	)
Non-GAAP net income	$	116.8		$	97.9		$	87.1		$	120.5
Non-GAAP net income per diluted share	$	2.44		$	2.03		$	1.80		$	2.52
Shares for purposes of computing diluted non-GAAP net income per share		47.8			48.2			48.4			47.8

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RECONCILIATION OF GAAP REVENUE BY OPERATING SEGMENT TO

NON-GAAP EX-CURRENCY

(unaudited)

	For the years ended December 31,
	GAAP					Ex-Currency							GAAP											Ex-Currency
	GAAP 2016		Percent of total			Ex-Currency		2016		Percent of total			GAAP 2015		Percent of total			Change from 2015 GAAP						Change from 2015 GAAP
(in millions)																		$			%			$			%
Industrial Inkjet	$	562,583		57	%		7,735	$	570,318		57	%	$	447,705		51	%	$	114,878			26	%	$	122,613			27	%
Productivity Software		151,737		15			2,109		153,846		15			135,350		15			16,387			12			18,496			14
Fiery		277,745		28			84		277,829		28			299,458		34			(21,713	)		(7	)		(21,629	)		(7	)
Total revenue	$	992,065		100	%	$	9,928	$	1,001,993		100	%	$	882,513		100	%	$	109,552			12	%	$	119,480			14	%

	For the years ended December 31,
	GAAP					Ex-Currency							GAAP										Ex-Currency
	GAAP 2016		Percent of total			Ex-Currency		2016		Percent of total			GAAP 2015		Percent of total			Change from 2015 GAAP					Change from 2015 GAAP
(in millions)																		$		%			$		%
Americas	$	500,411		50	%		388	$	500,799		50	%	$	473,599		54	%	$	26,812		6	%	$	27,200		6	%
EMEA		360,305		37			7,283		367,588		37			291,103		33			69,202		24			76,485		26
APAC		131,349		13			2,257		133,606		13			117,811		13			13,538		11			15,795		13
Total revenue	$	992,065		100	%	$	9,928	$	1,001,993		100	%	$	882,513		100	%	$	109,552		12	%	$	119,480		14	%

RECONCILIATION OF GAAP REVENUE & GROSS PROFIT BY OPERATING SEGMENT TO

NON-GAAP EX-CURRENCY

(unaudited)

	For the years ended December 31,
	GAAP			Ex-Currency Adjustments		Ex-Currency			GAAP
(in millions)	2016					2016			2015
Industrial Inkjet
Revenue	$	562,583		$	7,735	$	570,318		$	447,705
Gross profit		199,448		$	4,205		203,653			152,918
Gross profit percentages		35.5	%				35.7	%		34.2	%
Productivity Software
Revenue	$	151,737		$	2,109	$	153,846		$	135,350
Gross profit		114,179		$	1,255		115,434			99,278
Gross profit percentages		75.2	%				75.0	%		73.3	%
Fiery
Revenue	$	277,745		$	84	$	277,829		$	299,458
Gross profit		198,322		$	82		198,404			210,140
Gross profit percentages		71.4	%				71.4	%		70.2	%

A reconciliation of operating segment gross profit to the consolidated statements of operations for the years ended December 31, 2016 and 2015 is as follows:

	For the years ended December 31,
	GAAP			Ex-Currency Adjustments		Ex-Currency			GAAP
(in millions)	2016					2016			2015
Segment gross profit	$	511,949		$	5,460	$	517,409		$	462,336
Stock-based compensation expense		(2,784	)				(2,784	)		(2,837	)
Other items excluded from segment profit		(475	)				(475	)		(115	)
Gross profit	$	508,690		$	5,460	$	514,150		$	459,384

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RECONCILIATION OF GAAP OPERATING EXPENSES TO

NON-GAAP EX-CURRENCY

(unaudited)

	For the years ended December 31,
(in thousands)	GAAP		Ex-Currency				GAAP							Ex-Currency
	2016		Ex-Currency Adjustments		2016		2015		Change from 2015 GAAP					Change from 2015 GAAP
									$		%			$		%
Research and development	$	151,192	$	1,283	$	152,475	$	141,364	$	9,828		7	%	$	11,111		8	%
Sales and marketing		169,042		1,884		170,926		156,339		12,703		8			14,587		9
General and administrative		85,614		1,206		86,820		72,797		12,817		18			14,023		19
Amortization of identified intangibles		39,560		237		39,797		26,510		13,050		49			13,287		50
Restructuring and other		6,729		122		6,851		5,731		998		17			1,120		20
Total operating expenses	$	452,137	$	4,732	$	456,869	$	402,741	$	49,396		12	%	$	54,128		13	%

Critical Accounting Policies

The preparation of consolidated financial statements requires estimates and judgments that affect the reported amounts of assets, liabilities, revenue, expenses, 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, restructuring activities, fair value of financial instruments, stock-based compensation, income taxes, valuation of goodwill and intangible assets, business combinations, build-to-suit leases, and contingencies on an ongoing basis. Estimates are based on historical and current experience, the impact of the current economic environment, and various other assumptions believed to be reasonable under the circumstances at the time of the estimate, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Our critical accounting policies and estimates are as follows:

• revenue recognition;

• allowances for doubtful accounts,

• inventory valuation and purchase commitment reserves,

• warranty reserves,

• litigation accruals,

• restructuring reserves,

• fair value of financial instruments;

• accounting for stock-based compensation;

• accounting for income taxes;

• valuation analyses of goodwill and intangible assets;

• business combinations;

• build-to-suit leases; and

• determination of functional currencies for consolidating international operations.

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Revenue recognition. Significant management judgments and estimates must be made and used in connection with the revenue recognized in any accounting period. Please refer to Note 1—The Company and its Significant Accounting Policies of the Notes to Consolidated Financial Statements for a more thorough and complete description of our revenue recognition accounting policy. For purposes of evaluating and understanding the judgments required, our revenue recognition policy is summarized below.

Product revenue includes hardware (industrial digital inkjet printers including components placed under maintenance agreements, ink required for industrial digital inkjet printers, design-licensed solutions including upgrades, and DFEs), software licensing and development, and royalties. Service revenue includes software license maintenance agreements, industrial digital inkjet printer maintenance and service, customer support, training, and consulting. The timing of revenue recognition for each of these categories is discussed below.

We recognize revenue on the sale of printers, ink, and DFEs in accordance with the provisions of SEC Staff Accounting Bulletin (“SAB”) 104, Revenue Recognition, and when applicable, ASC 605-25, Revenue Recognition—Multiple-Element Arrangements. We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collection is reasonably assured. 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 some of the leading printer manufacturers are 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.

For multiple element arrangements, we allocate revenue to the software deliverables and the non-software deliverables as a group based on the relative selling prices of all of the deliverables in the arrangement. For non-software deliverables, we allocate the arrangement consideration based on the relative selling price of the deliverables using best estimate of the sales price (“BESP”). For software deliverables (including post-contract customer support, professional services, hosting, and training), we generally use vendor-specific objective evidence of the fair value of the sales price (“VSOE”), when available. The selling price for each element is based upon the following hierarchy: VSOE if available, third party evidence (“TPE”) if VSOE is not available, or BESP if neither VSOE nor TPE are available.

We have established our ability to produce estimates sufficiently dependable to require adoption of the percentage of completion method with respect to certain fixed price contracts where we provide information technology system development and implementation services. Revenue on such 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. These services require that we perform significant, extensive, and complex design, development, modification, or implementation activities of our customers’ systems. Performance will often extend over long periods, and our right to receive future payment depends on our future performance in accordance with these agreements.

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The key estimates and assumptions and corresponding uncertainties for recognizing revenue are summarized as follows:

Key Estimates and Assumptions

Key Uncertainties

We establish VSOE of selling price using the price charged for a deliverable when sold separately and generally evidenced by a substantial majority of historical stand-alone transactions falling within a reasonably narrow range. In addition, we consider major service type, customer type, and other variables in determining VSOE. Our revenue estimates and assumptions are based on our ability to assert and maintain VSOE. BESP is generally evidenced by a majority of historical transactions falling within a reasonable price range. We also consider multiple factors, including, but not limited to, cost of products, gross margin objectives, historical pricing practices, customer type, and distribution channels. Our revenue estimates and assumptions are based on our ability to maintain consistent BESP. Distributors and resellers participate in various marketing and other programs, and we maintain estimated accruals and allowances for these programs based on contractual terms and historical experience. If the arrangement includes a customer-negotiated refund or right of return relative to the delivered item and the delivery and performance of the undelivered item is considered probable and substantially in our control, the delivered element constitutes a separate unit of accounting. We limit revenue recognition for delivered elements to the amount that is not contingent on the future delivery of products or services, future performance obligations, or subject to customer-specified return or refund privileges. The percentage of completion method involves recognizing probable and reasonably estimable revenue using the percentage of services completed based on the current cumulative cost as a percentage of the estimated total cost, using a reasonably consistent profit margin over the period.

As our business and offerings evolve over time, modifications to our pricing and discounting methodologies, changes in the scope and nature of service offerings and/or changes in customer segmentation may result in a lack of consistency required to establish and/or maintain VSOE or to maintain consistent BESP. Additionally, technological changes resulting in variability in product costs and gross margins may require changes to our BESP model. Changes in BESP may result in a different allocation of revenue to the deliverables in multiple-element arrangements. These factors, among others, may adversely impact the amount of revenue and gross margins we report in a particular period. If we experience changes in market or competitive conditions resulting in credits issued to our distributors and partners deviating significantly from our estimates, our revenue may be adversely impacted. Revenue recognition is dependent on proper identification of the separate units of accounting in an arrangement and determining whether they have stand-alone value. Significant contract interpretation can be required to determine the appropriate accounting, including whether the deliverables specified in a multiple element arrangement should be treated as separate units of accounting for revenue recognition purposes, and, if so, how the price should be allocated among the elements and when to recognize revenue for each element. Due to the long-term nature of these projects, developing the estimates of costs often requires significant judgment. Factors that must be considered in estimating the progress of work completed and ultimate cost of the projects include, but are not limited to, the availability of labor and labor productivity, the nature and complexity of the work to be performed, and the impact of delayed performance. If changes occur in delivery, productivity, or other factors used in developing the estimates of costs or revenue, we revise our cost and revenue estimates, which may result in increases or decreases in revenue and costs. Such revisions are reflected in net income in the period in which the facts that give rise to that revision become known.

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Allowances for doubtful accounts. We establish an allowance for doubtful accounts to ensure that trade receivables are not overstated due to uncollectibility. Our accounts receivable balance was $220.8 million, net of allowance for doubtful accounts and revenue reserves of $23.3 million, as of December 31, 2016. To ensure that we have established an adequate allowance for doubtful accounts, management analyzes accounts receivable and historical bad debts, customer concentrations, customer creditworthiness, current economic trends and macroeconomic conditions, changes in customer payment terms, the length of time receivables are past due, and significant one-time events. 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.

Inventory valuation. Management estimates potential future inventory obsolescence and noncancellable purchase commitments to properly value inventory and establish adequate reserves for potential losses on purchase commitments. Significant management judgment and estimates must be made related to inventory valuation including the evaluation of current economic trends, changes in customer demand, product design changes, product life and demand, and the acceptance of our products.

Warranty reserves. Our Industrial Inkjet printer products are generally accompanied by a 12-month limited warranty, which covers both parts and labor. Our Fiery DFE products are generally accompanied by a 12 to 15-month limited warranty. In accordance with ASC 450-30, Loss Contingencies, an accrual is established when the warranty liability is estimable and probable based upon historical experience. A provision for estimated future warranty work is recorded in cost of revenue when revenue is recognized.

The warranty liability is reviewed regularly and periodically adjusted to reflect changes in warranty estimates. Significant management judgments and estimates must be made in connection with establishing and updating warranty reserves including estimated potential inventory return rates and replacement or repair costs. Warranty reserves were $10.3 million as of December 31, 2016.

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.

The material assumptions used by management to estimate the required litigation accrual include:

• communication with our external attorneys regarding the expected duration of the lawsuit, the potential outcome of the lawsuit, and the likelihood of settlement;

• likelihood of assertion of unasserted claims and assessments;

• our strategy regarding the lawsuit;

• deductible amounts under our insurance policies; and

• past experiences with similar lawsuits.

Litigation is inherently unpredictable, and while we believe that we have valid defenses with respect to legal matters pending against us, our financial statements could be materially affected in any particular period by the unfavorable resolution of one or more of these contingencies or because of the diversion of management’s attention and the incurrence of significant expenses.

Restructuring reserves. We have engaged, and may continue to engage, in restructuring actions, which require management to utilize significant estimates related to the timing and the expense for severance and other

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employee separation costs, realizable values of assets made obsolete, lease cancellation, facility downsizing, and other exit costs. If actual amounts differ from our estimates, the amount of the restructuring charges could be materially impacted.

Fair value of financial instruments. We invest our excess cash on deposit with major banks in money market, U.S. Treasury and government-sponsored entity, corporate debt, municipal, 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 the Consolidated Balance Sheets.

As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a three-tier fair value hierarchy as more fully defined in Note 6—Investments and Fair Value Measurements of the Notes to Consolidated Financial Statements. We utilize the market approach to measure fair value of our fixed income securities. The “market approach” is a valuation technique that uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The fair value of our fixed income securities are obtained using readily-available market prices from a variety of industry standard data providers, large financial institutions, and other third-party sources for the identical underlying securities.

As part of this process, we engaged pricing services to assist management in its analysis. All estimates, key assumptions, and forecasts were either provided by or reviewed by us. While we chose to utilize third party pricing services, the impairment analysis and related valuations represent the conclusions of management and not the conclusions or statements of any third party.

Specifically, we obtain the fair value of our Level 2 financial instruments from third party asset managers, the custodian bank, and the accounting service provider. Independently, these service providers use professional pricing services to gather pricing data, which may include quoted market prices for identical or comparable instruments or inputs other than quoted prices that are observable either directly or indirectly.

The validation procedures performed by management include the following:

• obtaining an understanding of the pricing service’s valuation methodologies, including the timing and frequency,

• evaluating the type, nature, and complexity of our investments in financial instruments,

• evaluating the activity level in the market for the type of securities in which we have invested including the volatility of price movements requiring analysis, and

• validating the quoted market prices provided by our service providers by completing a three-way reconciliation, comparing the assessment of the fair values provided by the asset manager, the custody bank, and the accounting book of record provider for each portfolio.

Obtaining an understanding of these valuation risks allows us to respond by developing internal controls that appropriately mitigate any risks identified. If material discrepancies are noted when comparing the valuations on a security-by-security basis, then we conduct detailed pricing analysis, search alternative pricing sources, or require the service provider to provide an in-depth price analysis prior to recording the fair value in our financial statements. If we determine that a price provided by the third party pricing services is not reflective of the fair value of the security, we require the custodian bank or accounting service provider to update their price file accordingly.

At least annually, we review the pricing practices followed by the various entities involved in determining the fair value of our securities; including comparing their process and practices to those followed by other external third party pricing vendors. Also, at least annually, we review the internal controls provided in place at the custodian bank and the accounting service provider.

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Accounting for 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, Stock Compensation—Improvements to Employee Share Based Payment Accounting, in 2016, we elected to account for forfeitures when they occur instead of estimating the expected forfeiture rate. We must use our judgment in determining and applying the assumptions needed for the valuation of employee stock options, RSUs, and issuance of common stock under our ESPP.

We use the Black-Scholes-Merton (“BSM”) option pricing model to value stock-based compensation for all equity awards, except market-based awards. Market-based awards are valued using a Monte Carlo valuation model. Option pricing models were developed to estimate the value of traded options that have no vesting or hedging restrictions and are fully transferable. The BSM model determines the fair value of stock-based payment awards based on the stock price on the date of grant and is affected by assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, our expected stock price volatility over the term of the awards, expected term, interest rates, and actual and projected employee stock option exercise behavior. 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, vesting period, and 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.

Accounting for income taxes. Significant management judgment is required to determine our provision for income taxes, our deferred tax assets and liabilities, and any valuation allowance recorded against our deferred tax assets. We estimate our actual current tax expense, including permanent charges and benefits, and temporary differences resulting from differing treatment of items, such as deferred revenue for tax and book accounting purposes. These temporary differences result in deferred tax assets and liabilities, which are included within 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. To the extent that we increase a valuation allowance in a period, we include an expense in the Consolidated Statement of Operations in the period in which such determination is made.

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. A significant piece of objective positive evidence evaluated for jurisdictions in a net deferred tax asset position was cumulative pre-tax income over the three years ended December 31, 2016. In addition, we considered that loss and credit carryforwards have not expired unused and a majority of our loss and credit carryforwards will not expire prior to 2022.

As of December 31, 2016, we have determined that it is more likely than not that we will realize the benefit related to our deferred tax assets, except for a valuation allowance related to the realization of existing California, Luxembourg, Israel, Netherlands, and Turkey deferred tax assets.

Deferred tax assets, net of deferred tax liabilities, as of December 31, 2016 were $42.1 million, net of our valuation allowance of $42.4 million.

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In accordance with ASC 740-10-25-5 through 17, Income Taxes—Basic Recognition Threshold, 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.

Significant management judgment is required in evaluating our uncertain tax positions. Our gross unrecognized benefits are $35.9 million as of December 31, 2016. Our evaluation of uncertain tax positions is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit, and new audit activity. If actual settlements differ from these estimates, or we adjust these estimates in future periods, we may need to recognize additional tax benefits or charges that could materially impact our financial position and results of operations.

As of December 31, 2016, we have permanently reinvested $164.6 million of unremitted foreign earnings. Should these earnings be remitted to the U.S., the tax on these earnings would be $34.6 million.

Valuation analyses of goodwill and intangible assets. We perform our annual goodwill impairment analysis in the fourth quarter of each year according to the provisions of ASC 350-20-35. A two-step impairment test of goodwill is required, unless the simplified method is elected. In the first step, the fair value of each reporting unit is compared to its carrying value. If the fair value exceeds carrying value, goodwill is not impaired and further testing is not required. If the carrying value exceeds fair value, then the second step of the impairment test is required to determine the implied fair value of the reporting unit’s goodwill. The implied fair value of goodwill is calculated by deducting the fair value of all tangible and intangible net assets of the reporting unit, excluding goodwill, from the fair value of the reporting unit as determined in the first step. If the carrying value of the reporting unit’s goodwill exceeds its implied fair value, then an impairment loss must be recorded equal to the difference.

Our goodwill valuation analysis is based on our respective reporting units (Industrial Inkjet, Productivity Software, and Fiery), which are consistent with our operating segments identified in Note 14—Segment Information, Geographic Regions, and Major Customers of the Notes to Consolidated Financial Statements. We determined the fair value of our reporting units as of December 31, 2016 by equally weighting the market and income approaches. Under the market approach, we estimated fair value based on market multiples of revenue or earnings of comparable companies. Under the income approach, we estimated fair value based on a projected cash flow method using a discount rate determined by our management to be commensurate with the risk inherent in our current business model.

The key estimates and assumptions and corresponding uncertainties for goodwill impairment analysis are summarized as follows:

• identification of comparable companies to benchmark under the market approach giving due consideration to the following factors:

^¡   financial condition and operating performance of the reporting unit being evaluated relative to companies operating in the same or similar businesses,

^¡   economic, environmental, and political factors faced by such companies, and

^¡   companies that are considered to be reasonable investment alternatives.

• impact of goodwill impairments recognized in prior years,

• susceptibility of each of our reporting units to fair value fluctuations,

• reporting unit revenue, gross profit, and operating expense growth rates,

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• six-year financial forecast,

• discount rate to apply to estimated cash flows,

• terminal values based on the Gordon growth methodology,

• appropriate market comparables,

• estimated multiples of revenue and earnings before interest expense and taxes (“EBIT”) that a willing buyer is likely to pay,

• reasonable gross profit levels,

• estimated control premium a willing buyer is likely to pay, including consideration of the following:

^¡   the most similar transactions in relevant industries and determined the average premium indicated by the transactions deemed to be most similar to a hypothetical transaction involving our reporting units

^¡   weighted average and median control premiums offered in relevant industries,

^¡   industry specific control premiums, and

^¡   specific transaction control premiums.

• significant events or changes in circumstances including the following:

^¡   significant negative industry or economic trends,

^¡   significant decline in our stock price for a sustained period,

^¡   our market capitalization relative to net book value,

^¡   significant changes in the manner of our use of the acquired assets,

^¡   significant changes in the strategy for our overall business, and

^¡   our assessment of growth and profitability in each reporting unit over the coming years.

Given the uncertainty of the economic environment and the potential impact on our business, there can be no assurance that our estimates and assumptions regarding the duration of the ongoing economic downturn in some regions, or the period or strength of recovery, made for purposes of our goodwill impairment testing at December 31, 2016 will prove to be accurate predictions of the future. If our assumptions regarding forecasted revenue or gross profit rates are not achieved, we may be required to record additional goodwill impairment charges in future periods relating to any of our reporting units, whether in connection with the next annual impairment testing in the fourth quarter of 2017 or prior to that, if any such change constitutes an interim triggering event. It is not possible to determine if any such future impairment charge would result or, if it does, whether such charge would be material.

As part of this process, we engaged a third party valuation firm to assist management in its analysis. All estimates, key assumptions, and forecasts were either provided by or reviewed by us. While we chose to utilize a third party valuation firm, the impairment analysis and related valuations represent the conclusions of management and not the conclusions or statements of any third party

Business combinations. We account for business acquisitions as purchase business combinations in accordance with ASC 805, Business Combinations, which requires that the acquisition method of accounting be used for all business combinations. Please refer to Note 1—The Company and its Significant Accounting Policies of the Notes to Consolidated Financial Statements for our accounting policy with respect to accounting for business combinations.

We allocate the purchase price of acquired companies to the tangible and intangible assets acquired, including in-process research & development (“IPR&D”), and liabilities assumed based on their estimated fair values. Such

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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.

The key estimates and assumptions and corresponding uncertainties to account for business acquisitions are summarized as follows:

Key Estimates and Assumptions

Key Uncertainties

Management estimates fair value based on assumptions believed to be reasonable. These estimates are based on historical experience and information obtained from the management of the acquired companies. Critical estimates in valuing certain intangible assets include, but are not limited to: future expected cash flows; acquired developed technologies and patents; expected costs to develop IPR&D into commercially viable products and estimating cash flows from the projects when completed; the acquired company’s brand awareness and market position, as well as assumptions about the period of time the acquired brand will continue to be used in our product portfolio; and discount rates. We estimate fair value of acquisition-related contingent consideration based on the probability of realization of the performance targets. This estimate is based on significant inputs that are not observable in the market, which ASC 820-10-35 refers to as Level 3 inputs, reflecting our assessment of the assumptions market participants would use to value these liabilities. The fair value of contingent consideration is measured at each reporting period, with any changes in the fair value recognized as a component of general and administrative expense. Other estimates associated with the accounting for acquisitions include severance costs and the costs to vacate or downsize facilities, including the future costs to operate and eventually abandon or relinquish duplicate facilities. These costs are recognized as restructuring and other expenses (i.e., not included in purchase accounting), are based on management estimates, and are subject to refinement.

Our financial projections may ultimately prove to be inaccurate and unanticipated events and circumstances may occur. As a result, these estimates are inherently uncertain and unpredictable, assumptions may be incomplete or inaccurate, and unanticipated events and circumstances may occur, which may affect the accuracy or validity of such assumptions, estimates or other actual results. Therefore, no assurance can be given that the underlying assumptions used to establish the valuation for these acquired businesses will prove to be correct. We typically engage a third party valuation firm to assist management in its analysis. All estimates, key assumptions, and forecasts were either provided by or reviewed by us. While we chose to utilize a third party valuation firm, the valuations represent the conclusions of management and not the conclusions or statements of any third party. Estimated costs may change as additional information becomes available regarding assets acquired and liabilities assumed and as management continues its assessment of the pre-merger operations.

Acquisition-related costs of $2.2, $5.5, and $1.5 million were expensed during the years ended December 31, 2016, 2015, and 2014, respectively, associated with businesses acquired during the periods reported and anticipated transactions. The significant decrease in acquisition costs incurred during the year ended December 31, 2016 is primarily due to the Reggiani and Matan acquisitions, which closed on July 1, 2015.

Build-to-Suit leases. If we are deemed to be the accounting owner of a facility in accordance with the requirements of AC 840-40-55, Leases, then we are required to account for the property as a depreciable asset and the related lease agreement must be accounted for as an imputed financing obligation. If we are not deemed

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to be the accounting owner, then we are required to account for the property as an operating lease. Significant judgments are required to make this determination, which relate to actions, guarantees, and investments that we make as a lessee that may be considered to be actions that only an owner would take. In addition, our potential investments in these facilities must comply with the required maximum guarantee test to ensure that potential investments cannot exceed 90% of the fair value of each facility.

We have four leases subject to these accounting requirements in California, New Hampshire, Spain, and the Netherlands. ASC 840-40-55, Sale-Leaseback Transactions, applies to “construction projects,” but does not define this term. The New Hampshire and Spain facilities consist of construction of new facilities. The facilities in Fremont, California, and the Netherlands were existing facilities, but were not functional in their then current forms; thus, these assets represented construction projects subject to the guidance. When leasing an existing facility, we must consider whether the leased asset is fully functional and may be occupied by any lessee in its current form without requiring improvement (commonly referred to as the “second tenant scope exception”).

On August 26, 2016, we entered into a six-year lease with BTMU whereby a 225,000 square foot manufacturing and warehouse facility is under construction related to our super-wide format industrial digital inkjet printer business in the Industrial Inkjet operating segment at a projected cost of $40 million and a construction period of 18 months. Minimum lease payments during the initial term are $1.8 million. Upon completion of the initial term, we have the option to renew the lease, purchase the facility, or return the facility to BTMU subject to an 89% residual value guarantee under which we would recognize additional rent expense in the form of a variable rent payment. We have assessed our exposure in relation to the residual value guarantee and believe that there is no deficiency to the guaranteed value with respect to funds expended by BTMU as of December 31, 2016. We are not deemed to be the accounting owner of this facility as we do not have responsibility for actions, guarantees, or investments for which only an owner would accept responsibility.

We are not deemed to be the accounting owner of the leased facilities in the Netherlands or Spain as we only have responsibility for normal tenant improvement costs in each of these facilities. Similarly, we are not responsible for actions, guarantees, or investments for which only an owner would accept responsibility.

We are deemed to be the accounting owner of the 6700 Dumbarton Circle facility in Fremont, California. The critical factor relating to this conclusion is that we are responsible for cost over-runs, if any, related to force majeure events including strikes, war, and material availability. The landlord is responsible for any costs related to force majeure events that result in any damage to the facility. Since we are responsible for cost overruns related to certain force majeure events, we are in substance offering an indemnification to the landlord for events outside of our control. As such, we are deemed to be the accounting owner of the facility. See Note 8—Commitments and Contingencies of the Notes to Consolidated Financial Statements.

We have applied the accounting and disclosure requirements set forth in ASC 810-10, Consolidation, for variable interest entities (“VIEs”). We have evaluated each facility lease agreement to determine if the arrangement qualifies as a VIE under ASC 810-10. We have determined that our facility lease agreements do not qualify as VIEs, and as such, they are not required to be included in our consolidated financial statements.

Determining functional currencies for the purpose of consolidating our international operations. We have a number of foreign subsidiaries, which together account for approximately 54% of our net revenue, approximately 31% of our total assets, and approximately 36% of our total liabilities as of December 31, 2016.

In preparing our consolidated financial statements, for subsidiaries that operate in a U.S. dollar functional currency environment, we must 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 assets, liabilities, and capital accounts, which are remeasured at historical exchange rates. Revenue and expenses are recorded at monthly exchange rates, which approximate average exchange rates in effect during each period. Gains or losses from foreign currency remeasurement are included in interest income and other income (expense), net.

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For those 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 accumulated other comprehensive income (“OCI”), adjusted for deferred income taxes.

Consequently, determination of the functional currency of each entity has a material impact on our financial position and results of operations. Management assesses the salient economic factors, both individually and collectively when determining the functional currency. The economic factors that must be evaluated include cash flow, sales price, sales market, expense, financing, and intercompany transaction indicators.

Recent Accounting Pronouncements

See Note 1—The Company and Its Significant Accounting Policies of the Notes to Consolidated Financial Statements for a full description of recent accounting pronouncements including the respective expected dates of adoption.

Liquidity and Capital Resources

Overview

Cash, cash equivalents, and short-term investments decreased by $37.6 million to $459.7 million as of December 31, 2016 from $497.4 million as of December 31, 2015. The decrease was primarily due to cash consideration paid for the acquisition of Optitex and Rialco, net of cash acquired, of $20.0 million, repayment of debt assumed through business acquisitions of $8.8 million, treasury stock purchases of $74.2 million, settlement of shares for employee common stock related tax liabilities and the stock option exercise price of certain stock options of $9.1 million, cash payments for property and equipment of $22.4 million, funding $6.3 million in the restricted collateral account related to our off-balance sheet lease, acquisition-related contingent consideration payments of $28.1 million, partially offset by cash flows provided by operating activities of $121.0 million, proceeds from ESPP purchases and stock option exercises of $11.1 million, and the impact of foreign exchange rate changes of $0.4 million.

Cash, cash equivalents, and short-term investments decreased by $119.3 million to $497.4 million as of December 31, 2015 from $616.7 million as of December 31, 2014. The decrease was primarily due to cash consideration for the acquisitions of Reggiani, Matan, CTI, and Shuttleworth, net of cash acquired, of $74.8 million, repayment of debt assumed through business acquisitions of $22.5 million, treasury stock purchases of $65.7 million, settlement of shares for employee common stock related tax liabilities and the stock option exercise price of certain stock options of $10.7 million, cash payments for property and equipment of $18.5 million, acquisition-related contingent consideration payments of $4.1 million, partially offset by cash flows provided by operating activities of $65.1 million and proceeds from ESPP purchases and stock option exercises of $11.5 million.

(in thousands)	2016			2015			2014
Cash and cash equivalents	$	164,313		$	164,091		$	298,133
Short-term investments		295,428			333,276			318,599
Total cash, cash equivalents, and short-term investments	$	459,741		$	497,367		$	616,732
Net cash provided by operating activities	$	121,004		$	68,357		$	92,130
Net cash used for investing activities		(12,050	)		(110,618	)		(180,657	)
Net cash provided by (used for) financing activities		(109,106	)		(91,682	)		211,036
Effect of foreign exchange rate changes on cash and cash equivalents		374			(99	)		(1,460	)
Increase (decrease) in cash and cash equivalents	$	222		$	(134,042	)	$	121,049

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As of December 31, 2016, we have approximately $164.6 million of unremitted earnings, which are not available to meet our operating and working capital requirements in the U.S. as these amounts have been permanently reinvested. Cash, cash equivalents, and short-term investments held outside of the U.S. in various foreign subsidiaries were $94.2 and $106.0 million as of December 31, 2016 and 2015, respectively. Cash, cash equivalents, and short term investments held outside of the U.S will be used to fund local operations and finance international acquisitions. If these funds are needed for our operations in the U.S., we would be required to accrue and pay U.S. federal and state income taxes on some or all of these funds. However, our intent is to indefinitely reinvest these funds outside of the U.S. and our current plans do not demonstrate a need to repatriate them to fund our U.S. operations.

Based on past performance and current expectations, we believe that our cash, cash equivalents, short-term investments, and cash generated from operating activities will satisfy our working capital, capital expenditure, investment, stock repurchase, commitments (see Note 8—Commitments and Contingencies of the Notes to Consolidated Financial Statements), and other liquidity requirements associated with our existing operations through at least the next twelve months. We believe that the most strategic uses of our cash resources include business acquisitions, strategic investments to gain access to new technologies, repurchases of shares of our common stock, and working capital. At December 31, 2016, cash, cash equivalents, and short-term investments available were $459.7 million. We believe that our liquidity position and capital resources are sufficient to meet our operating and working capital needs.

Operating Activities

Net cash provided by operating activities was $121.0, $68.4, and $92.1 million for the years ended December 31, 2016, 2015, and 2014, respectively.

Net cash provided by operating activities in 2016 consists primarily of net income of $45.5 million and non-cash charges and credits of $110.7 million adjusted by the net change in operating asset and liabilities of $35.2 million. Non-cash charges and credits of $110.7 million consist primarily of $55.1 million in depreciation and amortization, $31.7 million of stock-based compensation expense, net of cash settlements, non-cash accretion of interest expense of $13.5 million, provision for bad debts and sales-related allowances of $10.7 million, and provision for inventory obsolescence of $5.2 million, and other non-cash charges and credits of $5.4 million, partially offset by deferred tax credits of $11.0 million. The net change in operating assets and liabilities of $35.2 million consists primarily of increased gross accounts receivable of $31.2 million, increased other current assets of $6.5 million, increased taxes receivable, net, of $2.4 million, partially offset by decreased accounts payable and accrued liabilities of $0.6 million and decreased gross inventories of $4.3 million.

Accounts Receivable

Our primary source of operating cash flow is the collection of accounts receivable from our customers. One measure of the effectiveness of our collection efforts is average days sales outstanding for accounts receivable (“DSO”). DSOs were 76, 69, and 68 days at December 31, 2016, 2015, and 2014, respectively. We calculate DSO by dividing net accounts receivable at the end of the quarter by revenue recognized during the quarter, multiplied by the total days in the quarter.

DSOs increased during the year ended December 31, 2016, compared with December 31, 2015, primarily due to increased Industrial Inkjet and Productivity Software revenue as a percentage of consolidated revenue, sales with extended payment terms, and a non-linear sales cycle resulting in significant billings at the end of the quarter. Industrial Inkjet and Productivity Software were 72% of consolidated revenue during the year ended December 31, 2016. By comparison, Industrial Inkjet and Productivity Software were 66% and 65% of consolidated revenue during the years ended December 31, 2015 and 2014, respectively.

We expect DSOs to vary from period to period because of changes in the mix of business between direct customers and end user demand driven through the leading printer manufacturers, the effectiveness of our

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collection efforts both domestically and overseas, and variations in the linearity of our sales. As the percentage of Industrial Inkjet and Productivity Software related revenue increases, we expect DSOs will trend higher. Our DSOs related to the Industrial Inkjet and Productivity Software operating segments are traditionally higher than those related to the significant printer manufacturer customers / distributors in our Fiery operating segment as, historically, these Fiery customers have been granted shorter payment terms and have paid on a more timely basis.

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. Trade receivables sold with recourse are generally short-term receivables with payment due dates of less than 10 days from date of sale, which are subject to a servicing obligation. We also 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 cumulatively under these facilities were $19.8 and $3.5 million throughout 2016 on a recourse and nonrecourse basis, respectively, which approximates the cash received. The receivables that were sold to third parties were removed from the Consolidated Balance Sheets and were reflected as cash provided by operating activities in the Consolidated Statements of Cash Flows.

Inventories

Our inventories are procured primarily in support of the Industrial Inkjet and Fiery operating segments. The majority of our Industrial Inkjet products are manufactured internally, while Fiery production is primarily outsourced. The result is lower inventory turnover for Industrial Inkjet inventories compared with Fiery inventories.

Our net inventories decreased by $7.3 million to $99.1 million at December 31, 2016 from $106.4 million at December 31, 2015 due to reduced inventories in the Industrial Inkjet operating segment due to improved inventory requirements forecasting and supplier management. Inventory turnover was 5.0 during the quarter ended December 31, 2016 compared with 4.7 turns during the quarter ended December 31, 2015. We calculate inventory turnover by dividing annualized current quarter cost of revenue by ending inventories.

Accounts Payable, Accrued and Other Liabilities, and Net Income Taxes Payable

Our operating cash flows are impacted by the timing of payments to our vendors for accounts payable and by our accrual of liabilities. The change in accounts payable, accrued and other liabilities, and net income taxes payable decreased our cash flows provided by operating activities by $1.8 and $10.6 million in 2016 and 2015, respectively. The change in accounts payable, accrued and other liabilities, and net income taxes payable increased our cash flows provided by operating activities by $3.1 million in 2014. Our working capital, defined as current assets minus current liabilities, was $552.4 and $586.7 million at December 31, 2016 and 2015, respectively.

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Investing Activities

Net cash used for investing activities was $12.1, $110.6, and $180.7 million for the years ended December 31, 2016, 2015, and 2014, respectively.

	2016			2015			2014
Purchases of short-term investments	$	(216,349	)	$	(328,911	)	$	(281,962	)
Proceeds from sales and maturities of short-term investments		252,856			311,508			139,185
Purchases of restricted investments and cash equivalents		(6,252	)		—			—
Purchases, net of proceeds from sales, of property and equipment		(22,373	)		(18,449	)		(15,900	)
Businesses and technology purchased, net of cash acquired		(19,932	)		(74,766	)		(21,980	)
Net cash used for investing activities	$	(12,050	)	$	(110,618	)	$	(180,657	)

Acquisitions

On June 16, 2016, we purchased Optitex for cash consideration of $11.6 million, net of cash acquired, plus an additional potential future cash earnout, which is contingent on achieving revenue and operating profit performance targets. Optitex has developed and markets integrated 2D and 3D CAD software that is shortening the design cycle, reducing our customers’ costs, and accelerating the adoption of fast fashion.

On March 1, 2016, we purchased Rialco for cash consideration of $8.4 million, net of cash acquired, plus an additional potential future cash earnout, which is contingent on achieving revenue and gross profit targets. Rialco is a leading European supplier of dye powders and color products for the textile, digital print, and other decorating industries.

The escrow of $1.5 million related to the Reggiani acquisition was remitted to us in return for the issuance of shares of common stock for the year ended December 31, 2016. We also purchased additional intellectual property related to the Reggiani business for $0.3 million. A tax recovery liability of $1.0 million related to the Creta Print S.L. “(Cretaprint”) acquisition was paid during the year ended December 31, 2016.

On July 1, 2015, we acquired Matan for approximately $38.9 million in cash, net of cash acquired, and Reggiani for approximately $26.6 million in cash, net of cash acquired, $26.9 million in shares of EFI stock, plus an additional future potential cash earnout contingent on achieving certain performance targets.

We acquired privately-held CTI and Shuttleworth during the fourth quarter of 2015, which have been included in our Productivity Software operating segment, for aggregate cash consideration of $9.3 million, net of cash acquired, $9.7 million in shares of EFI stock, plus a potential future cash earnout, which is contingent on achieving certain performance targets.

SmartLinc, Rhapso, DirectSmile, and DIMS were acquired in 2014 for aggregate cash consideration of $20.4 million, net of cash acquired, plus additional future cash earnouts contingent on achieving certain performance targets; technology was acquired from Polymeric for $1.1 million; $0.3 million was paid related to the GamSys Software SPRL (“GamSys”) acquisition, which was dependent on accounts receivable collections; and purchase price adjustments of $0.2 million were paid with respect to the acquisitions of Metrix Software (“Metrix”), Lector Computersysteme GmbH (“Lector”), and Rhapso.

Property and Equipment

Net purchases of property and equipment were $22.3, $18.5, and $15.9 million in 2016, 2015, and 2014, respectively, including the purchase of ceramic digital ink formulation equipment and research and development equipment.

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Our property and equipment additions have historically been funded from operating activities. We anticipate that we will continue to purchase necessary property and equipment in the normal course of our business. The amount and timing of these purchases and the related cash outflows in future periods is difficult to predict and is dependent on a number of factors including the hiring of employees, the rate of change in computer hardware / software used in our business, and our business outlook.

Investments

Proceeds from sales and maturities, net of purchases, of marketable securities were $36.5 million in 2016. Purchases of marketable securities, net of proceeds from sales and maturities, were $17.4 and $142.8 million in 2015 and 2014, respectively. We have classified our investment portfolio as “available for sale.” Our investments are made with a policy of capital preservation and liquidity as primary objectives. We may hold investments in fixed income debt securities to maturity; however, we may sell an investment at any time if the quality rating of the investment declines, the yield on the investment is no longer attractive, or we have better uses for the cash. Since we invest primarily in investment securities that are highly liquid with a ready market, we believe the purchase, maturity, or sale of our investments has no material impact on our overall liquidity.

Financing Activities

Net cash used for financing activities was $109.1 and $91.7 million for the years ended December 31, 2016 and 2015, respectively. Net cash provided by financing activities as $211.0 million during the year ended December 31, 2014.

In September 2014, we completed a private placement of $345 million principal amount of Notes. The net proceeds from this offering were $336.3 million, after deducting commissions and offering expenses paid by us. We used approximately $29.4 million of the net proceeds to pay the cost of the Note Hedges (after such cost was partially offset by the proceeds from the Warrant transactions).

Stock Option and ESPP Proceeds

Historically, our recurring cash flows provided by financing activities have been from the receipt of cash from the issuance of common stock through the exercise of stock options and employee purchases of ESPP shares. We received proceeds from the exercise of stock options of $1.3, $2.0, and $7.7 million and employee purchases of ESPP shares of $9.8, $9.5, and $8.6 million in 2016, 2015, and 2014, respectively. While we may continue to receive proceeds from these plans in future periods, the timing and amount of such proceeds are difficult to predict and are contingent on a number of factors including the price of our common stock, the timing and number of stock options exercised by employees that had participated in these plans, net settlement options, and general market conditions. We anticipate that cash provided from the exercise of stock options will decline over time as we have shifted to issuance of RSUs, rather than stock options. Although we may grant stock option awards from time to time, the granting of stock options is no longer our usual practice.

Treasury Stock Purchases

The primary use of funds for financing activities in 2016, 2015, and 2014 was $83.3, $76.4, and $101.1 million, respectively, of cash used to repurchase outstanding shares of our common stock. Such purchases included $9.1, $10.7, and $24.3 million of cash used for net settlement of shares for the exercise price of certain stock options and any tax withholding obligations incurred in connection with such exercises and minimum tax withholding obligations that arose on the vesting of RSUs.

On November 6, 2013, the board of directors approved an authorization to repurchase of $200 million of outstanding common stock. Under this publicly announced plan, we repurchased 1.5 and 1.8 million shares for an aggregate purchase price of $65.7 and $76.8 million during the years ended December 31, 2015 and 2014,

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respectively. On November 9, 2015, the board of directors cancelled $55 million, effective December 31, 2015, remaining for repurchase under the 2013 authorization and approved a new authorization to repurchase $150 million of outstanding common stock commencing January 1, 2016. This authorization expires December 31, 2018. Under this publicly announced plan, we repurchased 1.8 million shares for an aggregate purchase price of $74.2 million during the year ended December 31, 2016.

See Item 5—Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities for further discussion of our common stock repurchase programs.

Earnout Payments

Earnout payments during the year ended December 31, 2016 of $23.8, $3.6, $0.4, and $0.2 million are primarily related to the previously accrued Reggiani, DirectSmile, SmartLinc, and Metrix contingent consideration liabilities, respectively. Earnout payments during the year ended December 31, 2015 of $2.0, $1.1, $0.6, and $0.3 million are primarily related to the previously accrued Technique, Inc. and Technique Business Systems Limited (collectively, “Technique”), GamSys, Metrix, and SmartLinc contingent consideration liabilities, respectively. Earnout payments during the year ended December 31, 2014 of $6.2, $4.5, $2.0, and $1.2 million are related to the previously accrued Cretaprint, Metrics Sistemas de Informação, Serviços e Comércio Ltda. and Metrics Sistemas de Informação e Serviço Ltda. (collectively, “Metrics”), Technique, and GamSys contingent consideration liabilities, respectively. The portion of the Metrics and Radius earnouts representing performance targets achieved in excess of amounts assumed in the opening balance sheet as of the respective acquisition date was $3.4 million during the year ended December 31, 2014, and is reflected as cash used for operating activities in the Consolidated Statements of Cash Flows.

We paid approximately $8.8 million of indebtedness, which was assumed in the Optitex and Matan acquisitions during the year ended December 31, 2016. We paid approximately $22.5 million of indebtedness, which was assumed in the Reggiani acquisition during the year ended December 31, 2015.

Other Commitments

Our Industrial Inkjet inventories consist of materials required for our internal manufacturing operations and finished goods and sub-assemblies purchased from third party contract manufacturers. Raw materials and finished goods, print heads, frames, digital UV curable ink, ceramic digital ink, various textile printing inks, and other components are required to support our internal manufacturing operations. Label and packaging digital inkjet printers, branded textile ink, and certain sub-assemblies are purchased from third party contract manufacturers and branded third party ink manufacturers.

Our Fiery inventory consists primarily of raw materials and finished goods, memory subsystems, processors, and ASICs, which are sold to third party contract manufacturers responsible for manufacturing our products. Should we decide to purchase components and manufacture Fiery DFEs internally, or should it become necessary for us to purchase and sell components other than memory subsystems, processors, and ASICs to our contract manufacturers, inventory balances and potentially property and equipment would increase significantly, thereby reducing our available cash resources. Further, the inventories we carry could become obsolete, thereby negatively impacting our financial condition and results of operations.

We are also reliant on several sole source suppliers for certain key components and could experience a further significant negative impact on our financial condition and results of operations if such supplies were reduced or not available. We may be required to compensate our subcontract manufacturers for components purchased for orders subsequently cancelled by us. We periodically review the potential liability and the adequacy of the related allowance.

We may be required to compensate our subcontract manufacturers for components purchased for orders subsequently cancelled by us. We periodically review the potential liability and the adequacy of the related allowance.

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Legal Proceedings

Please refer to Item 3, Legal Proceedings, in this Annual Report on Form 10-K for more information regarding our legal proceedings.

Contractual Obligations and Off-Balance Sheet Financing

The impact of contractual obligations on our liquidity and capital resources in future periods should be analyzed in conjunction with the factors that impact our cash flows from operating activities discussed previously. The following table summarizes our significant contractual obligations at December 31, 2016 and the effect that such obligations are expected to have on our liquidity and cash flows in future periods. This table excludes amounts already recorded on our balance sheet as liabilities at December 31, 2016, with the exception of acquisition-related contingent consideration liabilities, unrecognized tax benefits, and our Notes.

	Payments due by period
(in thousands)	Total		Less than 1 year		Between 1-3 years		Between 3-5 years		More than 5 years
Operating lease obligations	$	71,004	$	9,097	$	16,088	$	11,925	$	33,894
Contingent consideration liabilities (1)		56,463		19,244		37,219		—		—
Purchase obligations (2)		37,452		37,452		—		—		—
Convertible senior notes (3)		352,763		2,588		350,175		—		—
Unrecognized tax benefits (4)		35,900		—		—		—		—
Total (2)	$	553,582	$	68,381	$	403,482	$	11,925	$	33,894

⁽¹⁾  Represents the fair value of acquisition-related contingent consideration liabilities. The current fair value is reflected in our Consolidated Balance Sheets under the caption “accrued and other liabilities” and represents the fair value of the contingent consideration liabilities that are payable within one year. The noncurrent fair value is reflected in our Consolidated Balance Sheets under the caption “noncurrent contingent and other liabilities” and represents the fair value of the contingent consideration liabilities that are payable beyond one year.

⁽²⁾  Excludes contractual obligations recorded on the balance sheet as current liabilities and certain purchase orders as discussed below.

⁽³⁾  Obligations related to our $345 million principal amount of our Notes, which is due in 2019. Estimated remaining interest payments for our Notes, assuming no early retirement of debt obligations, are $7.8 million through 2019.

⁽⁴⁾  As of December 31, 2016, our liability for unrecognized tax benefits, including interest and penalties, is reflected in our Consolidated Balance Sheet as $12.0 million of “noncurrent income taxes payable” and $23.9 million as a reduction of “deferred tax assets.” Due to the uncertainty of the timing of future payments, unrecognized tax benefits are presented in the total column on a separate line in this table. See Note 11—Income Taxes of the Notes to the Consolidated Financial Statements for additional discussion of unrecognized tax benefits.

Purchase obligations in the table above include agreements to purchase goods or services that are enforceable, noncancellable, and legally binding that specify all significant terms including fixed or minimum quantities to be purchased; fixed, minimum, or variable price provisions; and the approximate timing of the transaction. Purchase obligations exclude purchase orders for raw materials and other goods and services that are cancelable without penalty. Our purchase orders are based on current manufacturing needs and are generally fulfilled by our vendors within short time horizons. We also enter into contracts for outsourced services; however, the obligations under these contracts were not significant and the contracts generally contain clauses allowing for cancellation without significant penalty.

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The expected timing of payment for the obligations listed above is estimated based on current information. Timing of payments and actual amounts paid may be different depending on when the goods or services are received or changes to agreed-upon amounts for some obligations.

Off-Balance Sheet Financing

On August 26, 2016, we entered into a lease agreement and have accounted for a lease term of 48.5 years, inclusive of two renewal options of 5.0 and 3.5 years, with the City of Manchester to lease 16.9 acres of land adjacent to the Manchester Regional Airport. The land is subleased to BTMU during the term of the lease related to the manufacturing facility that is being constructed on the site which is described below. Minimum lease payments are $13.1 million during the 48.5 year term of the land lease, excluding four months of the land lease that is financed into the manufacturing facility lease.

On August 26, 2016, we entered into a six-year lease with BTMU whereby a 225,000 square foot manufacturing and warehouse facility is under construction related to our super-wide format industrial digital inkjet printer business in the Industrial Inkjet operating segment at a projected cost of $40 million and a construction period of 18 months. Minimum lease payments during the initial term are $1.8 million. Upon completion of the initial term, we have the option to renew the lease, purchase the facility, or return the facility to BTMU subject to an 89% residual value guarantee under which we would recognize additional rent expense in the form of a variable rent payment. We have assessed our exposure in relation to the residual value guarantee and believe that there is no deficiency to the guaranteed value with respect to funds expended by BTMU as of December 31, 2016. We are treated as the owner of the facility for federal income tax purposes.

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 of million U.S. government securities and cash equivalents, respectively, with a third party trustee and will be restricted during the construction period. Upon completion of construction, the funds will be released as cash and cash equivalents. The portion that represents 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.

Item 7A: Quantitative and Qualitative Disclosures about Market Risk

The following discussion of our risk management activities includes “forward-looking statements” that involve risks and uncertainties. Actual results could differ materially from those projected in the forward-looking statements.

Market Risk

We are exposed to various market risks. Market risk is the potential loss arising from adverse changes in market rates and prices, general credit, foreign currency exchange rate fluctuations, liquidity, and interest rate risks, which may be exacerbated by the tight global credit market and increase in economic uncertainty that have affected various sectors of the financial market and continue to cause credit and liquidity issues. We do not enter into derivatives or other financial instruments for trading or speculative purposes. We may enter into financial instrument contracts to manage and reduce the impact of changes in foreign currency exchange rates on earnings and cash flows. The counterparties to such contracts are major financial institutions. We hedge our operating expense exposure in Indian rupees. The notional amount of our Indian rupee cash flow hedge was $3.2 million at December 31, 2016. We hedge balance sheet remeasurement exposures using forward contracts not designated as hedging instruments with notional amounts of $158.7 million at December 31, 2016 consisting of hedges of Brazilian real, British pound sterling, Israeli shekel, Australian dollar, Japanese yen, Chinese renminbi, and Euro-denominated intercompany balances with notional amounts of $90.7 million at December 31, 2016, hedges of Brazilian real, British pound sterling, Australian dollar, Israeli shekel, and Euro-denominated trade receivables

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with notional amounts of $39.8 million at December 31, 2016, and hedges of British pounds sterling, Indian rupee, and Euro-denominated other net monetary assets with notional amounts of $28.2 million at December 31, 2016.

Since Europe represents a significant portion of our revenue and cash flow, SEC encourages disclosure of our European concentrations of credit risk regarding gross receivables, related reserves, and aging on a region or country basis, and the impact on liquidity with respect to estimated timing of receivable payments. 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).

Marketable Securities

We maintain an investment portfolio of short-term fixed income debt securities of various holdings, types, and maturities. These short-term investments are generally classified as available-for-sale and, consequently, are recorded on our Consolidated Balance Sheets at fair value with unrealized gains and losses reported as a separate component of OCI. We attempt to limit our exposure to interest rate risk by investing in securities with maturities of less than three years; however, we may be unable to successfully limit our risk to interest rate fluctuations. At any time, a sharp rise in interest rates could have a material adverse impact on the fair value of our investment portfolio. Conversely, declines in interest rates could have a material favorable impact on the fair value of our investment portfolio. Increases or decreases in interest rates could have a material impact on interest earnings related to new investments during the period. We do not currently hedge these interest rate exposures.

Interest Rate Risk

Hypothetical changes in the fair values of financial instruments held by us at December 31, 2016 that are sensitive to changes in interest rates are presented below. The modeling technique measures the change in fair value arising from selected potential changes in interest rates. Market changes reflect immediate hypothetical parallel shifts in the yield curve of plus or minus 100 basis points over a twelve month time horizon (in thousands):

Valuation of securities assuming an interest rate decrease of 100 basis points	No change in interest rates	Valuation of securities assuming an interest rate increase of 100 basis points
$  322,725	$  319,003	$  315,263

We have no European sovereign debt investments. Our European debt investments consist of non-sovereign corporate debt securities of $28.0 million, which represents 14% of our corporate debt instruments (9% of our short-term investments) at December 31, 2016. European debt investments are with corporations domiciled in the northern and central European countries of Sweden, Netherlands, Norway, France, Switzerland, and the U.K. We do not have any short-term investments with corporations domiciled in the higher risk “southern European” countries (i.e., Italy, Spain, Greece, and Portugal) or Ireland. We believe that we do not have significant exposure with respect to our money market and corporate debt investments in Europe, although we do have some exposure due to the interdependencies among the European Union countries.

As of December 31, 2016, we have $345 million principal amount of Notes outstanding. We carry these instruments at face value less unamortized discount on our Consolidated Balance Sheets. Since these instruments bear interest at fixed rates, we have no financial statement risk associated with changes in interest rates. Although the fair value of these instruments fluctuates when interest rates change, a substantial portion of the market value

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of our Notes in excess of the outstanding principal amount relates to the conversion premium. Please refer to Note 6—Investments and Fair Value Measurements and Note 7—Convertible Senior Notes, Note Hedges, and Warrants of the Notes to Consolidated Financial Statements.

Foreign Currency Exchange Risk

A large portion of our business is conducted in countries other than the U.S. We are primarily exposed to changes in exchange rates for the Euro, British pound sterling, Indian rupee, Japanese yen, Brazilian real, Chinese renminbi, Israeli shekel, New Zealand dollar, and Australian dollar. Although the majority of our receivables are invoiced and collected in U.S. dollars, we have exposure from non-U.S. dollar-denominated sales (consisting of the Euro, British pound sterling, Brazilian real, Chinese renminbi, Israeli shekel, Australian dollar, and Canadian dollar) and operating expenses (primarily the Euro, British pound sterling, Chinese renminbi, Israeli shekel, Japanese yen, Indian rupee, Brazilian real, and Australian dollar) in foreign countries. We can benefit from or be adversely affected by either a weaker or stronger U.S. dollar relative to major currencies worldwide with respect to our consolidated financial statements. Accordingly, we can benefit from a stronger U.S. dollar due to the corresponding reduction in our foreign operating expenses translated in U.S. dollars and at the same time we can be adversely affected by a stronger U.S. dollar due to the corresponding reduction in foreign revenue translated in U.S. dollars.

We hedge our operating expense exposure in Indian rupees. The notional amount of our Indian rupee cash flow hedge was $3.2 million at December 31, 2016. We hedge balance sheet remeasurement exposures using forward contracts not designated as hedging instruments with notional amounts of $158.7 million at December 31, 2016 consisting of hedges of Brazilian real, British pound sterling, Israeli shekel, Australian dollar, Japanese yen, Chinese renminbi, and Euro-denominated intercompany balances with notional amounts of $90.7 million at December 31, 2016, hedges of Brazilian real, British pound sterling, Australian dollar, Israeli shekel, and Euro-denominated trade receivables with notional amounts of $39.8 million at December 31, 2016, and hedges of British pounds sterling, Indian rupee, and Euro-denominated other net monetary assets with notional amounts of $28.2 million at December 31, 2016.

The impact of hypothetical changes in foreign exchanges rates on revenue and income from operations are presented below. The modeling technique measures the change in revenue and income from operations resulting from changes in selected foreign exchange rates with respect to the Euro and British pound sterling of plus or minus one percent during the year ended December 31, 2016 as follows (in thousands):

	Impact of a foreign exchange rate decrease of one percent		No change in foreign exchange rates		Impact of a foreign exchange rate increase of one percent
Revenue	$	994,604	$	992,065	$	989,526
Income from operations	$	56,870	$	56,553	$	56,236

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Item 8: Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm		84
Consolidated Balance Sheets as of December 31, 2016 and 2015		85
Consolidated Statements of Operations for the Years Ended December 31, 2016, 2015, and 2014		86
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2016, 2015, and 2014		87
Consolidated Statements of Stockholders’ Equity for the Years Ended December  31, 2016, 2015, and 2014		88
Consolidated Statements of Cash Flows for the Years Ended December 31, 2016, 2015, and 2014		89
Notes to Consolidated Financial Statements		90
Unaudited Quarterly Consolidated Financial Information		147

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Electronics For Imaging, Inc.

Fremont, California

We have audited the accompanying consolidated balance sheets of Electronics For Imaging, Inc. and subsidiaries (the “Company”) as of December 31, 2016 and 2015 and the related consolidated statements of operations, comprehensive income, cash flows, and stockholders’ equity for each of the three years in the period ended December 31, 2016. Our audits also included the financial statement schedule listed in the Index at Item 15. These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Electronics For Imaging, Inc. and subsidiaries as of December 31, 2016 and 2015 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2016, based on the criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 21, 2017, expressed an unqualified opinion on the Company’s internal control over financial reporting.

/S/    DELOITTE & TOUCHE LLP

San Jose, California

February 21, 2017

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Electronics For Imaging, Inc.

Consolidated Balance Sheets

	December 31,
(in thousands)	2016			2015
Assets
Current assets:
Cash and cash equivalents	$	164,313		$	164,091
Short-term investments, available for sale		295,428			333,276
Accounts receivable, net of allowances of $23.3 and $22.0 million, respectively		220,813			193,121
Inventories		99,075			106,378
Income taxes receivable		975			473
Assets held for sale		3,781			—
Other current assets		31,881			29,675
Total current assets		816,266			827,014
Property and equipment, net		103,304			97,779
Restricted investments and cash equivalents		6,252			—
Goodwill		359,841			338,793
Intangible assets, net		122,997			135,552
Deferred tax assets		58,477			41,043
Other assets		14,359			9,970
Total assets	$	1,481,496		$	1,450,151
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	114,287		$	113,541
Accrued and other liabilities		85,505			74,425
Deferred revenue		53,813			48,767
Income taxes payable		10,256			3,594
Total current liabilities		263,861			240,327
Convertible senior notes, net		304,484			290,734
Imputed financing obligation related to build-to-suit lease		14,152			13,480
Noncurrent contingent and other liabilities		42,786			51,101
Deferred tax liabilities		16,351			19,003
Noncurrent income taxes payable		12,030			11,312
Total liabilities		653,664			625,957
Commitments and contingencies (Note 8)
Stockholders’ equity:
Preferred stock, $0.01 par value; 5,000 shares authorized; none issued and outstanding		—			—
Common stock, $0.01 par value; 150,000 shares authorized; 53,038 and 51,808 shares issued, respectively		530			518
Additional paid-in capital		705,901			657,354
Treasury stock, at cost; 6,457 and 4,476 shares, respectively		(273,730	)		(190,439	)
Accumulated other comprehensive loss		(24,694	)		(17,424	)
Retained earnings		419,825			374,185
Total stockholders’ equity		827,832			824,194
Total liabilities and stockholders’ equity	$	1,481,496		$	1,450,151

See accompanying notes to consolidated financial statements.

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Electronics For Imaging, Inc.

Consolidated Statements of Operations

	For the years ended December 31,
(in thousands, except per share amounts)	2016			2015			2014
Revenue	$	992,065		$	882,513		$	790,427
Cost of revenue (1)		483,375			423,129			360,690
Gross profit		508,690			459,384			429,737
Operating expenses:
Research and development (1)		151,192			141,364			134,732
Sales and marketing (1)		169,042			156,339			147,383
General and administrative (1)		85,614			72,797			66,932
Amortization of identified intangibles		39,560			26,510			20,673
Restructuring and other (Note 13)		6,729			5,731			6,578
Total operating expenses		452,137			402,741			376,298
Income from operations		56,553			56,643			53,439
Interest expense		(17,716	)		(17,364	)		(5,859	)
Interest income and other income (expense), net		545			(1,757	)		(5,493	)
Income before income taxes		39,382			37,522			42,087
Benefit from (provision for) income taxes		6,164			(3,982	)		(8,373	)
Net income	$	45,546		$	33,540		$	33,714
Net income per basic common share	$	0.97		$	0.71		$	0.72
Net income per diluted common share	$	0.95		$	0.70		$	0.70
Shares used in basic per-share calculation		46,900			47,217			46,866
Shares used in diluted per-share calculation		47,797			48,150			48,406
(1)        Includes stock-based compensation expense as follows:
	2016			2015			2014
Cost of revenue	$	2,784		$	2,837		$	2,562
Research and development		8,968			9,406			8,818
Sales and marketing		7,690			7,602			7,070
General and administrative		12,384			14,226			17,611

See accompanying notes to consolidated financial statements.

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Electronics For Imaging, Inc.

Consolidated Statements of Comprehensive Income

(in thousands)	For the years ended December 31,
	2016			2015			2014
Net income	$	45,546		$	33,540		$	33,714
Net unrealized investment losses:
Unrealized holding losses, net of tax benefits of less than $0.1, $0.1, and $0.2 million for the years ended December 31, 2016, 2015, and 2014, respectively		(97	)		(169	)		(344	)
Reclassification adjustments included in net income, net of no tax benefit for the year ended December 31, 2016 and less than $0.1 million for the years ended December 31, 2015 and 2014		—			(66	)		(24	)
Net unrealized investment losses		(97	)		(235	)		(368	)
Currency translation adjustments, net of tax benefit of $0.5 million for the year ended December 31, 2016, no tax provision for the year ended December 31, 2015, and tax provision of less than $0.1 million for the year ended December 31, 2014		(7,181	)		(9,872	)		(5,576	)
Unrealized gains (losses) on cash flow hedges		8			40			(25	)
Comprehensive income	$	38,276		$	23,473		$	27,745

See accompanying notes to consolidated financial statements.

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Electronics For Imaging, Inc.

Consolidated Statements of Stockholders’ Equity

	Common stock				Additional paid-in capital			Treasury stock						Accumulated Other comprehensive income (loss)			Retained earnings		Total stockholders’ equity
(in thousands)	Shares		Amount					Shares			Amount
Balances as of December 31, 2013		47,370	$	474	$	474,330			(396	)	$	(12,897	)	$	(1,388	)	$	306,931	$	767,450
Comprehensive income (loss), net of tax															(5,969	)		33,714		27,745
Exercise of common stock options		490		5		7,690														7,695
Restricted stock vested		1,174		12		(12	)													—
Equity component of convertible senior notes, net						63,114														63,114
Purchase of note hedges						(63,928	)													(63,928	)
Issuance of warrants						34,535														34,535
Stock-based compensation						36,061														36,061
Stock repurchases									(2,340	)		(101,095	)							(101,095	)
Stock issued pursuant to ESPP		637		6		8,615														8,621
Tax benefit from employee stock plans						8,491														8,491
Balances as of December 31, 2014		49,671	$	497	$	568,896			(2,736	)	$	(113,992	)	$	(7,357	)	$	340,645	$	788,689
Comprehensive income (loss), net of tax															(10,067	)		33,540		23,473
Exercise of common stock options		124		1		1,901														1,902
Restricted stock vested		925		9		(9	)													—
Common stock issued in connection with business acquisitions		787		8		36,559														36,567
Stock-based compensation, net of cash settlements						33,741														33,741
Non-cash settlement of vacation liabilities by issuing RSUs						1,353														1,353
Stock repurchases									(1,740	)		(76,447	)							(76,447	)
Stock issued pursuant to ESPP		301		3		9,544														9,547
Tax benefit from employee stock plans						5,369														5,369
Balances as of December 31, 2015		51,808	$	518	$	657,354			(4,476	)	$	(190,439	)	$	(17,424	)	$	374,185	$	824,194
Comprehensive income (loss), net of tax															(7,270	)		45,546		38,276
Exercise of common stock options		115		1		1,344														1,345
Restricted stock vested		787		8		(8	)													—
Common stock issued in connection with business acquisition		30		—		73														73
Cumulative effect adjustment upon adoption of ASU 2016-09						2,743												94		2,837
Stock-based compensation, net of cash settlements						31,726														31,726
Non-cash settlement of vacation liabilities by issuing RSUs						3,059														3,059
Stock repurchases									(1,981	)		(83,291	)							(83,291	)
Stock issued pursuant to ESPP		298		3		9,756														9,759
Balances as of December 31, 2016		53,038	$	530	$	705,901			(6,457	)	$	(273,730	)	$	(24,694	)	$	419,825	$	827,832

See accompanying notes to consolidated financial statements.

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Electronics For Imaging, Inc.

Consolidated Statements of Cash Flows

	For the years ended December 31,
(in thousands)	2016			2015			2014
Cash flows from operating activities:
Net income	$	45,546		$	33,540		$	33,714
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		55,081			40,124			31,099
Deferred taxes		(10,955	)		(7,384	)		(5,836	)
Tax benefit from employee stock plans		—			5,369			8,491
Provision for bad debts and sales-related allowances		10,678			7,536			7,408
Provision for inventory obsolescence		5,187			5,193			6,300
Stock-based compensation, net of cash settlements		31,726			33,741			36,061
Contingent consideration payments related to businesses acquired		—			—			(3,428	)
Non-cash accretion of interest expense on convertible notes and imputed financing obligation		13,489			12,957			4,433
Other non-cash charges and credits		5,443			3,842			(3,608	)
Changes in operating assets and liabilities, net of effect of acquired companies:
Accounts receivable		(31,221	)		(34,355	)		(27,143	)
Inventories		4,306			(6,759	)		(11,868	)
Other current assets		(6,499	)		(14,863	)		13,409
Accounts payable and accrued liabilities		652			(6,371	)		8,729
Income taxes receivable and payable, net		(2,429	)		(4,213	)		(5,631	)
Net cash provided by operating activities		121,004			68,357			92,130
Cash flows from investing activities:
Purchases of short-term investments		(216,349	)		(328,911	)		(281,962	)
Proceeds from sales and maturities of short-term investments		252,856			311,508			139,185
Purchases of restricted investments and cash equivalents		(6,252	)		—			—
Purchases, net of proceeds from sales, of property and equipment		(22,373	)		(18,449	)		(15,900	)
Businesses and technology purchased, net of cash acquired		(19,932	)		(74,766	)		(21,980	)
Net cash used for investing activities		(12,050	)		(110,618	)		(180,657	)
Cash flows from financing activities:
Proceeds from issuance of convertible notes, net of debt issuance costs paid		(3	)		(58	)		336,365
Purchase of convertible note hedges		—			—			(63,928	)
Proceeds from issuance of warrants		—			—			34,535
Proceeds from issuance of common stock		11,100			11,450			16,317
Purchases of treasury stock and net share settlements		(83,292	)		(76,447	)		(101,095	)
Repayment of debt assumed through business acquisitions		(8,800	)		(22,534	)		(564	)
Contingent consideration payments related to businesses acquired		(28,111	)		(4,093	)		(10,594	)
Net cash provided by (used for) financing activities		(109,106	)		(91,682	)		211,036
Effect of foreign exchange rate changes on cash and cash equivalents		374			(99	)		(1,460	)
Increase (decrease) in cash and cash equivalents		222			(134,042	)		121,049
Cash and cash equivalents at beginning of year		164,091			298,133			177,084
Cash and cash equivalents at end of year	$	164,313		$	164,091		$	298,133

See accompanying notes to consolidated financial statements.

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Electronics For Imaging, Inc.

Notes to Consolidated Financial Statements

Note 1: The Company and Its Significant Accounting Policies

The Company

We are a world leader in customer-centric digital printing innovation focused on the transformation of the printing, packaging, ceramic tile decoration, and textile industries from the use of traditional analog based printing to digital on-demand printing.

Our products include industrial super-wide and wide format display graphics, textile, label and packaging, and ceramic tile decoration industrial digital inkjet printers that utilize our digital ink, industrial digital inkjet printer parts, and professional services; print production workflow, web-to-print, cross-media marketing, and business process automation solutions; and color printing DFEs creating an on-demand digital printing ecosystem. Our ink includes digital UV curable, LED curable, ceramic, water-based, and thermoforming ink, as well as a variety of textile ink including dye sublimation, pigmented, reactive dye, acid dye, pure disperse dye, and water-based dispersed printing ink. Our award-winning business process automation solutions are integrated from creation to print and are vertically integrated with our industrial digital inkjet printers and products produced by the leading production digital color page printer manufacturers that are driven by our Fiery DFEs.

Our product portfolio includes industrial super-wide and wide format digital inkjet products (“Industrial Inkjet”) including VUTEk and Matan display graphics super-wide and wide format, Reggiani textile, Jetrion label and packaging, and Cretaprint ceramic tile decoration and construction material industrial digital inkjet printers and ink; print production workflow, web-to-print, cross-media marketing, Optitex textile 2D and 3D CAD applications, and business process automation software (“Productivity Software”), which provides corporate printing, label and packaging, publishing, and mailing and fulfillment solutions for the printing and packaging industry; and Fiery DFEs (“Fiery”). Our integrated solutions and award-winning technologies are designed to automate print and business processes, streamline workflow, provide profitable value-added services, and produce accurate digital output.

Significant Accounting Policies

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

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 lease accounting, functional currency determination, and contingencies on an ongoing basis. Estimates are based on historical and current experience, the impact of the current economic environment, and various other assumptions believed to be reasonable under the circumstances at the time of the estimate, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

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Notes to Consolidated Financial Statements—(Continued)

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 short-term investments. Available-for-sale securities are stated at fair value with unrealized gains and losses reported as a separate component of OCI, adjusted for deferred income taxes. The credit portion of any other-than-temporary impairment is included in net income. Realized gains and losses on sales of financial instruments are recognized upon sale of the investments using the specific identification method.

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

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.

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Notes to Consolidated Financial Statements—(Continued)

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

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 securities, contingent acquisition-related liabilities, self-insurance liability, derivative instruments, and convertible senior notes are disclosed in Note 6—Investments and Fair Value Measurements of the Notes to Consolidated Financial Statements.

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. As such, revenue is generally recognized when persuasive evidence of an arrangement exists, the product has been delivered or services have been rendered, the fee is fixed or determinable, and collection of the resulting receivable is reasonably assured.

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;

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Notes to Consolidated Financial Statements—(Continued)

• 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 events. We may not request collateral from our customers, although down payments or letters of credit are generally required from Industrial Inkjet and Productivity Software customers to ensure payment. If we determine that collection of a fee is not reasonably assured, we defer the fee and recognize revenue when collection becomes reasonably assured, which is generally upon receipt of cash.

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, Software—Revenue Recognition, and if applicable, SAB 104, and ASC 605-25, to all transactions involving the sale of software products and hardware transactions where the software is not incidental.

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 terms and conditions. As a result, significant contract interpretation is sometimes required to determine the appropriate accounting, including whether the deliverables specified in a multiple element arrangement should be treated as separate units of accounting for revenue recognition purposes, and, if so, how the price should be allocated among the elements and when to recognize revenue for each element. We recognize revenue for delivered elements only when the delivered elements have stand-alone value, uncertainties regarding customer acceptance are resolved, and there are no customer-negotiated refund or return rights for the delivered elements. If the arrangement includes a customer-negotiated refund or right of return relative to the delivered item and the delivery and performance of the undelivered item is considered probable and substantially in our control, the delivered element constitutes a separate unit of accounting. We limit revenue recognition for delivered elements to the amount that is not contingent on the future delivery of products or services, future performance obligations, or subject to customer-specified return or refund privileges. Changes in the allocation of the sales price between elements may impact the timing of revenue recognition, but will not change the total revenue recognized on the contract.

Multiple-Deliverable Arrangements

We recognize revenue in multiple element arrangements involving tangible products containing software and non-software components that function together to deliver the product’s essential functionality by applying the relative sales price method of allocation in accordance with ASC 605-25. The sales price for each element is determined using VSOE when available (including post-contract customer support, professional services, hosting, and training). When VSOE is not available, then TPE is used. If VSOE or TPE are not available, then BESP is used when applying the relative sales price method for each unit of accounting. When the arrangement includes software and non-software elements, revenue is first allocated to the non-software and software elements as a group based on their relative sales price. Thereafter, the relative sales price allocated to the software elements as a group is further allocated to each unit of accounting in accordance with ASC 985-605. We then defer revenue with respect to the relative sales price that was allocated to any undelivered element.

We have calculated BESP for software licenses and non-software deliverables. We considered several different methods of establishing BESP including cost plus a reasonable margin, stand-alone sales price of the same or

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Notes to Consolidated Financial Statements—(Continued)

similar products, and if available, targeted rate of return, list price less discount, and company published list prices to identify the most appropriate representation of the estimated sales price of our products. Due to the wide range of pricing offered to our customers, we determined that sales price of the same or similar products, list price less discount, and company published list prices were not appropriate methods to determine BESP for our products. Cost plus a reasonable margin and targeted rate of return were eliminated due to the difficulty in determining the cost associated with the intangible elements of each product’s cost structure. As a result, management believes that the best estimate of the sales price of an element is the median sales price of deliverables sold in stand-alone transactions and/or separately priced deliverables contained in bundled arrangements. Elements sold as stand-alone transactions and in bundled arrangements during the four quarters immediately preceding the end of each reporting period were included in the calculation of BESP.

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, Certain Revenue Arrangements that Include Software Elements, determined that tangible products containing software and non-software components that function together to deliver the product’s essential functionality are not required to follow the software revenue recognition guidance in ASC 985-605 as long as the hardware components of the tangible product substantively contribute to its functionality. In addition, hardware components of tangible products containing software components shall always be excluded from the guidance in ASC 985-605. Non-software elements are accounted for in accordance with SAB 104.

Multiple element arrangements containing only software elements remain subject to the provisions of ASC 985-605 and must follow the residual method. When several elements of a multiple element arrangement, including software licenses, post-contract customer support, hosting, and professional services, are sold to a customer through a single contract, the revenue from such multiple element arrangements are allocated to each element using the residual method in accordance with ASC 985-605. Revenue is allocated to the support elements and professional service elements of an agreement using VSOE and to the software license elements of the agreement using the residual method. We have established VSOE for professional services and hosting based on the rates charged to our customers in stand-alone orders. We have also established VSOE for post-contract customer support based on substantive renewal rates. Accordingly, software license fees are recognized under the residual method for arrangements in which the software was licensed with maintenance and/or professional services, and where the maintenance and professional services were not essential to the functionality of the delivered software.

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.

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Notes to Consolidated Financial Statements—(Continued)

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, Revenue Recognition—Construction-Type and Production-Type Contracts. These services require that we perform significant, extensive, and complex design, development, modification, or implementation activities of our customers’ systems. Performance will often extend over long periods, and our right to receive future payment depends on our future performance in accordance with these agreements.

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

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

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.

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Notes to Consolidated Financial Statements—(Continued)

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

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

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

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Notes to Consolidated Financial Statements—(Continued)

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

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, Transfers and Servicing, trade receivables are derecognized from our Consolidated Balance Sheet when sold to third parties upon determining that such receivables are presumptively beyond the reach of creditors in a bankruptcy proceeding. The recourse obligation is measured using market data from similar transactions and the servicing liability is determined based on the fair value that a third party would charge to service these receivables. These liabilities were determined to not be material at December 31, 2016 and 2015.

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 are generally stated at standard cost, which approximates the lower of actual cost, using the first-in, first-out cost flow assumption, or market. We periodically review our inventories for potential excess or obsolete items and write down specific items to net realizable value as appropriate. Work-in-process inventories consist of our product at various levels of assembly and include materials, labor, and manufacturing overhead. Finished goods inventory represents completed products awaiting shipment.

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 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

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Notes to Consolidated Financial Statements—(Continued)

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 lease (forty years), and purchased buildings (forty years). When assets are disposed, the asset and accumulated depreciation are removed from our records and the related gain or loss is recognized in our results of operations.

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

In accordance with ASC 350-40, Intangibles—Goodwill and Other—Internal-Use Software, software development costs, including costs incurred to purchase third party software, are capitalized during the application development stage when certain factors are present including, among others, that technology exists to achieve the performance requirements, management has committed to funding the project, and conceptual formulation, design, and testing of possible software alternatives (preliminary project phase) have all been completed. Costs incurred during the preliminary project phase, post-implementation /operational phase, process re-engineering, training, and maintenance must be expensed as incurred. The accumulation of software costs to be capitalized ceases when the software is substantially developed and is ready for its intended use. Capitalized internal use software is amortized over an estimated useful life of three to five years using the straight-line method.

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, a two-step impairment test of goodwill is required, unless the simplified method is elected. In the first step, the fair value of each reporting unit is compared to its carrying value. If the fair value exceeds carrying value, goodwill is not impaired and further testing is not required. If the carrying value exceeds fair value, then the second step of the impairment test is required to determine the implied fair value of the reporting unit’s goodwill. The implied fair value of goodwill is calculated by deducting the fair value of all tangible and intangible net assets of the reporting unit, excluding goodwill, from the fair value of the reporting unit as determined in the first step. If the carrying value of the reporting unit’s goodwill exceeds its implied fair value, then an impairment loss must be recorded equal to the difference. We have not been required to perform this second step of the process because the fair value of our reporting units have exceeded their carrying value as of December 31, 2016, 2015, and 2014.

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

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Notes to Consolidated Financial Statements—(Continued)

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 of the useful life of the technology with a $1.6 million impact on amortization expense. No changes have been made to the useful lives of amortizable identifiable intangible assets in 2015 or 2014. Intangible amortization expense was $39.6, $26.5, and $20.7 million for the years ended December 31, 2016, 2015, or 2014, respectively.

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

Our Industrial Inkjet printers are generally accompanied by a 12-month limited warranty, which covers both parts and labor. Our Fiery DFE limited warranty is 12 to 15 months. Estimated future hardware and software warranty costs are recorded as a cost of product revenue when the related revenue is recognized based on historical and projected warranty claim rates, historical and projected cost-per-claim, and knowledge of specific product failures that are outside our typical experience. Factors that affect our warranty liability include the number of installed units subject to warranty protection, product failure rates, estimated material costs, estimated distribution costs, and estimated labor costs.

Warranty reserves were $10.3 and $9.6 million as of December 31, 2016 and 2015, respectively.

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 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

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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 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 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

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

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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

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, Simplifying the Accounting for Measurement Period Adjustments; and

• 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

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, Stock Compensation—Improvements to Employee Share Based Payment Accounting, in 2016, we elected to account for forfeitures when they occur instead of estimating the expected forfeiture rate.

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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

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 assets, liabilities, and capital accounts, which are remeasured at historical exchange rates. Revenue and expenses are remeasured at monthly exchange rates, which approximate average exchange rates in effect during each period. Gains or losses from foreign currency remeasurement are included in interest income and other income (expense), net. Net gains or losses resulting from foreign currency transactions, including hedging gains and losses, are reported in interest income and other income (expense), net, and were losses of $3.8, $4.2, and $6.8 million for the years ended December 31, 2016, 2015, and 2014, respectively.

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, Foreign Currency Matters, we consider the U.S. dollar to be the functional currency for each of our international subsidiaries except for our Brazilian subsidiary, Metrics, for which we consider the Brazilian real to be the subsidiary’s functional currency; our German subsidiaries, EFI GmbH and Alphagraph, for which we consider the Euro to be the subsidiaries’ functional currency; our Italian subsidiary, Reggiani, for which we consider the Euro to be the functional currency; our Spanish subsidiary, Cretaprint, for which we consider the Euro to be the subsidiary’s functional currency; our U.K. subsidiaries, Electronics For Imaging United Kingdom Limited, Shuttleworth, and Rialco, for which we consider the British pound sterling to be the subsidiaries’ functional currency; our Israeli subsidiary, Matan, for which we consider the shekel to be the functional currency; our Japanese subsidiary, Electronics For Imaging Japan KK, for which we consider the Japanese yen to be the subsidiary’s functional currency; our New Zealand subsidiary contains the Prism Group Holdings Limited (“Prism”) operations in New Zealand for which we consider the New Zealand dollar to be the functional currency; our Australian subsidiary contains the Prism, OPS, and Metrix operations in Australia for which we consider the Australian dollar to be the functional currency; and our subsidiary in the People’s Republic of China, which contains the operations of our Cretaprint sales and support center and our Industrial Inkjet demonstration center for which we consider the renminbi to be the functional currency. Optitex generates revenue and incurs operating expenses primarily in local currencies. Upon consideration of the salient economic indicators, we consider the local currency in each of Optitex’s primary locations (shekel, rupee, Euro, and U.S. dollar) to be the functional currencies for Optitex.

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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 shares of restricted stock having a dilutive effect, non-vested restricted stock for which the performance criteria have been met, shares to be purchased under our ESPP having a dilutive effect, the assumed issuance at the beginning of 2016 of shares potentially issued from escrow related to the acquisition of CTI, the assumed issuance at the beginning of 2016 of shares issued from escrow during 2016 related to the acquisition of Reggiani, the assumed conversion of our Notes having a dilutive effect using the treasury stock method, as well as the dilutive effect of our warrants when the stock price exceeds the conversion price of the Notes. Any potential shares that are anti-dilutive as defined in ASC 260, Earnings Per Share, are excluded from the effect of dilutive securities.

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

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 derivative instruments in earnings in the period of change. Gains and losses on foreign currency forward contracts used to hedge balance sheet exposures are recognized in interest income and other income (expense), net, in the same period as the remeasurement gain or loss of the related foreign currency denominated assets and liabilities.

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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

In accordance with the Variable Interest Entities (“VIE”) sub-section of ASC 810, Consolidation, we perform a formal assessment at each reporting period regarding whether any consolidated entity is considered the primary beneficiary of a VIE based on the power to direct activities that most significantly impact the economic performance of the entity and the obligation to absorb losses or rights to receive benefits that could be significant to us. We do not have any arrangements that meet the definition of a VIE.

Recent Accounting Pronouncements

Debt Issuance Costs. In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, which is effective in the first quarter of 2016. ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt, which is consistent with the presentation of debt discounts and premiums. Retrospective application is required, which resulted in the reclassification of $5.8 million of debt issuance costs from other current assets and other assets to a direct reduction of our 7.5% Convertible Senior Notes, net, due 2019 (“Notes”) in our Consolidated Balance Sheet as of December 31, 2015.

Inventory Valuation. In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory, which is effective in the first quarter of 2017. ASU 2015-11 requires that inventory be valued at the lower of cost or net realizable value, which is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. We currently value inventory at the lower of cost or net realizable value less a reasonable profit margin as allowed by the current inventory valuation guidance. The adoption of ASU 2015-11 is expected to increase our inventory valuation in 2017.

Measurement Period Adjustments. In September 2015, the FASB issued ASU 2015-16, Simplifying the Accounting for Measurement Period Adjustments. The acquirer of a business is required to retrospectively adjust provisional amounts recognized at the acquisition date with a corresponding adjustment to goodwill. Those adjustments are required when new information is obtained about facts and circumstances that existed as of the acquisition date and, if known, would have affected the measurement of the amounts initially recognized or would have resulted in the recognition of additional assets or liabilities. Under current guidance, the acquirer also must revise comparative prior period information, including depreciation, amortization, or other income affects as a result of changes made to provisional amounts. To simplify the accounting for measurement period adjustments, ASU 2015-16 eliminates the requirement to retrospectively account for those adjustments. The impact on our financial statements will be determined in the future if measurement period adjustments are identified.

Lease Arrangements. Under current guidance, the classification of a lease by a lessee as either an operating lease or a capital lease determines whether an asset and liability is recognized on the balance sheet. ASU 2016-02, issued in February 2016 and effective in the first quarter of 2019, requires that a lessee recognize an asset and liability on its balance sheet related to all leases with terms in excess of one year. For all leases, a lessee

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will be required to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the statement of financial position. The right-to-use asset represents the right to use the underlying asset during the lease term.

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 asset in the statement of operations. Principal repayments are classified within financing activities and interest payments are classified as operating activities in the statement of cash flows.

• 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 lease accounting guidance will be rescinded by the new guidance, although simplified guidance will remain regarding lessee control during the construction period. Consequently, the accounting for build-to-suit leases will be the same as finance leases unless the lessee control provisions are applicable.

We have not quantified the impact, but we expect our consolidated financial position and results of operations to be materially effected.

Principal vs Agent. In March 2016, the FASB issued ASU 2016-08, Principal vs. Agent Considerations (Reporting Revenue Gross vs Net), streamlining and clarifying the criteria for identifying whether an entity is satisfying a performance obligation as the principal or agent in the transaction. The entity that is responsible for fulfilling the contractual obligations related to the good or service is acting as the principal and recognizes the gross amount of consideration. The entity that is responsible only for arranging delivery to the customer is acting as the agent and recognizes revenue in the amount of the fee or commission related to arranging for the delivery of the good or service.

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. In March 2016, the FASB issued ASU 2016-09, which is effective in the first quarter of 2017 with early adoption permitted. We elected to early adopt this standard in the second quarter of 2016, which required retroactive application of this standard as of the first quarter in 2016 resulting in the following:

• 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 capital in the first quarter of 2016 were reversed upon adoption. We recorded $2.2 million of deferred tax assets related to excess tax benefits for federal research and development income tax credits not previously benefitted.

• 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.

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• 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. In June 2016, the FABS issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, amending current guidance regarding other-than-temporary impairment of available-for-sale debt securities. The new guidance requires an estimate of the expected credit loss when fair value is below the amortized cost of the asset without regard for the length of time that the fair value has been below the amortized cost or the historical or implied volatility of the asset. Credit losses on available-for-sale debt securities will be limited to the difference between the security’s amortized cost basis and its fair value. The use of an allowance to record estimated credit losses (and subsequent recoveries) will also be required under the new guidance.

ASU 2016-13 will be effective in the first quarter of 2020. We are evaluating its impact on the carrying value of our available-for-sale securities and results of operations.

Settlement of Convertible Debt. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments, requiring that cash settlements of principal amounts of debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the debt must classify the portion of the principal payment attributable to the accreted interest related to the debt discount as cash outflows from operating activities. This is consistent with the classification of the coupon interest payments.

ASU 2016-15 will be effective in the first quarter of 2018. Accordingly, $63.6 million debt discount attributable to the difference between the 0.75% coupon interest rate on our Notes and the 4.98% (5.46% inclusive of debt issuance costs) effective interest rate will be classified as an operating cash outflow in the Consolidated Statement of Cash Flows upon cash settlement in 2019.

Restricted Cash. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows: Restricted Cash, requiring that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows.

ASU 2016-18 will be effective in the first quarter of 2018. We are evaluating its impact on our statement of cash flows.

Revenue Recognition. ASU 2014-09, Revenue from Contracts with Customers, issued in May 2014, enhances the comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets. The principles-based guidance provides a framework for addressing revenue recognition issues comprehensively. The standard requires that revenue should be recognized in an amount that reflects the consideration that the entity expects to be entitled in exchange for goods or services, which are referred to as performance obligations.

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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 will be effective in the first quarter of 2018. Two adoption methods are allowed under ASU 2014-09. Under the full retrospective method, the revised guidance is applied to all contracts in all reporting periods presented in the financial statements, subject to certain allowable exceptions. Retained earnings is adjusted for the cumulative effect of the change as of January 1, 2016. Under the modified retrospective method, the revised guidance is applied to all contracts existing as of January 1, 2018, with an adjustment to beginning retained earnings for the cumulative effect of the change and providing additional disclosures comparing results to previous guidance. We continue to evaluate the available adoption methods.

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.

Supplemental Disclosure of Cash Flow Information

	For the years ended December 31,
(in thousands)	2016			2015			2014
Net cash paid for income taxes	$	6,812		$	8,512		$	6,157
Cash paid for interest expense	$	2,975		$	2,945		$	128
Acquisitions of businesses and technology:
Cash paid for businesses and technology purchased, excluding contingent consideration	$	21,560		$	82,446		$	23,888
Cash acquired in business acquisitions		(1,628	)		(7,680	)		(1,908	)
Net cash paid for business acquisitions	$	19,932		$	74,766		$	21,980
Common stock issued in connection with business acquisitions	$	73		$	36,567		$	—
Non-cash investing and financing activities:
Non-cash settlement of vacation liabilities by issuing RSUs		3,059		$	1,353		$	—
Property and equipment received, but not paid		1,257			1,684			2,275
	$	4,316		$	3,037		$	2,275

Note 2: Earnings Per 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

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common shares result from the assumed exercise of outstanding common stock options having a dilutive effect using the treasury stock method, non-vested shares of restricted stock having a dilutive effect, non-vested restricted stock for which the performance criteria have been met, shares to be purchased under our ESPP having a dilutive effect, the assumed issuance at the beginning of 2016 of shares potentially issued from escrow related to the acquisition of CTI, the assumed issuance at the beginning of 2016 of shares issued from escrow during 2016 related to the acquisition of Reggiani, the assumed conversion of our Notes having a dilutive effect using the treasury stock method, as well as the dilutive effect of our warrants when the stock price exceeds the conversion price of the Notes. Any potential shares that are anti-dilutive as defined in ASC 260 are excluded from the effect of dilutive securities.

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. Accordingly, performance-based RSUs, which vested on various dates during the years ended December 31, 2016, 2015, and 2014 based on achievement of specified performance criteria related to revenue, cash flows from operating activities, and non-GAAP operating income targets; market-based RSUs, which vested during the year ended December 31, 2015 based on achievement of specified stock prices for defined periods; and performance-based stock options, which vested during the year ended December 31, 2016 are included in the determination of net income per diluted common share as of the beginning of each respective year.

Basic and diluted earnings per share for the years ended December 31, 2016, 2015, and 2014 are reconciled as follows (in thousands, except for per share amounts):

	2016		2015		2014
Basic net income per share:
Net income available to common shareholders	$	45,546	$	33,540	$	33,714
Weighted average common shares outstanding		46,900		47,217		46,866
Basic net income per share	$	0.97	$	0.71	$	0.72
Dilutive net income per share:
Net income available to common shareholders	$	45,546	$	33,540	$	33,714
Weighted average common shares outstanding		46,900		47,217		46,866
Dilutive stock options, restricted stock, and ESPP purchase rights		897		933		1,540
Weighted average common shares outstanding for purposes of computing diluted net income per share		47,797		48,150		48,406
Dilutive net income per share	$	0.95	$	0.70	$	0.70

Potential shares of common stock that are not included in the determination of diluted net income per share because they are anti-dilutive for the periods presented consist of ESPP purchase rights having an anti-dilutive effect of less than 0.1 million shares for the years ended December 31, 2016, 2015 and 2014 and the assumed vesting of RSUs having an anti-dilutive effect of less than 0.1 million shares for the year ended December 31, 2016.

The weighted-average number of common shares outstanding does not include the effect of the potential common shares from conversion of our Notes and exercise of our Warrants, which were issued in September 2014. The effects of these potentially outstanding shares were not included in the calculation of diluted net

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Notes to Consolidated Financial Statements—(Continued)

income per share because the effect would have been anti-dilutive since the conversion price of the Notes and the strike price of the Warrants exceeded the average market price of our common stock. We have the option to pay cash, issue shares of common stock, or any combination thereof for the aggregate amount due upon conversion of the Notes. Our intent is to settle the principal amount of the Notes in cash upon conversion. As a result, only amounts payable in excess of the principal amount of the Notes are considered in diluted net income per share under the treasury stock method. The Note Hedges are also not included in the calculation of diluted net income per share because the effect of any exercise of the Note Hedges would be anti-dilutive. Please refer to Note 7—Convertible Senior Notes, Note Hedges, and Warrants of the Notes to Consolidated Financial Statements for additional information.

Note 3: Business Acquisitions

We acquired Optitex Ltd. (“Optitex”) and Rialco Limited (“Rialco”) during 2016, which have been included in our Productivity Software and Industrial Inkjet operating segments, respectively. Post-acquisition revenue was $19.8 million in 2016 related to these two acquisitions. We acquired Reggiani and Matan during 2015, which has been included in our Industrial Inkjet operating segment, and two business process automation businesses, which have been included in our Productivity Software operating segment. Post-acquisition revenue was $88.4 million in 2015 related to these four acquisitions. We acquired four business process automation businesses during 2014, which have been included in our Productivity Software operating segment. Acquisition-related transaction costs were $2.2, $5.5, and $1.5 million during the years ended December 31, 2016, 2015, and 2014, respectively.

These acquisitions were accounted for as purchase business combinations. We allocated the purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed on the basis of their estimated fair value on their respective acquisition dates. Excess purchase consideration was recorded as goodwill. Factors contributing to a purchase price that results in goodwill include, but are not limited to, the retention of research and development personnel with skills to develop future technology, manufacturing capacity in the Industrial Inkjet operating segment, support personnel to provide maintenance services related to the products, a trained sales force capable of selling current and future products, the opportunity to cross-sell products of the acquired businesses to existing customers, the positive reputation of each of these businesses in the market, the opportunity to sell our Productivity Software Suite to customers of the acquired businesses, the opportunity to expand our presence in the digital inkjet textile printing market through the acquisition of the Reggiani digital inkjet textile printer business, and the synergy of Optitex technology with Reggiani digital inkjet textile printers. Rialco’s technical and commercial capabilities benefit the Industrial Inkjet operating segment in the sourcing, specification, and purification of high quality dyes and expand our research, development, and innovation base to develop ink for the signage, ceramic, and packaging markets.

We engaged a third party valuation firm to aid management in its analyses of the fair value of these acquired businesses. All estimates, key assumptions, and forecasts were either provided by or reviewed by us. While we chose to utilize a third party valuation firm, the fair value analyses and related valuations represent the conclusions of management and not the conclusions or statements of any third party.

The purchase price allocations for the 2016 purchase business combinations are preliminary and subject to change within the respective measurement periods as valuations are finalized. We expect to continue to obtain information to assist us in finalizing the fair value of the net assets acquired during the respective measurement periods, which end at various dates in 2017. Measurement period adjustments will be recognized in the reporting period in which the adjustment amounts are determined.

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2016 Acquisitions

Industrial Inkjet Operating Segment

Rialco, a private limited liability company incorporated in England and Wales and headquartered in Bradford, U.K., was acquired on March 1, 2016. Rialco has been included in the Industrial Inkjet operating segment.

We purchased Rialco for cash consideration of $8.4 million, net of cash acquired, plus an additional potential future cash earnout, which is contingent on achieving certain revenue and gross profit performance targets over three consecutive 12-month periods. Rialco is a leading European supplier of dye powders and color products for the textile, digital print, and other decorating industries. Rialco’s pure disperse dyes are particularly important in the manufacture of high-quality dye sublimation inkjet inks for textile applications, which is a key growth area in the global migration from analog to digital print.

The fair value of the earnout related to the Rialco acquisition is estimated to be $2.3 million at December 31, 2016, by applying the income approach in accordance with ASC 805-30-25-5, adjusted for the impact of post-acquisition foreign currency translation changes. Key assumptions include a risk-free discount rate of 0.8% and probability-adjusted revenue and gross profit levels. Probability-adjusted revenue and gross profit are significant inputs that are not observable in the market, which ASC 820-10-35 refers to as Level 3 inputs. This contingent liability is reflected in the Consolidated Balance Sheet as of December 31, 2016, as a current and noncurrent liability of $1.2 and $1.1 million, respectively, with the first payment due in the third quarter of 2017, if earned. In accordance with ASC 805-30-35-1, changes in the fair value of contingent consideration subsequent to the acquisition date are recognized in general and administrative expenses.

Productivity Software Segment

Optitex, a privately-held Israeli company headquartered in Rosh Ha’Ayin, Israel, was acquired on June 16, 2016. Optitex has been included in the Productivity Software operating segment.

We purchased Optitex for cash consideration of $11.6 million, net of cash acquired, plus an additional potential future cash earnout, which is contingent on achieving certain revenue and operating profit performance targets over three consecutive 12-month periods. Optitex has developed and markets integrated 2D and 3D CAD software that is shortening the design cycle, reducing our customers’ costs, and accelerating the adoption of fast fashion.

The fair value of the earnout related to the Optitex acquisition is estimated to be $24.4 million at December 31, 2016, by applying the income approach in accordance with ASC 805-30-25-5, adjusted for the impact of post-acquisition foreign currency translation changes. Key assumptions include a risk-free discount rate of 2.3% and probability-adjusted revenue and operating profit levels. Probability-adjusted revenue and operating profit are significant inputs that are not observable in the market, which ASC 820-10-35 refers to as Level 3 inputs. This contingent liability is reflected in the Consolidated Balance Sheet as of December 31, 2016, as a current and noncurrent liability of $8.4 and $16.0 million, respectively, with the first payment due in the fourth quarter of 2017, if earned. In accordance with ASC 805-30-35-1, changes in the fair value of contingent consideration subsequent to the acquisition date are recognized in general and administrative expenses.

2015 Acquisitions

Industrial Inkjet Operating Segment

On July 1, 2015, we acquired privately-held Reggiani, a societa per azioni headquartered in Bergamo, Italy, and privately-held Matan, an Israeli company headquartered in Rosh Ha’Ayin, Israel, which have been included in the Industrial Inkjet operating segment.

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We purchased Matan for cash consideration of approximately $38.9 million, net of cash acquired. Matan super-wide format digital inkjet roll-to-roll printers, including advanced material handling features such as in-line cutting and slitting, expand our offerings in this market.

We purchased Reggiani for cash consideration of approximately $26.6 million, net of cash acquired, the issuance of 0.6 million shares of EFI common stock valued at $26.9 million, plus a potential future cash earnout, which is contingent on achieving certain revenue and earnings before interest and tax (“EBIT”) performance targets over consecutive 18 and 12-month periods. Reggiani industrial digital inkjet textile printers address the full scope of advanced textile printing with versatile printers suitable for pigmented, reactive dye, acid dye, and water-based dispersed printing ink. This acquisition expands our presence in the digital inkjet textile printing market.

The fair value of the earnout related to the Reggiani acquisition is estimated to be $22.8 million at December 31, 2016, by applying the income approach in accordance with ASC 805-30-25-5, which is net of an earnout payment, which was accelerated into 2016 of $23.8 million. Key assumptions include a risk-free discount rate of 4.98%, a probability-adjusted revenue level, and probability-adjusted EBIT. Probability-adjusted revenue and EBIT are significant inputs that are not observable in the market, which ASC 820-10-35, refers to as Level 3 inputs. This contingent liability is reflected in the Consolidated Balance Sheet as of December 31, 2016, as a current and noncurrent liability of $7.1 and $15.7 million, respectively.

Productivity Software Operating Segment

We acquired privately-held CTI and Shuttleworth, which have been included in our Productivity Software operating segment, for aggregate cash consideration of $9.3 million, net of cash acquired, the issuance of 0.2 million shares of EFI common stock valued at $9.7 million, plus a potential future cash earnout, which is contingent on achieving certain performance targets.

CTI, a California limited liability company headquartered in San Diego, California, was acquired on October 6, 2015 and provides manufacturing execution software for the corrugated packaging industry, including business and management capabilities, with a customer base including sheet feeders, sheet plants, and full corrugated box plants.

Shuttleworth, a private limited liability company incorporated in England and Wales and headquartered in Kettering, U.K., was acquired on November 4, 2015, and provides business process automation solutions to the signage and packaging digital print industries. Support and operations of Shuttleworth were included in the Productivity Software operating segment, which provides Pace, Monarch, and Radius products to the Shuttleworth customer base, while continuing to support existing Shuttleworth customers.

The fair value of the CTI and Shuttleworth earnouts are estimated to be $6.8 million at December 31, 2016, by applying the income approach in accordance with ASC 805-30-25-5. Key assumptions include risk-free discount rates of 0.6% to 1.3% and probability-adjusted revenue levels. Probability-adjusted revenue is a significant input that is not observable in the market, which ASC 820-10-35, refers to as a Level 3 input. This contingent liability is reflected in the Consolidated Balance Sheet as of December 31, 2016, as a current and noncurrent liability of $2.4 and $4.4 million, respectively.

2014 Acquisitions

Productivity Software Operating Segment

We acquired privately-held SmartLinc, Rhapso, DirectSmile, and DIMS, which have been included in our Productivity Software operating segment, for aggregate cash consideration of $20.4 million, net of cash acquired,

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Notes to Consolidated Financial Statements—(Continued)

plus additional potential future cash earnouts, which were contingent on achieving certain performance targets. Earnout payments related to the 2014 acquisitions were $4.0 and $0.3 million at December 31, 2016 and 2015, respectively.

SmartLinc, a Wisconsin corporation headquartered in Milwaukee, Wisconsin, was acquired on January 16, 2014, and provides business process automation software for shipping and logistics operations.

Rhapso, a societe anonyme organized under French law headquartered in Les Ulis, France, was acquired on April 14, 2014, and provides printing, packaging, and scheduling software to European customers in the corrugated packaging market sector.

DirectSmile, a limited liability company under German law headquartered in Berlin, Germany, was acquired on July 18, 2014, and provides software solutions for variable data printing, cross media marketing automation, and image personalization technologies.

DIMS, a limited liability company under Dutch law headquartered in Lichtenvoorde, Netherlands, was acquired on September 15, 2014, and is a leading supplier of business process automation software for high end, multilingual, and multi-national print and packaging companies with a large portion of its installed base in Europe.

Valuation Methodologies

Intangible assets acquired in 2016, 2015, and 2014 consist of customer relationships, trade names, existing technology, backlog, and IPR&D. Each intangible asset valuation methodology for each acquisition assumes discount rates between 16% and 30%.

Customer Relationships and Backlog were valued using the excess earnings method, which is an income approach. The value of customer relationships lies in the generation of a consistent and predictable revenue source and the avoidance of costs associated with developing the relationships. Customer relationships were valued by estimating the revenue attributable to existing customer relationships and probability-weighting each forecast year to reflect the uncertainty of maintaining existing relationships based on historical attrition rates.

Backlog represents unfulfilled customer purchase orders at the acquisition date that will provide a relatively secure revenue stream, subject only to potential customer cancellation.

Trade Names were valued using the relief from royalty method, which is an income approach, with royalty rates based on various factors including an analysis of market data, comparable trade name agreements, and consideration of historical advertising dollars spent supporting the trade name.

Existing Technology was valued using the relief from royalty method based on royalty rates for similar technologies. The value of existing technology is derived from consistent and predictable revenue, including the opportunity to cross-sell to existing customers and the avoidance of the costs associated with developing the technology. Revenue related to existing technology was adjusted in each forecast year to reflect the evolution of the technology and the cost of sustaining research and development required to maintain the technology.

Rialco existing technology was valued using the cost approach. The value of existing technology is estimated based on the historical time and cost to develop the technology, the estimated man-years required to recreate the technology, historical employee compensation and benefits, and a reasonable mark-up based on profit for companies with similar operations.

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IPR&D was valued using the relief from royalty method by estimating the cost to develop purchased IPR&D into commercially viable products, estimating the net cash flows resulting from the sale of those products, and discounting the net cash flows back to their present value. Project schedules were based on management’s estimate of tasks completed and tasks to be completed to achieve technical and commercial feasibility.

	Matan			Reggiani			CTI			Shuttleworth			DIMS
Discount rate for IPR&D		16	%		21	%		18	%		20	%		20	%
IPR&D percent complete at acquisition date		33	%		70	%		75	%		17	%		76	%
IPR&D percent complete at December 31, 2016		88	%		100	%		95	%		100	%		93	%
Acquisition-date valuation (in thousands)	$	3,190		$	10,879		$	150		$	555		$	389

IPR&D is subject to amortization after product completion over the product life or otherwise assessed for impairment in accordance with acquisition accounting guidance. Additional costs incurred to complete IPR&D after the acquisition are expensed.

The allocation of the purchase price to the assets acquired and liabilities assumed (in thousands) with respect to each of these acquisitions at their respective acquisition dates is summarized as follows:

	2016 Acquisitions									2015 Acquisitions															2014 Acquisitions
	Industrial Inkjet				Productivity Software					Industrial Inkjet										Productivity Software					Productivity Software
	Rialco				Optitex					Matan					Reggiani					CTI and Shuttleworth					SmartLinc, Rhapso, DirectSmile, DIMS
	Weighted average useful life		Purchase Price Allocation		Weighted average useful life		Purchase Price Allocation			Weighted average useful life		Purchase Price Allocation			Weighted average useful life		Purchase Price Allocation			Weighted average useful life		Purchase Price Allocation			Weighted average useful  life		Purchase Price Allocation
Customer relationships		6 years	$	2,512		3-4 years	$	8,890			6 years	$	6,630			4 years	$	12,187			3-4 years	$	5,001			5 years	$	8,569
Existing technology		5 years		846		5 years		7,760			5 years		8,790			4 years		33,118			5 years		5,634			4 years		4,890
Trade names		5 years		763		4 years		2,020			5 years		2,570			5 years		11,964			4 years		1,357			4 years		1,231
IPR&D		—		—		—		—			—		3,190			—		10,879			—		705			—		389
Backlog		< one year		56		< one year		370			< one year		70			< one year		704			< one year		132			—		—
Goodwill				1,426				28,147					26,609					61,341					17,790					21,078
				5,603				47,187					47,859					130,193					30,619					36,157
Net tangible assets (liabilities)				5,177				(11,924	)				(4,945	)				(32,571	)				(3,611	)				(3,758	)
Total purchase price			$	10,780			$	35,263				$	42,914				$	97,622				$	27,008				$	32,399

The initial preliminary purchase price allocations were adjusted by $0.8, $3.8, and $0.2 million during 2016, 2015, and 2014, respectively, primarily related to certain current assets and deferred tax liabilities. Pro forma results of operations for Optitex and Rialco have not been presented because their pre-acquisition revenue and net income are not material to our Consolidated Results of Operations for the year ended December 31, 2016.

Goodwill, which represents the excess of the purchase price over the net tangible and intangible assets acquired is not deductible for tax purposes with the exception of Optitex and Matan. Goodwill that was generated by our acquisitions of Optitex and Matan is deductible for U.S. tax purposes, but is not deductible for tax purposes in Israel. Pre-acquisition goodwill acquired in the Rhapso acquisition is deductible in Germany.

Rialco generates revenue and incurs operating expenses primarily in British pounds sterling. Upon consideration of the salient economic indicators discussed in ASC 830-10-55-5, we consider the British pounds sterling to be the functional currency for Rialco.

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Notes to Consolidated Financial Statements—(Continued)

Optitex generates revenue and incurs operating expenses primarily in local currencies. Upon consideration of the salient economic indicators, we consider the local currency in each of Optitex’s primary locations (shekel, rupee, Euro, and U.S. dollar) to be the functional currencies for Optitex.

Note 4: Balance Sheet Components

Inventories

Inventories, net of allowances, as of December 31, 2016 and 2015 are as follows (in thousands):

	2016		2015
Raw materials	$	45,798	$	53,783
Work in process		7,362		6,646
Finished goods		45,915		45,949
	$	99,075	$	106,378

Property and Equipment, Net

Property and equipment, net, as of December 31, 2016 and 2015 are as follows (in thousands):

	2016			2015
Land, buildings, and improvements (including build-to-suit lease)	$	67,841		$	72,373
Equipment and purchased software		86,495			69,748
Furniture and leasehold improvements		18,713			17,449
		173,049			159,570
Less accumulated depreciation and amortization		(69,745	)		(61,791	)
	$	103,304		$	97,779

We lease approximately 59,000 square feet in Fremont, California, under a 15-year lease agreement. The leased facility was a cold shell requiring additional build-out and tenant improvements. As explained in Note 8—Commitments and Contingencies of the Notes to Consolidated Financial Statements, we are deemed to be the accounting owner of the facility. The capitalized cost under the build-to-suit lease was $10.3 and $10.6 million as of December 31, 2016 and 2015, respectively, based on the estimated replacement cost, including capitalized interest, which has been reduced by accumulated depreciation.

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Notes to Consolidated Financial Statements—(Continued)

Accrued and Other Liabilities

Accrued and other liabilities as of December 31, 2016 and 2015 are as follows (in thousands):

	2016		2015
Accrued compensation and benefits	$	30,609	$	31,104
Warranty provision—current		10,054		9,635
Accrued royalty payments		4,994		5,305
Contingent consideration—current		19,244		4,545
Short-term financing obligations		98		4,469
Deferred rent		2,938		3,367
Restructuring and other		1,824		3,019
Sales tax liabilities		1,997		655
Other accrued liabilities		13,747		12,326
	$	85,505	$	74,425

Accumulated Other Comprehensive Income (Loss) (“OCI”)

OCI classified within stockholders’ equity in our Consolidated Balance Sheets as of December 31, 2016 and 2015 are as follows (in thousands):

	2016			2015
Net unrealized investment losses	$	(473	)	$	(376	)
Currency translation losses		(24,230	)		(17,049	)
Net unrealized gains on cash flow hedges		9			1
	$	(24,694	)	$	(17,424	)

There were no amounts reclassified out of OCI for the year ended December 31, 2016, and less than $0.1 million, net of tax, for the years ended December 31, 2015 and 2014, consisting of unrealized gains and losses from investments in debt securities reported within interest income and other income (expense), net, in our Consolidated Statements of Operations.

Note 5: Goodwill and Long-Lived Intangible Assets

Purchased Intangible Assets

Our purchased identified intangible assets resulting from acquisitions that closed during the years ended December 31, 2016 and 2015 are as follows (in thousands, except for weighted average useful life):

			December 31, 2016									December 31, 2015
	Weighted average useful life (years)		Gross carrying amount		Accumulated amortization			Weighted remaining average useful life (years)		Net carrying amount		Gross carrying amount		Accumulated amortization			Net carrying amount
Goodwill		—	$	359,841	$	—			—	$	359,841	$	338,793	$	—		$	338,793
Customer relationships and other		5.1	$	88,557	$	(49,527	)		2.8	$	39,030	$	75,145	$	(36,625	)	$	38,520
Existing technology		4.0		173,543		(122,654	)		2.7		50,889		161,441		(114,018	)		47,423
Trademarks and trade names		11.1		67,701		(38,300	)		6.3		29,401		65,395		(30,949	)		34,446
IPR&D		—		3,677		—			—		3,677		15,163		—			15,163
Amortizable intangible assets		5.7	$	333,478	$	(210,481	)		3.8	$	122,997	$	317,144	$	(181,592	)	$	135,552

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Notes to Consolidated Financial Statements—(Continued)

Acquired customer relationships and other, existing technology, and trademarks and trade names are amortized over their estimated useful lives of two to sixteen years using the straight-line method, which approximates the pattern in which the economic benefits of the identified intangible assets are realized. The useful life of certain developed technology was reduced during 2016 based on a re-assessment of the useful life of the technology with a $1.6 million impact on amortization expense. No changes have been made to the useful lives of amortizable identifiable intangible assets in 2015 or 2014. Aggregate amortization expense was $39.6, $26.5, and $20.7 million for the years ended December 31, 2016, 2015, and 2014, respectively.

IPR&D is subject to amortization after product completion over the product life or otherwise assessed for impairment in accordance with acquisition accounting guidance.

As of December 31, 2016, future estimated amortization expense for each of the next five years and thereafter related to the amortization of identified intangible assets is as follows (in thousands):

For the years ended December 31,	Future amortization expense
2017	$	39,613
2018		35,264
2019		26,780
2020		10,256
2021		3,991
Thereafter		7,093
	$	122,997

Goodwill Rollforward

The goodwill rollforward for the years ended December 31, 2016 and 2015 as required by ASC 805 is as follows (in thousands):

	Industrial Inkjet			Productivity Software			Fiery			Total
Ending Balance, December 31, 2014	$	59,124		$	121,486		$	64,833		$	245,443
Additions (Reggiani, Matan, CTI, and Shuttleworth acquisitions)	$	91,776		$	17,790		$	—		$	109,566
Opening balance sheet adjustment		(3,826	)		(13	)		—			(3,839	)
Foreign currency adjustments		(4,891	)		(6,135	)		(1,351	)		(12,377	)
Ending Balance, December 31, 2015	$	142,183		$	133,128		$	63,482		$	338,793
Additions (Rialco and Optitex acquisitions)	$	1,426		$	28,147		$	—		$	29,573
Opening balance sheet adjustment		(171	)		(663	)		—			(834	)
Foreign currency adjustments		(2,370	)		(5,137	)		(184	)		(7,691	)
Ending Balance, December 31, 2016	$	141,068		$	155,475		$	63,298		$	359,841
Accumulated Impairment as of December 31, 2016, recognized in 2008	$	103,991		$	—		$	—		$	103,991

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Notes to Consolidated Financial Statements—(Continued)

Goodwill Assessment

ASU 2011-08, Intangibles—Goodwill and Other (ASC 350): Testing Goodwill for Impairment, provides that a simplified analysis of goodwill impairment may be performed consisting of a qualitative assessment to determine whether further impairment testing is necessary. Due to the significant additions to goodwill resulting from the business combinations completed during 2016 and 2015 and because our reporting units are susceptible to fair value fluctuations, we determined that the quantitative analysis should be performed.

A two-step impairment test of goodwill is required by ASC 350-20-35. In the first step, the fair value of each reporting unit is compared to its carrying value. If the fair value exceeds carrying value, goodwill is not impaired and further testing is not required. If the carrying value exceeds fair value, then the second step of the impairment test is required to determine the implied fair value of the reporting unit’s goodwill. The implied fair value of goodwill is calculated by deducting the fair value of all tangible and intangible net assets of the reporting unit, excluding goodwill, from the fair value of the reporting unit as determined in the first step. If the carrying value of the reporting unit’s goodwill exceeds its implied fair value, then an impairment loss must be recorded equal to the difference.

Our goodwill valuation analysis is based on our respective reporting units (Industrial Inkjet, Productivity Software, and Fiery), which are consistent with our operating segments identified in Note 14—Segment Information, Geographic Regions, and Major Customers of the Notes to Consolidated Financial Statements. We determined the fair value of our reporting units as of December 31, 2016 by equally weighting the market and income approaches. Under the market approach, we estimated fair value based on market multiples of revenue or earnings of comparable companies. Under the income approach, we estimated fair value based on a projected cash flow method using a discount rate determined by our management to be commensurate with the risk inherent in our current business model. Based on our valuation results, we have determined that the fair values of our Industrial Inkjet, Productivity Software, and Fiery reporting units exceed their carrying values by $575, $444, and $515 million, respectively, or 151%, 267%, and 533%, respectively.

To identify suitable comparable companies under the market approach, consideration was given to the financial condition and operating performance of the reporting unit being evaluated relative to companies operating in the same or similar businesses, potentially subject to corresponding economic, environmental, and political factors and considered to be reasonable investment alternatives. Consideration was given to the investment characteristics of the subject companies relative to those of similar publicly traded companies (i.e., guideline companies), which are actively traded. In applying the Public Company Market Multiple Method, valuation multiples were derived from historical and projected operating data of guideline companies and applied to the appropriate operating data of our reporting units to arrive at an indication of fair value. Five suitable guideline companies were identified for the Industrial Inkjet, reporting unit. Six suitable guideline companies were identified for the Productivity Software and Fiery reporting units, respectively.

As part of this process, we engaged a third party valuation firm to assist management in its analysis. All estimates, key assumptions, and forecasts were either provided by or reviewed by us. While we chose to utilize a third party valuation firm, the impairment analysis and related valuations represent the conclusions of management and not the conclusions or statements of any third party.

Solely for purposes of establishing inputs for the income approach to assess the fair value of the Industrial Inkjet, Productivity Software, and Fiery reporting units, we made the following assumptions:

• Industrial Inkjet revenue growth of 26% in 2016 exceeded historical normalized growth rates for the Industrial Inkjet operating segment due to the Reggiani, Matan, and Rialco acquisitions.

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Notes to Consolidated Financial Statements—(Continued)

• Productivity Software revenue growth of 12% in 2016 approximated historical normalized growth rates for the Productivity Software operating segment.

• Fiery revenue declined by 7% in 2016 primarily due to weak APAC demand, especially in China, reduced end user demand associated with the Drupa trade show in June 2016, which occurs every four years, caused by end users delaying purchasing decisions until new printer models are available, and decreased sales to one significant printer manufacturer purchasing less inventory. Fiery revenue growth of 2% to 3% is assumed in the forecast horizon as printer distributor / manufacturer inventories and end user demand return to normal levels and APAC demand recovers.

• Despite ongoing economic uncertainty, our reporting units’ revenue is assumed to grow at historical normalized rates between 2017 and 2022 for the following primary reasons:

^¡   Our Industrial Inkjet revenue is positioned to outpace the slow economy due to the ongoing transition from solvent-based to UV curable-based printing and from UV curing to UV/LED curing. This transition is expected to continue through the forecast horizon.

^¡   Our acquisitions of Rialco in 2016 and Reggiani and Matan in 2015 will enable us to continue to achieve historical normalized Industrial Inkjet revenue growth rates through the forecast horizon.

^¡   Our acquisitions of Optitex in 2016 and CTI and Shuttleworth in 2015 will enable us to continue to achieve historical normalized Productivity Software revenue growth rates through the forecast horizon.

^¡   Our acquisition strategy in the Productivity Software reporting unit will enable us to achieve historical normalized revenue growth rates through the forecast horizon. Our intention is to continue to explore additional acquisition opportunities in this operating segment to further consolidate the business process automation and cloud-based order entry and order management software industries.

^¡   Long-term industry growth after 2022.

^¡   Gross profit percentages will approximate historical average levels in the Industrial Inkjet, Productivity Software and Fiery reporting units.

Our discounted cash flow projections are six-year financial forecasts, which were based on annual financial forecasts developed internally by management for use in managing our business and through discussions with the valuation firm engaged by us. The significant assumptions utilized in these conservative six-year financial forecasts included consolidated annual revenue growth rates ranging from 6% to 10% which equates to a consolidated compound annual growth rate of 8%. The upper end of the range exceeds our historical normalized growth rates due to the addition of the Reggiani textile and Optitex software businesses to our portfolio. Future cash flows were discounted to present value using a mid-year convention and a consolidated discount rate of 10%. Terminal values were calculated using the Gordon growth methodology with a consolidated long-term growth rate of 4%, except for Fiery at 2.5%. The sum of the fair values of the Industrial Inkjet, Productivity Software, and Fiery reporting units was reconciled to our current market capitalization (based on our stock price) plus an estimated control premium. Percentages of revenue over the six-year forecast horizon were compared to approximate percentages realized by the guideline companies. To assess the reasonableness of the estimated control premium of 13.2%, we examined the most similar transactions in relevant industries and determined the average premium indicated by the transactions deemed to be most similar to a hypothetical transaction involving our reporting units. We examined the weighted average and median control premiums offered in relevant industries, industry specific control premiums, and specific transaction control premiums to conclude that our estimated control premium is reasonable.

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We assess the impairment of identifiable intangibles and long-lived assets whenever events or changes in circumstances indicate the carrying value may not be recoverable or the life of the asset may need to be revised. Factors considered important that could trigger an impairment review include:

• significant negative industry or economic trends,

• significant decline in our stock price for a sustained period,

• our market capitalization relative to net book value,

• significant changes in the manner of our use of the acquired assets,

• significant changes in the strategy for our overall business, and

• our assessment of growth and profitability in each reporting unit over the coming years.

Given the uncertainty of the economic environment and the potential impact on our business, there can be no assurance that our estimates and assumptions regarding the duration of the ongoing economic downturn, or the period or strength of recovery, made for purposes of our goodwill impairment testing at December 31, 2016 will prove to be accurate predictions of the future. If our assumptions regarding forecasted revenue or gross profit rates are not achieved, we may be required to record additional goodwill impairment charges in future periods relating to any of our reporting units, whether in connection with the next annual impairment testing in the fourth quarter of 2017 or prior to that, if any such change constitutes an interim triggering event. It is not possible to determine if any such future impairment charge would result or, if it does, whether such charge would be material.

Long-Lived Assets

We evaluate potential impairment with respect to long-lived assets whenever events or changes in circumstances indicate their carrying amount may not be recoverable. No asset impairment charges were recognized during the years ended December 31, 2016, 2015, or 2014.

Note 6: Investments and Fair Value Measurements

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 short-term investments. Available-for-sale securities are stated at fair value with unrealized gains and losses reported as a separate component of OCI, adjusted for deferred income taxes. The credit portion of any other-than-temporary impairment is included in net income. Realized gains and losses on sales of financial instruments are recognized upon sale of the investments using the specific identification method.

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Our available-for-sale short-term investments as of December 31, 2016 and 2015 are as follows (in thousands):

	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
December 31, 2016
U.S. Government and sponsored entities	$	70,893	$	49	$	(348	)	$	70,594
Corporate debt securities		198,166		102		(621	)		197,647
Municipal government		1,278		—		(1	)		1,277
Asset-backed securities		24,233		79		(17	)		24,295
Mortgage-backed securities—residential		1,615		3		(3	)		1,615
Total short-term investments	$	296,185	$	233	$	(990	)	$	295,428
December 31, 2015
U.S. Government and sponsored entities	$	98,411	$	12	$	(137	)	$	98,286
Corporate debt securities		198,498		20		(510	)		198,008
Asset-backed securities		35,276		195		(174	)		35,297
Mortgage-backed securities—residential		1,689		2		(6	)		1,685
Total short-term investments	$	333,874	$	229	$	(827	)	$	333,276

The fair value and duration that investments, including cash equivalents, have been in a gross unrealized loss position as of December 31, 2016 and 2015 are as follows (in thousands):

	Less than 12 Months					More than 12 Months					TOTAL
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
December 31, 2016
U.S. Government and sponsored entities	$	39,810	$	(348	)	$	—	$	—		$	39,810	$	(348	)
Corporate debt securities		133,382		(581	)		13,158		(40	)		146,540		(621	)
Municipal government		1,268		(1	)		—		—			1,268		(1	)
Asset-backed securities		4,540		(7	)		4,611		(10	)		9,151		(17	)
Mortgage-backed securities—residential		428		(1	)		153		(2	)		581		(3	)
Total	$	179,428	$	(938	)	$	17,922	$	(52	)	$	197,350	$	(990	)
December 31, 2015
U.S. Government and sponsored entities	$	82,366	$	(137	)	$	—	$	—		$	82,366	$	(137	)
Corporate debt securities		136,274		(448	)		16,940		(62	)		153,214		(510	)
Asset-backed securities		27,928		(103	)		7,131		(71	)		35,059		(174	)
Mortgage-backed securities—residential		764		(2	)		269		(4	)		1,033		(6	)
Total	$	247,332	$	(690	)	$	24,340	$	(137	)	$	271,672	$	(827	)

For fixed income securities that have unrealized losses as of December 31, 2016, we have determined that we do not have the intent to sell any of these investments and it is not more likely than not that we will be required to sell any of these investments before recovery of the entire amortized cost basis. We have evaluated these fixed income securities and determined that no credit losses exist. Accordingly, management has determined that the unrealized losses on our fixed income securities as of December 31, 2016 were temporary in nature.

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Amortized cost and estimated fair value of investments at December 31, 2016 are summarized by maturity date as follows (in thousands):

	Amortized cost		Fair value
Mature in less than one year	$	107,033	$	106,918
Mature in one to three years		189,152		188,510
Total short-term investments	$	296,185	$	295,428

For the year ended December 31, 2016, net realized gains of $0.4 million were recognized, which were comprised of $0.4 million in realized gains from sale of investments, partially offset by less than $0.1 million in realized losses. For the year ended December 31, 2015, net realized gains of $0.1 million were recognized, which were comprised of $0.2 million in realized gains from sale of investments, partially offset by $0.1 million in realized losses. For the year ended December 31, 2014, net realized gains of less than $0.1 million were recognized. As of December 31, 2016 and 2015, net unrealized losses of $0.8 and $0.6 million, respectively, were included in OCI in the accompanying Consolidated Balance Sheets.

Fair Value Measurements

ASC 820 identifies fair value as the exchange price, or exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a three-tier fair value hierarchy as follows:

Level 1: Inputs that are quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date;

Level 2: Inputs that are other than quoted prices included within Level 1, that are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date for the duration of the instrument’s anticipated life or by comparison to similar instruments; and

Level 3: Inputs that are unobservable or that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. These include management’s own judgments about market participant assumptions developed based on the best information available in the circumstances.

We utilize the market approach to measure the fair value of our fixed income securities. The market approach is a valuation technique that uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The fair value of our fixed income securities is obtained using readily-available market prices from a variety of industry standard data providers, large financial institutions, and other third-party sources for the identical underlying securities. The fair value of our investments in certain money market funds is expected to maintain a Net Asset Value of $1 per share and, as such, is priced at the expected market price.

We obtain the fair value of our Level 2 financial instruments from several third party asset managers, custodian banks, and the accounting service providers. Independently, these service providers use professional pricing services to gather pricing data, which may include quoted market prices for identical or comparable instruments or inputs other than quoted prices that are observable either directly or indirectly. As part of this process, we engaged a pricing service to assist management in its pricing analysis and assessment of other-than-temporary impairment. All estimates, key assumptions, and forecasts were either provided by or reviewed by us. While we chose to utilize a third party pricing service, the impairment analysis and related valuations represent conclusions of management and not conclusions or statements of any third party.

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Our investments and liabilities measured at fair value have been presented in accordance with the fair value hierarchy specified in ASC 820 as of December 31, 2016 and 2015 in order of liquidity as follows (in thousands):

	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
December 31, 2016
Assets:
Money market funds	$	23,575	$	23,575	$	—	$	—
U.S. Government and sponsored entities		70,594		51,870		18,724		—
Corporate debt securities		197,647		—		197,647		—
Municipal government		1,277		—		1,277		—
Asset-backed securities		24,295		—		24,228		67
Mortgage-backed securities—residential		1,615		—		1,615		—
	$	319,003	$	75,445	$	243,491	$	67
Liabilities:
Contingent consideration, current and noncurrent	$	56,463	$	—	$	—	$	56,463
Self-insurance		1,542		—		—		1,542
	$	58,005	$	—	$	—	$	58,005
December 31, 2015
Assets:
Money market funds	$	13,221	$	13,221	$	—	$	—
U.S. Government and sponsored entities		98,286		34,712		63,574		—
Corporate debt securities		198,778		—		198,778		—
Asset-backed securities		35,297		—		35,113		184
Mortgage-backed securities—residential		1,684		—		1,684		—
	$	347,266	$	47,933	$	299,149	$	184
Liabilities:
Contingent consideration, current and noncurrent	$	54,796	$	—	$	—	$	54,796
Self-insurance		1,268		—		—		1,268
	$	56,064	$	—	$	—	$	56,064

Money market funds consist of $23.6 and $13.2 million, which have been classified as cash equivalents as of December 31, 2016 and 2015, respectively. Corporate debt securities include $0.7 million, which have been classified as cash equivalents at December 31, 2015.

Investments are generally classified within Level 1 or Level 2 of the fair value hierarchy because they are valued using quoted market prices or alternative pricing sources with reasonable levels of price transparency. Investments in U.S. Treasury obligations and overnight money market mutual funds have been classified as Level 1 because these securities are valued based on quoted prices in active markets or are actively traded at $1.00 Net Asset Value. There have been no transfers between Level 1 and 2 during the years ended December 31, 2016 and 2015.

Government agency investments and corporate debt instruments, including investments in asset-backed and mortgage-backed securities, have generally been classified as Level 2 because markets for these securities are

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less active or valuations for such securities utilize significant inputs, which are directly or indirectly observable. We hold asset-backed securities with income payments derived from and collateralized by a specified pool of underlying assets. Asset-backed securities in the portfolio are predominantly collateralized by credit cards and auto loans. We also hold two asset-backed securities collateralized by mortgage loans, which have been fully reserved.

Liabilities for Contingent Consideration

Acquisition-related liabilities for contingent consideration (i.e., earnouts) are related to the purchase business combinations of Optitex and Rialco in 2016; Shuttleworth, CTI, and Reggiani in 2015; DIMS, DirectSmile, and SmartLinc in 2014; Metrix, GamSys, and PrintLeader Software (“PrintLeader”) in 2013; and Technique in 2012.

The fair value of these earnouts is estimated to be $56.5 and $54.8 million as of December 31, 2016 and 2015, respectively, by applying the income approach in accordance with ASC 805-30-25-5. Key assumptions include risk-free discount rates between 0.6% and 4.98% (Monte Carlo valuation method) and discount rates between 4.2% and 6.0% (probability-adjusted method), as well as probability-adjusted revenue and EBIT levels. Probability-adjusted revenue, gross margin, and EBIT are significant inputs that are not observable in the market, which ASC 820-10-35 refers to as Level 3 inputs. These contingent liabilities have been reflected in the Consolidated Balance Sheet as of December 31, 2016 as current and noncurrent liabilities of $19.3 and $37.2 million, respectively.

The fair value of contingent consideration increased by $6.8 million, including $2.7 million of earnout interest accretion during the year ended December 31, 2016 related to all acquisitions. The Rialco, Optitex, Reggiani, DirectSmile, and CTI earnout performance probabilities increased while the DIMS and Shuttleworth earnout performance probabilities decreased or were not achieved in 2016. The fair value of contingent consideration decreased by $2.1 million, net of $1.4 million of earnout interest accretion during the year ended December 31, 2016 related to all acquisitions. The DIMS, DirectSmile, GamSys, and Metrix, earnout performance probability percentages were reduced or not achieved in 2015. In accordance with ASC 805-30-35-1, changes in the fair value of contingent consideration subsequent to the acquisition date have been recognized in general and administrative expense.

Earnout payments during the year ended December 31, 2016 of $23.8, $3.6, $0.4, and $0.2 million are primarily related to the previously accrued Reggiani, DirectSmile, SmartLinc, and Metrix contingent consideration liabilities, respectively. Earnout payments during the year ended December 31, 2015 of $2.0, $1.1, $0.6, and $0.3 million are primarily related to the previously accrued Technique, GamSys, Metrix, and SmartLinc contingent consideration liabilities, respectively.

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Changes in the contingent liability for contingent consideration during the years ended December 31, 2016 and 2015 are summarized as follows:

Fair value of contingent consideration at December 31, 2014	$	12,277
Fair value of Reggiani contingent consideration at July 1, 2015		43,170
Fair value of CTI contingent consideration at October 6, 2015		2,551
Fair value of Shuttleworth contingent consideration at November 4, 2015		5,077
Changes in valuation		(2,135	)
Payments		(4,093	)
Foreign currency adjustment		(2,051	)
Fair value of contingent consideration at December 31, 2015	$	54,796
Fair value of Rialco contingent consideration at March 1, 2016		2,109
Fair value of Optitex contingent consideration at June 16, 2016		22,300
Changes in valuation		6,813
Payments		(28,111	)
Foreign currency adjustment		(1,444	)
Fair value of contingent consideration at December 31, 2016	$	56,463

A narrative description of the sensitivity of recurring fair value measurements to changes in unobservable inputs is required if a change in those inputs might result in a significantly higher or lower fair value measurement. Since the most significant inputs to the fair value measurement of the contingent consideration liability are the probability-adjusted revenue and discount rate, we reviewed the sensitivity of the fair value measurement to changes in these inputs. We assessed the probability of achieving the revenue performance targets for the contingent consideration associated with each acquisition at percentage levels between 50% and 100% as of each respective acquisition date based on an assessment of the historical performance of each acquired entity, our current expectations of future performance, and other relevant factors. A change in probability-adjusted revenue of five percentage points from the level assumed in the current valuations would result in an increase in the fair value of contingent consideration of $1.2 million or a decrease of $3.6 million resulting in a corresponding adjustment to general and administrative expense. A change in the discount rate of one percentage point results in an increase in the fair value of contingent consideration of $0.5 million or a decrease of $0.8 million. The potential undiscounted amount of future contingent consideration cash payments that we could be required to make related to our business acquisitions, beyond amounts currently accrued, is $14.6 million as of December 31, 2016.

Fair Value of Derivative Instruments

We utilize the income approach to measure the fair value of our derivative assets and liabilities. The income approach uses pricing models that rely on market observable inputs such as yield curves, currency exchange rates, and forward prices, and are therefore classified as Level 2 measurements. The notional amount of our derivative assets and liabilities was $161.8 and $118.6 million as of December 31, 2016 and 2015, respectively. The fair value of our derivative assets and liabilities that were designated for cash flow hedge accounting treatment having notional amounts of $3.2 million as of December 31, 2016 and 2015, respectively, was not material.

Fair Value of Convertible Senior Notes

In September 2014, we issued $345 million aggregate principal amount of 0.75% Convertible Senior Notes due 2019 (“Notes”). The Notes are carried at their original issuance value, net of unamortized debt discount, and are

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not marked to market each period. The approximate fair value of the Notes as of December 31, 2016 was approximately $355 million and was considered a Level 2 fair value measurement. Fair value was estimated based upon actual quotations obtained at the end of the reporting period or the most recent date available. A substantial portion of the market value of our Notes in excess of the outstanding principal amount relates to the conversion premium.

Note 7: Convertible Senior Notes, Note Hedges, and Warrants

0.75% Convertible Senior Notes Due 2019

In September 2014, we completed a private placement of $345 million principal amount of 0.75% Convertible Senior Notes due 2019 (“Notes”). The Notes were sold to the initial purchasers for resale to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. The net proceeds from this offering were approximately $336.3 million, after deducting the initial purchasers’ commissions and the offering expenses paid by us. We used approximately $29.4 million of the net proceeds to purchase the Note Hedges described below, net of the proceeds from the Warrant transactions also described below.

The Notes are senior unsecured obligations of EFI with interest payable semiannually in arrears on March 1 and September 1 of each year, commencing March 1, 2015. The Notes are not callable and will mature on September 1, 2019, unless previously purchased or converted in accordance with their terms prior to such date. Holders of the Notes who convert in connection with a “fundamental change,” as defined in the indenture governing the Notes (“Indenture”), may require us to purchase for cash all or any portion of their Notes at a purchase price equal to 100 percent of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any.

The initial conversion rate is 18.9667 shares of common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $52.72 per share of common stock. Upon conversion of the Notes, holders will receive cash, shares of common stock or a combination thereof, at our election. Our intent is to settle the principal amount of the Notes in cash upon conversion. If the conversion value exceeds the principal amount, we would deliver shares of our common stock for our conversion obligation in excess of the aggregate principal amount. As of December 31, 2016, none of the conditions allowing holders of the Notes to convert had been met.

Throughout the term of the Notes, the conversion rate may be adjusted upon the occurrence of certain events. Holders of the Notes will not receive any cash payment representing accrued and unpaid interest upon conversion of a Note. Holders may convert their Notes only under the following circumstances:

• during any calendar quarter commencing after the calendar quarter ending on December 31, 2014 (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;

• during the five business day period after any five consecutive trading day period (“Notes Measurement Period”) in which the “trading price” (as the term is defined in the Indenture) per $1,000 principal amount of notes for each trading day of such Notes Measurement Period was less than 98% of the product of the last reported stock price on such trading day and the conversion rate on each such trading day;

• upon the occurrence of specified corporate events; or

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• at any time on or after March 1, 2019 until the close of business on the second scheduled trading day immediately preceding the maturity date.

We separated the Notes into liability and equity components. The carrying amount of the liability component was calculated by measuring the estimated fair value of a similar liability that does not have an associated convertible feature. The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the face value of the Notes as a whole. The excess of the principal amount of the liability component over its carrying amount (“debt discount”) is amortized to interest expense over the term of the Notes using the effective interest method with an effective interest rate of 4.98% per annum (5.46% inclusive of debt issuance costs). The equity component is not remeasured as long as it continues to meet the conditions for equity classification.

We allocated the total transaction costs incurred by the Notes issuance to the liability and equity components based on their relative values. Issuance costs of $7.0 million attributable to the $281.4 million liability component are being amortized to expense over the term of the Notes, and issuance costs of $1.6 million attributable to the $63.6 million equity component were offset against the equity component in stockholders’ equity. Additionally, we recorded a deferred tax liability of $23.7 million on the debt discount, which is not deductible for tax purposes.

The Notes consist of the following at December 31, 2016 and 2015 (in thousands):

	2016			2015
Liability component	$	345,000		$	345,000
Debt discount, net of amortization		(36,115	)		(48,515	)
Debt issuance costs, net of amortization		(4,401	)		(5,751	)
Net carrying amount	$	304,484		$	290,734
Equity component	$	63,643		$	63,643
Less: debt issuance costs allocated to equity		(1,582	)		(1,582	)
Net carrying amount	$	62,061		$	62,061

Upon adoption of ASU 2015-03, $5.8 million of debt issuance costs have been reclassified from other current assets and other assets to a direct reduction of convertible senior notes, net, in our Consolidated Balance Sheet as of December 31, 2015.

Interest expense recognized related to the Notes during the years ended December 31, 2016, 2015, and 2014 was as follows (in thousands):

	2016		2015		2014
0.75% coupon	$	2,588	$	2,595	$	798
Amortization of debt issuance costs		1,350		1,396		419
Amortization of debt discount		12,400		11,667		3,461
	$	16,338	$	15,658	$	4,678

Note Hedges

We paid an aggregate of $63.9 million in convertible note hedge transactions with respect to our common stock (“Note Hedges”) in September 2014. The Note Hedges will expire upon maturity of the Notes. The Note Hedges

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are intended to offset the potential dilution upon conversion and/or offset any cash payments we are required to make in excess of the principal amount upon conversion of the Notes in the event that the market value per share of our common stock, as measured under the terms of the Note Hedges, is greater than the strike price of the Note Hedges. The strike price of the Note Hedges initially correspond to the conversion price of the Notes and is subject to anti-dilution adjustments substantially similar to those applicable to the conversion price of the Notes. The Note Hedges are separate transactions and are not part of the Notes. Holders of the Notes will not have any rights with respect to the Note Hedges.

Warrants

Concurrently with entering into the Note Hedges, we separately entered into warrant transactions (“Warrants”), whereby we sold warrants to acquire shares of our common stock at a strike price of $68.86 per share. We received aggregate proceeds of $34.5 million from the sale of the Warrants. If the average market value per share of our common stock for the reporting period, as measured under the Warrants, exceeds the strike price of the Warrants, the Warrants will have a dilutive effect on our earnings per share. The Warrants are separate transactions and are not part of the Notes or the Note Hedges and are accounted for as a component of additional paid-in capital. Holders of the Notes and Note Hedges will not have any rights with respect to the Warrants.

Note 8: Commitments and Contingencies

Contingent Consideration

We are required to make payments to the former stockholders of acquired companies based on the achievement of specified performance targets as more fully explained in Note 6—Investments and Fair Value Measurements.

Purchase Commitments

We subcontract with other companies to manufacture our products. During the normal course of business, our subcontractors procure components based on orders placed by us. If we cancel all or part of our orders, we may still be liable to the subcontractors for the cost of the components they purchased to manufacture our products. We periodically review the potential liability compared to the adequacy of the related allowance.

Lease Commitments

As of December 31, 2016, we lease certain of our current facilities under noncancellable operating lease agreements. We are required to pay property taxes, insurance, and nominal maintenance costs for certain of these facilities and any increases over the base year of these expenses on the remainder of our facilities.

Future minimum lease payments under noncancellable operating leases, including our build-to-suit lease, and future minimum sublease receipts, for each of the next five years and thereafter as of December 31, 2016 are as follows (in thousands):

	Future Minimum		Future Minimum
Fiscal Year	Lease Payments		Sublease Receipts
2017	$	9,097	$	370
2018		8,240		313
2019		7,848		166
2020		6,570		—
2021		5,355		—
Thereafter		33,894		—
Total	$	71,004	$	849

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Rent expense was approximately $8.8, $8.0, and $6.1 million for the years ended December 31, 2016, 2015, and 2014, respectively.

Off-Balance Sheet Financing

On August 26, 2016, we entered into a lease agreement and have accounted for a lease term of 48.5 years, inclusive of two renewal options of 5.0 and 3.5 years, with the City of Manchester to lease 16.9 acres of land adjacent to the Manchester Regional Airport. The land is subleased to BTMU during the term of the lease related to the manufacturing facility that is being constructed on the site, which is described below. Minimum lease payments are $13.1 million during the 48.5 year term of the land lease, excluding four months of the land lease that is financed into the manufacturing facility lease.

On August 26, 2016, we entered into a six-year lease with BTMU whereby a 225,000 square foot manufacturing and warehouse facility is under construction related to our super-wide format industrial digital inkjet printer business in the Industrial Inkjet operating segment at a projected cost of $40 million and a construction period of 18 months. Minimum lease payments during the initial term are $1.8 million. Upon completion of the initial term, we have the option to renew the lease, purchase the facility, or return the facility to BTMU subject to an 89% residual value guarantee under which we would recognize additional rent expense in the form of a variable rent payment. We have assessed our exposure in relation to the residual value guarantee and believe that there is no deficiency to the guaranteed value with respect to funds expended by BTMU as of December 31, 2016. We are treated as the owner of the facility for federal income tax purposes.

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 will be restricted during the construction period. Upon completion of construction, the funds will be released as cash and cash equivalents. The portion of released funds that represents 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.

The funds pledged as collateral are invested in U.S. government securities and cash equivalents as of December 31, 2016, and are classified as Level 1 in the fair value hierarchy as more fully defined in Note 6—Investments and Fair Value Measurements. Net unrealized losses of less than $0.1 million were included in OCI in the accompanying Consolidated Balance Sheet as of December 31, 2016.

We have applied the accounting and disclosure requirements set forth in ASC 810-10 for VIEs. We have evaluated the BTMU lease agreement to determine if the arrangement qualifies as a VIE under ASC 810-10. We have determined that the lease agreement does not qualify as a VIE and, as such, we are not required to consolidate the VIE in our consolidated financial statements.

Assets Held for Sale

Management has approved a plan to sell approximately 5.6 acres of land and the office building located at 1340 Corporate Center Curve, Eagan, Minnesota, consisting of 43,682 square feet. We intend to enter into a lease agreement with the purchaser of the facility whereby we will lease 22,000 square feet under a ten-year lease agreement at market rental rates. The gain on the sale of the facility and land will be deferred over the lease term.

Assets held for sale of $3.8 million have been reclassified to other current assets as of December 31, 2016 consisting of $2.9 million net book value of the facility and $0.9 million of related land. Management expects the sale and related lease-back to be completed in the next nine months.

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Build-to-Suit Lease Arrangement

We entered into a 15-year lease agreement pursuant to which we leased approximately 59,000 square feet of a building located in Fremont, California. The lease commenced on September 1, 2013. Minimum lease payments are $18.5 million, net of full abatement of rent for the first three years of the lease term. During the initial lease term, we also have certain rights of first refusal to (i) lease the remaining portion of the facility and/or (ii) purchase the facility. This location contains the engineering, marketing, and administrative operations for our Fiery operating segment. We relocated our former corporate headquarters to the adjacent building, which we purchased during the fourth quarter of 2013.

The leased facility was a cold shell requiring additional build-out and tenant improvements. The landlord paid the costs of the build-out up to $4.5 million, including all structural improvements, and we paid the costs of tenant improvements beyond that amount. We paid $5.3 million of tenant improvements, including furniture and equipment and capitalized interest. The landlord is responsible for costs related to force majeure events that result in any damage to the facility. We were responsible for cost over-runs, if any, related to force majeure events including strikes, war, and material availability. Since we were responsible for cost overruns related to certain force majeure events, we were in substance offering an indemnification for events outside of our control. As such, we are deemed to be the accounting owner of the facility. As of December 31, 2016 and 2015, we have capitalized $10.3 and $10.6 million, respectively, in property and equipment based on the estimated replacement cost of the portion of the building that we occupy, including capitalized interest, reduced by accumulated depreciation.

Monthly lease payments are allocated between the land element of the lease, which is accounted for as an operating lease upon lease execution, and the imputed financing obligation. The imputed financing obligation is being amortized upon lease commencement in accordance with the effective interest method using the interest rate determined in accordance with the requirements of sale leaseback accounting. The imputed interest cost incurred during the construction period was capitalized as a component of the construction cost upon lease commencement. As of December 31, 2016, the imputed financing obligation in connection with the facility was $14.2 million, including accrued interest, which was classified as a noncurrent imputed financing obligation in our Consolidated Balance Sheet. If the requirements of sale leaseback accounting are satisfied, or at the end of the initial lease term, we will reverse the net book value of the building and the corresponding imputed financing obligation.

Guarantees and Product Warranties

Guarantees must be disclosed upon issuance and a liability recognized for the fair value of obligations we assume under such guarantees in accordance with ASC 460, Guarantees, which applies to both general guarantees and product warranties.

Our Industrial Inkjet printers are generally accompanied by a 12-month limited warranty, which covers both parts and labor. Our Fiery DFE products limited warranty is generally 12 to 15 months. In accordance with ASC 450-30, an accrual is established when the warranty liability is estimable and probable based on historical experience. A provision for the estimated warranty costs relating to products that have been sold is recorded in cost of revenue upon recognition of revenue and the resulting accrual is reviewed regularly and periodically adjusted to reflect changes in warranty estimates.

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Notes to Consolidated Financial Statements—(Continued)

The changes in product warranty reserve for the years ended December 31, 2016 and 2015 were as follows (in thousands):

	2016			2015
Balance at January 1,	$	9,635		$	9,682
Liability assumed through business acquisitions		—			1,006
Provisions, net of releases		12,715			11,839
Settlements		(12,031	)		(12,892	)
Balance at December 31,	$	10,319		$	9,635

Indemnifications

In the normal course of business and in an effort to facilitate the sales of our products, we sometimes indemnify other parties, including customers, lessors, and parties to other transactions with us. When we indemnify these parties, typically those provisions protect other parties against losses arising from our infringement of third party intellectual property rights or other claims made by third parties arising from the use or distribution of our products. Those provisions often contain various limitations including limits on the amount of protection provided.

As permitted under Delaware law, pursuant to our bylaws, charter, and indemnification agreements with our current and former executive officers, directors, and general counsel, we are required, subject to certain limited qualifications, to indemnify our executive officers, directors, and general counsel for certain events or occurrences while the executive officer, director, or general counsel is or was serving at our request in such capacity. The indemnification period covers all pertinent events and occurrences during the executive officer’s, director’s, or general counsel’s lifetime. The maximum potential future payments we may be obligated to make under these indemnification agreements is unlimited; however, we have director and officer insurance coverage that limits our exposure and may enable us to recover a portion of any future amounts paid.

Legal Proceedings

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.

As of December 31, 2016, we are subject to the matter discussed below.

MDG Matter

EFI acquired Matan in 2015 from sellers (the “2015 Sellers”) that acquired Matan Digital Printing Ltd. from other sellers in 2001 (the “2001 Sellers”). The 2001 Sellers have asserted a claim against the 2015 Sellers and Matan asserting that they are entitled to a portion of the 2015 Sellers’ proceeds from EFI’s acquisition. The 2015 Sellers dispute any such claim and have fully indemnified EFI against the 2001 Sellers’ claim.

Although we are fully indemnified and we do not believe that it is probable that we will incur a loss, it is reasonably possible that our financial statements could be materially affected by an unfavorable resolution of this

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matter. Accordingly, it is reasonably possible that we could incur a material loss in this matter. We estimate the range of loss to be between one dollar and $10.1 million. If we incur a loss in this matter, it will be offset by an indemnification receivable of an equal amount representing a claim against the escrow account established in connection with the Matan acquisition.

Other Matters

As of December 31, 2016, we were subject to various other claims, lawsuits, investigations, and proceedings in addition to the matter discussed above. There is at least a reasonable possibility that additional losses may be incurred in excess of the amounts that we have accrued. However, we believe that these claims are not material to our financial statements or the range of reasonably possible losses is not reasonably estimable. Litigation is inherently unpredictable, and while we believe that we have valid defenses with respect to legal matters pending against us, our financial statements could be materially affected in any particular period by the unfavorable resolution of one or more of these contingencies or because of the diversion of management’s attention and the incurrence of significant expenses.

Note 9: Common Stock Repurchase Programs

On November 6, 2013, the board of directors approved the repurchase of $200 million of outstanding common stock. Under this publicly announced plan, we repurchased 1.8 and 1.5 million shares for an aggregate purchase price of $74.2 and $65.7 million during the years ended December 31, 2016 and 2015, respectively.

On November 9, 2015, the board of directors cancelled $54.9 million remaining for repurchase under the 2013 authorization and approved a new authorization to repurchase $150 million of outstanding common stock commencing January 1, 2016. This authorization expires December 31, 2018.

Our employees have the option to surrender shares of common stock to satisfy their tax withholding obligations that arise on the vesting of RSUs. In connection with stock option exercises, certain employees can surrender shares to satisfy the exercise price of certain stock options and any tax withholding obligations incurred in connection with such exercises. Employees surrendered 0.2 and 0.2 million shares for an aggregate purchase price of $9.1 and $10.7 million for the years ended December 31, 2016 and 2015, respectively.

These repurchased shares reduce shares outstanding and are recorded as treasury stock under the cost method thereby reducing stockholders’ equity by the cost of the repurchased shares. Our buyback program is limited by SEC regulations and is subject to compliance with our insider trading policy.

Note 10: 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.

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Our exposures are primarily related to non-U.S. dollar-denominated revenue in Europe, the U.K., Latin America, China, Israel, Australia, New Zealand, Canada, and to non-U.S. dollar-denominated operating expenses in Europe, India, Japan, the U.K., China, Israel, Brazil, and Australia. We hedge our operating expense cash flow exposure in Indian rupees. We hedge balance sheet remeasurement exposure associated with 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-denominated net monetary assets.

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 by the counterparty associated with these instruments because, by policy, we deal with counterparties having a minimum investment grade or better credit rating. Credit risk is managed through the continuous monitoring of exposures to such counterparties.

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 derivative instruments in earnings in the period of change. Gains (losses) on foreign currency forward contracts used to hedge balance sheet exposures are recognized in interest income and other income (expense), net, in the same period as the remeasurement gain (loss) of the related foreign currency denominated assets and liabilities. Forward contracts not designated as hedging instruments consist of hedges of Brazilian real, British pound sterling, Israeli shekel, Australian dollar, Japanese yen, Chinese renminbi, and Euro-denominated intercompany balances with notional amounts of $90.7 and $63.7 million at December 31, 2016 and 2015, respectively, hedges of Brazilian real, British pound sterling, Australian dollar, Israeli shekel, and Euro-denominated trade receivables with notional amounts of $39.8 and $49.1 million at December 31, 2016 and 2015, respectively, and hedges of British pounds sterling, Indian rupee, and Euro-denominated other net monetary assets with notional amounts of $28.2 and $2.6 million at December 31, 2016 and 2015, respectively.

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Note 11: Income Taxes

The components of income before income taxes for the years ended December 31, 2016, 2015, and 2014 are as follows (in thousands):

	2016		2015		2014
U.S.	$	8,254	$	9,311	$	15,090
Foreign		31,128		28,211		26,997
Total	$	39,382	$	37,522	$	42,087

The provision for (benefit from) income taxes for the years ended December 31, 2016, 2015, and 2014 is summarized as follows (in thousands):

	2016			2015			2014
Current:
U.S. Federal	$	(7,593	)	$	3,755		$	5,050
State		662			1,813			1,237
Foreign		11,722			5,798			7,922
Total current		4,791			11,366			14,209
Deferred:
U.S. Federal		(4,276	)		(3,119	)		(94	)
State		(567	)		(583	)		846
Foreign		(6,112	)		(3,682	)		(6,588	)
Total deferred		(10,955	)		(7,384	)		(5,836	)
Provision for (benefit from) income taxes	$	(6,164	)	$	3,982		$	8,373

The reconciliation of the income tax provision (benefit) computed at the federal statutory rate to the actual tax provision (benefit) for the years ended December 31, 2016, 2015, and 2014 is as follows (in thousands):

	2016					2015					2014
Tax provision at federal statutory rate	$	13,783		35.0	%	$	13,133		35.0	%	$	14,731		35.0	%
State income taxes, net of federal benefit		62		0.2			800		2.1			360		0.9
Research and development credits		(2,627	)	(6.7	)		(4,217	)	(11.2	)		(2,629	)	(6.2	)
Effect of foreign operations		(3,439	)	(8.7	)		(3,483	)	(9.3	)		(2,293	)	(5.4	)
Increase in value of intangible assets		—		—			—		—			(3,130	)	(7.4	)
Reduction in accrual for estimated potential tax assessments		(15,404	)	(39.1	)		(4,808	)	(12.7	)		(2,088	)	(5.0	)
Non-deductible stock-based compensation pursuant to ASC 718-740		1,288		3.3			3,244		8.6			2,793		6.6
Domestic manufacturing deduction		(831	)	(2.1	)		(878	)	(2.3	)		(598	)	(1.4	)
Other		1,004		2.4			191		0.4			1,227		2.8
Provision for (benefit from) income taxes	$	(6,164	)	(15.7	)%	$	3,982		10.6	%	$	8,373		19.9	%

During the year ended December 31, 2016, we recognized a $16.6 million tax benefit (including state tax benefit) from the release of previously unrecognized tax benefits due to the expiration of U.S. federal, state, and foreign statutes of limitations, of which $10.3 million related to the 2012 sale of our Foster City building and land.

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During the year ended December 31, 2014, we recognized a $3.1 million tax benefit related to the increased valuation of intangible assets for Brazilian tax reporting resulting from the merger of our Brazilian subsidiaries.

We earn a significant amount of our operating income outside the U.S., which is deemed to be permanently reinvested in foreign jurisdictions. Of the income generated in jurisdictions with tax rates materially lower than the statutory U.S. tax rate of 35%, most is earned in the Netherlands, Spain, United Kingdom, Italy, and the Cayman Islands. Our effective tax rate could fluctuate significantly and be adversely impacted if anticipated earnings in the Netherlands, Spain, and the Cayman Islands are proportionally lower than current projections and earnings in all other jurisdictions are proportionally higher than current projections.

While we currently do not foresee a need to repatriate the earnings of foreign operations, should we require more capital in the U.S. than is generated by our U.S. operations, we may elect to repatriate funds held in our foreign jurisdictions or raise capital in the U.S. through debt or equity issuances. These alternatives could result in higher effective tax rates, the cash payments of taxes and/or increased interest expense. As of December 31, 2016, we have permanently reinvested $164.6 million of unremitted foreign earnings. Should these earnings be remitted to the U.S., the tax on these earnings would be $34.6 million.

In Altera Corp.v. Commissioner, the U.S Tax Court issued an opinion on July 27, 2015, related to the treatment of stock-based compensation expense in an intercompany cost-sharing arrangement. To date, the U.S. Department of the Treasury has not withdrawn the requirement to include stock-based compensation in intercompany cost-sharing arrangements from its regulations. Due to the uncertainty related to the status of the current regulations and the ultimate outcome of the appeal, we have not recorded any benefit as of December 31, 2016 in our Consolidated Statement of Operations. We will continue to monitor ongoing developments and potential impacts to our consolidated financial statements.

The tax effects of temporary differences that give rise to deferred tax assets (liabilities) as of December 31, 2016 and 2015 are as follows (in thousands):

	2016			2015
Reserves and accruals not currently deductible for tax purposes	$	14,079		$	13,804
Net operating loss carryforwards		10,055			10,409
Tax credit carryforwards		63,985			44,176
Deferred revenue		1,642			3,778
Stock-based compensation		8,487			8,309
Other		6,222			5,099
Gross deferred tax assets		104,470			85,575
Depreciation and amortization		(17,845	)		(24,042	)
State Taxes		(2,092	)		(1,841	)
Gross deferred tax liabilities		(19,937	)		(25,883	)
Deferred tax valuation allowance		(42,406	)		(37,652	)
Net deferred tax assets	$	42,127		$	22,040

We have $16.1 million ($54.8 million for state tax purposes) and $42.3 million ($37.3 million for state tax purposes) of loss and credit carryforwards at December 31, 2016 for U.S. federal tax purposes. A majority of these federal and state losses and credits will expire between 2022 and 2027. A significant portion of these net operating loss and credit carryforwards relate to recent acquisitions. Utilization of these loss and credit carryforwards will be subject to an annual limitation under the Internal Revenue Code (“IRC”). We also have a valuation allowance related to California and Luxembourg deferred tax assets.

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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 valuation allowances on deferred tax assets related to California, Luxembourg, Israel, Netherlands, and Turkey deferred tax assets that will not be realized based on the size of the net operating loss and research and development credits being generated, 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 will include an expense within the tax benefit in the Consolidated Statement of Operations in the period in which such determination is made.

A reconciliation of the change in the gross unrecognized tax benefits from January 1, 2014 to December 31, 2016 is as follows (in millions):

	Federal, State, and Foreign Tax			Accrued Interest  and Penalties			Gross Unrecognized Income Tax Benefits
Balance at January 1, 2014	$	32.4		$	0.6		$	33.0
Additions for tax positions of prior years		0.9			0.4			1.3
Additions for tax positions related to 2014		3.6			—			3.6
Reductions due to lapse of applicable statute of limitations		(2.7	)		(0.2	)		(2.9	)
Balance at December 31, 2014	$	34.2		$	0.8		$	35.0
Additions for tax positions of prior years		14.1			0.2			14.3
Additions for tax positions related to 2015		4.7			—			4.7
Reductions due to lapse of applicable statute of limitations		(6.9	)		(0.5	)		(7.4	)
Balance at December 31, 2015	$	46.1		$	0.5		$	46.6
Additions for tax positions of prior years		1.8			0.2			2.0
Additions for tax positions related to 2016		3.9			—			3.9
Reductions due to lapse of applicable statute of limitations		(16.4	)		(0.2	)		(16.6	)
Balance at December 31, 2016	$	35.4		$	0.5		$	35.9

As of December 31, 2016, 2015, and 2014, gross unrecognized benefits that would affect the effective tax rate if recognized were $32.0, $43.5, and $32.1 million, respectively, offset by deferred tax benefits of $1.1, $1.0, and $0.7 million related to the federal tax effect of state income taxes for the same periods. Over the next twelve months, our existing tax positions will continue to generate increased liabilities for unrecognized tax benefits. It is reasonably possible that our gross unrecognized tax benefits will decrease up to $3.5 million in the next twelve months. These adjustments, if recognized, would positively impact our effective tax rate, and would be recognized as additional tax benefits in our Consolidated Statements of Operations.

In accordance with ASU 2013-11, we recorded $20.0 million of gross unrecognized tax benefits as an offset to deferred tax assets as of December 31, 2016, and the remaining $12.0 million has been recorded as noncurrent income taxes payable.

We recognize potential accrued interest and penalties related to unrecognized tax benefits in income tax expense. At December 31, 2016, 2015, and 2014, we have accrued $0.5, $0.5, and $0.9 million, respectively, for potential payments of interest and penalties.

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In accordance with ASU 2016-09, which was adopted in the second quarter of 2016, we recorded $2.2 million of deferred tax assets related to excess tax benefits for federal research and development income tax credits not previously benefitted and $0.6 million of deferred tax assets for the tax benefit on the cumulative effect adjustment associated with the change in accounting for RSU forfeitures.

We are subject to examination by the Internal Revenue Service (“IRS”) for the 2013-2015 tax years, state tax jurisdictions for the 2012-2015 tax years, the Netherlands tax authority for the 2014-2015 tax years, the Spanish tax authority for the 2012-2015 tax years, and the Italian tax authority for the 2012-2015 tax years.

Note 12: Employee Benefit Plans

Equity Incentive Plans

As of December 31, 2016, we had outstanding equity awards under our 2009 Plan, which is defined below. No awards may be granted under our 2007 Stock Plan. Our primary equity incentive plans are summarized as follows:

2009 Stock Plan

As most recently amended on June 4, 2013, our stockholders approved amendments to the Amended and Restated 2009 Equity Incentive Award Plan (“2009 Plan”) to increase the number of shares of common stock reserved under the plan for future issuance up to 11.6 million shares and authorize the granting of performance-based awards under the plan through the 2018 annual meeting of stockholders.

The 2009 Plan provides for grants of stock options (both incentive and nonqualified stock options), restricted stock awards, stock appreciation rights, performance shares, performance stock units, dividend equivalents, stock payments, deferred stock, RSUs, and performance-based awards. Options and awards generally vest over a period of one to four years from the date of grant and generally expire seven to ten years from the date of the grant. The terms of the 2009 Plan provide that an option price shall not be less than 100% of fair value on the date of the grant. Our board of directors may grant a stock bonus or stock unit award under the 2009 Plan in lieu of all or a portion of any cash bonus that a participant would have otherwise received for the related performance period.

The shares of common stock covered by the 2009 Plan may be treasury shares, authorized but unissued shares, or shares purchased in the open market. If an award under the 2009 Plan is forfeited (including a reimbursement of a non-vested award upon a participant’s termination of employment at a price equal to the par value of the common stock subject to the award) or expired, any shares of common stock subject to the award may be used again for new grants under the 2009 Plan.

The 2009 Plan is administered by the Compensation Committee of the Board of Directors (“Committee”). The Committee has the exclusive authority to administer the 2009 Plan, including the power to (i) designate participants under the 2009 Plan, (ii) determine the types of awards granted to participants under the 2009 Plan, the number of such awards, and the number of shares of our common stock that is subject to such awards, (iii) determine and interpret the terms and conditions of any awards under the 2009 Plan, including the vesting schedule, exercise price, whether to settle or accept the payment of any exercise price, in cash, common stock, other awards, or other property, and whether an award may be cancelled, forfeited, or surrendered, (iv) prescribe the form of each award agreement, and (v) adopt rules for the administration, interpretation, and application of the 2009 Plan.

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Persons eligible to participate in the 2009 Plan include all of our employees, directors, and consultants, as determined by the Committee. As of December 31, 2016, approximately 3,600 employees and consultants and 5 non-employee directors were eligible to participate in the 2009 Plan.

There were 2.4, 2.3, and 2.5 million shares outstanding and 1.7, 2.7, and 3.4 million shares available for grant under the 2009 Plan as of December 31, 2016, 2015, and 2014, respectively.

Amended and Restated 2000 Employee Stock Purchase Plan

As most recently amended on June 4, 2013, our stockholders approved the Amended and Restated 2000 Employee Stock Purchase Plan that increased the number of shares authorized for issuance pursuant to such plan by 2 million shares. The share increase was intended to ensure that we continue to have a sufficient reserve of common stock available under the ESPP to provide our eligible employees with the opportunity to acquire our common stock through participation in a payroll deduction-based ESPP designed to operate in compliance with Section 423 of the IRC. The ESPP does not provide for an automatic increase in the number of shares reserved for issuance under the ESPP.

The ESPP is qualified under Section 423 of the IRC. Eligible employees may contribute from one to ten percent of their base compensation. Employees are not able to purchase more than the number of shares having a value greater than $25,000 in any calendar year, as measured at the beginning of the offering period under the ESPP. The purchase price shall be the lesser of 85% of the fair value of the stock, either on the offering date or on the purchase date. The offering period shall not exceed 27 months beginning with the offering date. The ESPP provides for offerings of four consecutive, overlapping six-month offering periods, with a new offering period commencing on the first trading day on or after February 1 and August 1 of each year.

During each of the years ended December 31, 2016, 2015, and 2014, there were 0.3, 0.3, and 0.6 million shares issued under the ESPP at an average purchase price of $32.88, $31.66, and $13.54, respectively. As of December 31, 2016, there was $0.5 million of total unrecognized compensation cost related to stock-based compensation arrangements granted under the ESPP, which is expected to be recognized over a period of 1.8 years. At December 31, 2016, 2015, and 2014, there were 1.2, 1.5, and 1.8 million shares, respectively, of our common stock reserved for issuance under the ESPP.

Employee 401(k) Plan

We sponsor a 401(k) Savings Plan (“401(k) Plan”) that provides retirement and incidental benefits for our employees. Employees may contribute from 1% to 40% of their annual compensation to the 401(k) Plan, limited to a maximum annual amount as set periodically by the IRS. In 2014, the maximum employee contribution was increased from 40% to 75%. We match 50% of U.S. employee contributions, up to a maximum of the first 4% of the employee’s compensation contributed to the plan, subject to IRS limitations. All matching contributions vest over four years starting with the hire date of the individual employee. Our matching contributions to the 401(k) Plan totaled $2.2, $2.3, and $2.1 million during the years ended December 31, 2016, 2015, and 2014, respectively. The employees’ contributions and our contributions are invested in mutual funds managed by a fund manager, or in self-directed retirement plans.

Valuation and Expense Information under ASC 718

We account for stock-based payment awards in accordance with ASC 718, which requires the measurement and recognition of compensation expense for all equity awards granted to our employees and directors, including employee stock options, RSUs, and ESPP purchase rights related to all stock-based compensation plans based on

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the fair value of such awards on the date of grant. We amortize stock-based compensation cost on a graded vesting basis over the vesting period reduced by forfeitures, after assessing the probability of achieving the requisite performance criteria with respect to performance-based awards. Stock-based compensation cost is recognized over the requisite service period for each separately vesting tranche of the award as though the award were, in substance, multiple awards. Prior to adoption of ASU 2016-09 in the first quarter of 2016 as explained more fully in Note 1—The Company and Its Significant Accounting Policies, stock-based compensation expense included estimated forfeitures.

We use the BSM option pricing model to value stock-based compensation for all equity awards, except market-based awards. We value market-based awards using a Monte Carlo valuation model.

The BSM model determines the fair value of stock-based payment awards based on the stock price on the date of grant and is affected by assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, our expected stock price volatility over the term of the awards, expected term, interest rates, and actual and projected employee stock option exercise behavior. 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 upon management’s consideration of the historical life, vesting period, and 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.

Stock-based compensation expense related to stock options, RSUs, ESPP purchase rights, and stock options under ASC 718 for the years ended December 31, 2016, 2015, and 2014 is summarized as follows (in thousands):

	2016			2015			2014
RSUs		28,952			29,671			32,429
ESPP purchase rights		2,795			4,003			3,368
Employee stock options		79			397			264
Total stock-based compensation		31,826			34,071			36,061
Income tax benefit		(10,342	)		(9,436	)		(10,045	)
Stock-based compensation expense, net of tax	$	21,484		$	24,635		$	26,016

Valuation Assumptions for Stock Options and ESPP Purchases

Our determination of the fair value of stock-based payment awards on the date of grant using BSM is affected by various assumptions including volatility, expected term, and interest rates. Expected volatility is based on the historical volatility of our stock over a preceding period commensurate with the expected term of the stock option. The expected term is based on management’s consideration of the historical life of the stock options, the vesting period of the stock options granted, and the contractual period of the stock options granted. The risk-free interest rate for the expected term of the stock options 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.

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Stock options were not granted during the years ended December 31, 2016, 2015, and 2014. The estimated weighted average fair value per share of ESPP purchase rights issued and the assumptions used to estimate fair value for the years ended December 31, 2016, 2015, and 2014 are as follows:

	2016			2015			2014
Weighted average fair value per share	$	10.69		$	10.28		$	11.12
Expected volatility		22% - 32	%		19% - 28	%		25% - 28	%
Risk-free interest rate		0.4% - 0.8	%		0.1% - 0.7	%		0.1% - 0.5	%
Expected term (in years)		0.5 - 2.0			0.5 - 2.0			0.5 - 2.0

Stock Option Activity

Stock options outstanding and exercisable, including performance-based and market-based options, as of December 31, 2016, 2015, and 2014 and activity for each of the years then ended are summarized as follows (in thousands, except weighted average exercise price and remaining contractual term):

	Shares			Weighted average exercise price		Weighted average remaining contractual term (years)		Aggregate intrinsic value
Options outstanding at January 1, 2014		1,060		$	14.66
Options forfeited and expired		(4	)		25.63
Options exercised		(490	)		15.72
Options outstanding at December 31, 2014		566		$	13.67
Options exercised		(124	)		15.35
Options outstanding at December 31, 2015		442		$	13.20
Options forfeited and expired		(12	)		10.77
Options exercised		(115	)		11.64
Options outstanding at December 31, 2016		315		$	13.86		1.46	$	9,480
Options vested and expected to vest at December 31, 2016		315		$	13.86		1.46	$	9,480
Options exercisable at December 31, 2016		315		$	13.86		1.46	$	9,480

Aggregate stock option intrinsic value represents the difference between the closing price per share of our common stock on the last trading day of the fiscal period and the exercise price of the underlying awards for the options that were in the money at December 31, 2016, 2015, and 2014. The total intrinsic value of options exercised, determined as of the date of option exercise, was $3.8, $3.7, and $13.2 million for the years ended December 31, 2016, 2015, and 2014, respectively. There was no unrecognized compensation cost related to stock options expected to vest as of December 31, 2016. The weighted average exercise price ranges between $11.40 and $16.57. The weighted average remaining contractual term ranges between 0.64 and 2.68 years.

Non-vested RSUs

Non-vested RSUs were awarded to employees under our equity incentive plans. Non-vested RSUs do not have the voting rights of common stock and the shares underlying non-vested RSUs are not considered issued and outstanding. Non-vested RSUs generally vest over a service period of one to four years. The compensation

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expense incurred for these service-based awards is based on the closing market price of our stock on the date of grant and is amortized on a graded vesting basis over the requisite service period. The weighted average fair value of RSUs granted during the years ended December 31, 2016, 2015, and 2014 were $43.35, $41.61, and $41.71, respectively.

Non-vested RSUs, including performance-based and market-based RSUs, as of December 31, 2016, 2015, and 2014, and activity for each of the years then ended, are summarized as follows (shares in thousands):

	Shares			Weighted average  grant date fair value
Non-vested at January 1, 2014		2,089		$	23.44
Restricted stock granted		1,272			41.71
Restricted stock vested		(1,174	)		21.94
Restricted stock forfeited		(184	)		23.62
Non-vested at December 31, 2014		2,003		$	35.91
Restricted stock granted		1,104			41.61
Restricted stock vested		(925	)		32.39
Restricted stock forfeited		(368	)		39.08
Non-vested at December 31, 2015		1,814		$	40.53
Restricted stock granted		1,359			43.35
Restricted stock vested		(787	)		38.34
Restricted stock forfeited		(303	)		39.54
Non-vested at December 31, 2016		2,083		$	43.34

Vested RSUs

Performance-based RSUs that vested based on annual financial results are included in the period that the performance criteria were met. The grant date fair value of RSUs that vested during the years ended December 31, 2016, 2015, and 2014 were $38.34, $32.39, and $21.94 million, respectively. Aggregate intrinsic value of RSUs vested and expected to vest at December 31, 2016 was $79.1 million calculated as the closing price per share of our common stock on the last trading day of the fiscal period multiplied by 1.8 million RSUs vested and expected to vest at December 31, 2016. RSUs expected to vest represent time-based RSUs unvested and outstanding at December 31, 2016, and performance-based RSUs for which the requisite service period has not been rendered, but are expected to vest based on the achievement of performance conditions. There was approximately $33.9 million of unrecognized compensation costs related to RSUs expected to vest as of December 31, 2016. That cost is expected to be recognized over a weighted average period of 1.33 years.

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Notes to Consolidated Financial Statements—(Continued)

Performance-based and Market-based RSUs and Stock Options

Performance-based and market-based RSUs included in the tables above as of December 31, 2016, 2015, and 2014, and activity for each of the years then ended, are summarized below (in thousands):

	Performance-based						Market-based
	RSUs			Stock Options			RSUs
Non-vested at January 1, 2014		680			16			—
Granted		709			—			34
Vested		(403	)		—			—
Forfeited		(134	)		—			—
Non-vested at December 31, 2014		852			16			34
Granted		569			—			18
Vested		(284	)		—			(3	)
Forfeited		(217	)		—			(26	)
Non-vested at December 31, 2015		920			16			23
Granted		821			—			—
Vested		(226	)		(4	)		—
Forfeited		(250	)		(12	)		—
Non-vested at December 31, 2016		1,265			—			23

Approximately 21% of the non-vested performance-based RSUs at December 31, 2016 subsequently vested during the first quarter of 2017 based on achievement of specified performance criteria related to revenue and non-GAAP operating income targets.

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Notes to Consolidated Financial Statements—(Continued)

We use the BSM option pricing model to value performance-based awards. We use a Monte Carlo option pricing model to value market-based awards. The estimated grant date fair value per share of performance-based and market-based RSUs granted and the assumptions used to estimate grant date fair value for the years ended December 31, 2016, 2015, and 2014 are as follows:

	Performance-based				Market-based
	RSUs				RSUs
	Short-term		Long-term
Year ended December 31, 2016 Grants
Grant date fair value per share	$	39.79	$	45.76
Service period (years)		1.0		2.0 - 3.0
Year ended December 31, 2015 Grants
Grant date fair value per share	$	38.77	$	42.82	$	33.84
Service period (years)		1.0		2.0 - 3.0
Derived service period (years)						1.60
Implied volatility						30.0	%
Risk-free interest rate						1.7	%
Year ended December 31, 2014 Grants
Grant date fair value per share	$	42.04	$	40.30	$	32.10
Service period (years)		1.0		4.0
Derived service period (years)						1.53
Implied volatility						35.0	%
Risk-free interest rate						2.3	%

Our performance-based RSUs generally vest when specified performance criteria are met based on bookings, revenue, cash provided by operating activities, non-GAAP operating income, non-GAAP earnings per share, revenue growth compared to market comparables, non-GAAP earnings per share growth compared to cash flow from operating activities growth, or other targets during the service period; otherwise, they are forfeited. Non-GAAP operating income is defined as operating income determined in accordance with GAAP, adjusted to remove the impact of certain expenses as defined in Unaudited Non-GAAP Financial Information. Non-GAAP earnings per share is defined as net income determined in accordance with GAAP, adjusted to remove the impact of certain expenses, divided by the weighted average number of common shares and dilutive potential common shares outstanding during the period as more fully defined in Note 2—Earnings Per Share of the Notes to Consolidated Financial Statements.

The grant date fair value per share determined in accordance with the BSM valuation model is being amortized over the service period of the performance-based awards. The probability of achieving the awards was determined based on review of the actual results achieved thus far by each business unit compared with the operating plan during the pertinent service period as well as the overall strength of the business unit. Stock-based compensation expense was adjusted based on this probability assessment. As actual results are achieved during the service period, the probability assessment is updated and stock-based compensation expense adjusted accordingly.

Market-based awards vest when our average closing stock price exceeds defined multiples of the closing stock price on a specified date for 90 consecutive trading days. If these multiples were not achieved by another specified date, the awards are forfeited. The grant date fair value is being amortized over the average derived

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Notes to Consolidated Financial Statements—(Continued)

service period of the awards. The average derived service period and total fair value were determined using a Monte Carlo valuation model based on our assumptions, which include a risk-free interest rate and implied volatility.

Note 13: Restructuring and Other

During the years ended December 31, 2016, 2015, and 2014, cost reduction actions lowered our operating expense run rate as we continue to analyze our cost structure and re-align our cost structure following our business acquisitions. These charges primarily relate to cost reduction actions undertaken to integrate recently acquired businesses, consolidate facilities, and lower our operating expense run rate. Restructuring and other consists primarily of restructuring, severance, retention, facility downsizing and relocation, and acquisition integration expenses. Our restructuring and other plans are accounted for in accordance with ASC 420, ASC 712, and ASC 820.

Restructuring and other costs for the years ended December 31, 2016, 2015, and 2014 were $6.7, $5.7, and $6.6 million, respectively. Restructuring and other charges include severance costs of $4.1, $3.0, and $3.2 million related to head count reductions of 128, 99, and 130 for the years ended December 31, 2016, 2015, and 2014, respectively. Severance costs include severance payments, related employee benefits, retention bonuses, outplacement fees, and relocation costs.

Facilities relocation and downsizing costs for the years ended December 31, 2016, 2015, and 2014 were $0.5, $0.9, and $2.0 million, respectively. Facilities restructuring and other costs are primarily related to the relocation of certain manufacturing and administrative locations to accommodate additional space requirements in 2016 and 2015, and consolidation of our German operations in 2014. Integration expenses for the years ended December 31, 2016, 2015, and 2014 of $2.1, $1.8, and $1.4 million, respectively, were required to integrate our business acquisitions.

Restructuring and other reserve activities for the years ended December 31, 2016 and 2015 are summarized as follows (in thousands):

	2016			2015
Reserve balance at January 1	$	3,019		$	2,102
Restructuring charges		2,808			3,109
Other charges		3,921			2,622
Non-cash restructuring and other		(403	)		—
Cash payments		(7,521	)		(4,814	)
Reserve balance at December 31	$	1,824		$	3,019

Note 14: Segment Information, Geographic Regions, and Major Customers

Operating Segments

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

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Notes to Consolidated Financial Statements—(Continued)

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.

We classify our revenue, operating segment profit (i.e., gross profit), assets, and liabilities in accordance with our operating segments as follows:

Industrial Inkjet, which consists of our VUTEk and Matan super-wide and wide format display graphics, Reggiani textile, Jetrion label and packaging, and Cretaprint ceramic tile decoration and construction material industrial digital inkjet printers; UV curable, LED curable, ceramic, water-based, and thermoforming ink, as well as a variety of textile ink including dye sublimation, pigmented, reactive dye, acid dye, pure disperse dye, and water-based dispersed printing ink; digital inkjet printer parts; and professional services. Printing surfaces include paper, vinyl, corrugated, textile, glass, plastic, aluminum composite, ceramic tile, wood, and many other flexible and rigid substrates.

Productivity Software, which consists of a complete software suite that enables efficient and automated end-to-end business and production workflows for the print and packaging industry. This Productivity Suite also provides tools to enable revenue growth, efficient scheduling, and optimization of processes, equipment, and personnel. Customers are provided the financial and technical flexibility to deploy locally within their business or to be hosted in the cloud. The Productivity Suite addresses all segments of the print industry and consists of the: (i) Packaging Suite, with Radius at its core, for tag & label, cartons, and flexible packaging businesses; (ii) Corrugated Packaging Suite, with CTI at its core, for corrugated packaging businesses; (iii) Enterprise Commercial Print Suite, with Monarch at its core, for enterprise print businesses; (iv) Publication Print Suite, with Monarch or Technique at its core, for publication print businesses; (v) Mid-market Print Suite, with Pace at its core, for medium size print businesses; (vi) Quick Print Suite, with PrintSmith at its core, for small printers and in-plant sites; and (vii) Value Added Products, available with the suite and standalone, such as web-to-print, e-commerce, cross media marketing, warehousing, fulfillment, shop floor data collection, and shipping to reduce costs, increase profits, and offer new products and services to their existing and future customers. We also market Optitex fashion CAD software, which facilitates fast fashion and increased efficiency in the textile and fashion industries.

Fiery, which consists of digital front ends (“DFEs”) that transform digital copiers and printers into high performance networked printing devices for the office, industrial, and commercial printing markets. This operating segment is comprised of (i) stand-alone DFEs connected to digital printers, copiers, and other peripheral devices, (ii) embedded DFEs and design-licensed solutions used in digital copiers and multi-functional devices, (iii) optional software integrated into our DFE solutions such as Fiery Central and Graphics Arts Package, (iv) Fiery Self Serve, our self-service and payment solution, (v) PrintMe, our mobile printing application, and (vi) stand-alone software-based solutions such as our proofing and scanning solutions.

Our CODM evaluates the performance of our operating segments based on net sales and gross profit. Gross profit for each operating segment includes revenue from sales to third parties and related cost of revenue attributable to the operating segment. Cost of revenue for each operating segment excludes certain expenses managed outside the operating segments consisting primarily of stock-based compensation expense. Operating income is not reported by operating segment because operating expenses include significant shared expenses and other costs that are managed outside of the operating segments. Such operating expenses include various corporate expenses such as stock-based compensation, corporate sales and marketing, research and development, income taxes, various non-recurring charges, and other separately managed general and administrative expenses.

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Notes to Consolidated Financial Statements—(Continued)

Operating segment profit (i.e., gross profit), excluding stock-based compensation expense, for the years ended December 31, 2016, 2015, and 2014 is summarized as follows (in thousands):

	2016			2015			2014
Industrial Inkjet
Revenue	$	562,583		$	447,705		$	379,170
Gross profit		199,448			152,918			143,981
Gross profit percentages		35.5	%		34.2	%		38.0	%
Productivity Software
Revenue	$	151,737		$	135,350		$	130,743
Gross profit		114,179			99,278			94,733
Gross profit percentages		75.2	%		73.3	%		72.5	%
Fiery
Revenue	$	277,745		$	299,458		$	280,514
Gross profit		198,322			210,140			193,585
Gross profit percentages		71.4	%		70.2	%		69.0	%

Operating segment profit (i.e., gross profit) for the years ended December 31, 2016, 2015, and 2014 is reconciled to the Consolidated Statements of Operations as follows (in thousands):

	2016			2015			2014
Segment gross profit	$	511,949		$	462,336		$	432,299
Stock-based compensation expense		(2,784	)		(2,837	)		(2,562	)
Other items excluded from segment profit		(475	)		(115	)		—
Gross profit	$	508,690		$	459,384		$	429,737

Tangible and intangible assets, net of liabilities, are summarized by operating segment as of December 31, 2016 and 2015 as follows (in thousands):

	Industrial Inkjet		Productivity Software			Fiery		Corporate and Unallocated Net Assets		Total
December 31, 2016
Goodwill	$	141,068	$	155,475		$	63,298	$	—	$	359,841
Identified intangible assets, net		84,465		38,440			92		—		122,997
Tangible assets, net of liabilities		156,202		(27,689	)		33,325		183,156		344,994
Net tangible and intangible assets	$	381,735	$	166,226		$	96,715	$	183,156	$	827,832
December 31, 2015
Goodwill	$	142,183	$	133,128		$	63,482	$	—	$	338,793
Identified intangible assets, net		101,623		33,432			497		—		135,552
Tangible assets, net of liabilities		102,351		(10,023	)		23,954		233,567		349,849
Net tangible and intangible assets	$	346,157	$	156,537		$	87,933	$	233,567	$	824,194

Corporate and unallocated assets consist of cash and cash equivalents, short-term investments, restricted investments and cash equivalents, corporate headquarters facility, convertible notes, imputed financing obligation, income taxes receivable, and income taxes payable.

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Notes to Consolidated Financial Statements—(Continued)

Geographic Regions

Our revenue originates in the U.S., China, the Netherlands, Germany, Italy, France, the U.K., Spain, Israel, Brazil, Australia, and New Zealand. We report revenue by geographic region based on ship-to destination. Shipments to some of our significant printer manufacturer/distributor customers are made to centralized purchasing and manufacturing locations, which in turn sell through to other locations. As a result of these factors, we believe that sales to certain geographic locations might be higher or lower, as the ultimate destinations are difficult to ascertain.

Our revenue by ship-to destination for the years ended December 31, 2016, 2015, and 2014 was as follows (in thousands):

	2016		2015		2014
Americas	$	500,411	$	473,599	$	438,421
EMEA		360,305		291,103		244,545
APAC		131,349		117,811		107,461
Total Revenue	$	992,065	$	882,513	$	790,427

Our tangible long-lived assets consist primarily of property and equipment, net, of $103.3 million. Of this amount, $88.5 million resides in the Americas, $12.9 million resides in EMEA, consisting primarily of Cretaprint and Reggiani equipment and leasehold improvements, and $1.9 million resides in APAC, consisting primarily of India leasehold improvements and equipment.

Major Customers

No customer accounted for more than 10% of our revenue for the year ended December 31, 2016. One customer, Xerox, provided revenue in excess of 10% of consolidated revenue by providing 12% and 11% of our consolidated revenue for the years ended December 31, 2015 and 2014, respectively. Xerox accounts receivable balance was 10% of our net consolidated accounts receivables at December 31, 2015.

15. Subsequent Events

Acquisition of the Freeflow Business from Xerox Corporation. (“Xerox”). On January 31, 2017, we acquired certain assets comprising Xerox’s FreeFlow Print Server DFE business for approximately $23.9 million in cash consideration.

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SUPPLEMENTARY DATA

Unaudited Quarterly Consolidated Financial Information

The following table presents our operating results for each of the quarters in the years ended December 31, 2016 and 2015. The information for each of these quarters is unaudited, but has been prepared on the same basis as our audited consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K. In the opinion of management, all necessary adjustments (consisting only of normal recurring adjustments) have been included that are required to state fairly our unaudited quarterly results when read in conjunction with our audited consolidated financial statements and the notes thereto appearing in this Annual Report on Form 10-K. These operating results are not necessarily indicative of the results for any future period.

	2016
(in thousands except per share data)	Q1		Q2		Q3		Q4
Revenue	$	234,133	$	245,650	$	245,575	$	266,707
Gross profit		118,397		125,047		125,194		140,052
Income from operations		6,969		11,709		9,410		28,465
Net income		2,103		5,235		17,662		20,546
Net income per basic common share	$	0.04	$	0.11	$	0.38	$	0.44
Net income per diluted common share	$	0.04	$	0.11	$	0.37	$	0.43
	2015
(in thousands except per share data)	Q1		Q2		Q3		Q4
Revenue	$	194,554	$	202,721	$	228,694	$	256,544
Gross profit		105,440		108,403		116,285		129,256
Income from operations		11,076		13,368		12,780		19,419
Net income		5,237		7,717		10,257		10,329
Net income per basic common share	$	0.11	$	0.16	$	0.22	$	0.22
Net income per diluted common share	$	0.11	$	0.16	$	0.21	$	0.21

Item 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A: Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as this term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Our management, including the Chief Executive Officer and Chief Financial Officer, is engaged in a comprehensive effort to review, evaluate, and improve our controls; however, management does not expect that our disclosure controls will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures is also based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Based on their evaluation as of the end of the period covered by this Annual Report on Form 10-K, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective to provide reasonable assurance as of December 31, 2016.

147

(b) Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) of the Exchange Act. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2016. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control—Integrated Framework (2013). Based on our assessment using those criteria, we concluded that our internal control over financial reporting was effective as of December 31, 2016.

Our management has excluded the internal control over financial reporting at Rialco and Optitex from its assessment of internal control over financial reporting as of December 31, 2016 because they were acquired in purchase business combinations during 2016. Rialco and Optitex represent approximately 4.4% and 2.0% of the total consolidated assets and total consolidated revenue, respectively, of the Company as of and for the year ended December 31, 2016.

Deloitte & Touche LLP, an independent registered public accounting firm, has audited the effectiveness of our internal control over financial reporting as of December 31, 2016, as stated in their report included in this Annual Report on Form 10-K.

(c) Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) identified in connection with our evaluation that occurred during the fourth quarter of fiscal 2016 that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.

(d) Report of Independent Registered Public Accounting Firm

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Electronics For Imaging, Inc.

Fremont, California

We have audited the internal control over financial reporting of Electronics For Imaging, Inc. and subsidiaries (the “Company”) as of December 31, 2016, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. As described in Management’s Report on Internal Control over Financial Reporting, management excluded Rialco Limited (“Rialco”) and Optitex Ltd. (“Optitex”) from its assessment of internal control over financial reporting as of December 31, 2016 because they were acquired in purchase business combinations during 2016. Rialco and Optitex represent approximately 4.4% and 2.0% of the total consolidated assets and total consolidated revenue, respectively, of the Company as of and for the year ended December 31, 2016. Accordingly, our audit did not include the internal control over financial reporting at Rialco and Optitex. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

148

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on the criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2016 of the Company and our report dated February 21, 2017 expressed an unqualified opinion on those financial statements and financial statement schedule.

/S/    DELOITTE & TOUCHE LLP

San Jose, California

February 21, 2017

Item 9B: Other Information

None.

149

PART III

Item 10: Directors, Executive Officers and Corporate Governance

Information regarding our directors is incorporated by reference from the information contained under the caption “Election of Directors” in our Proxy Statement for our 2017 Annual Meeting of Stockholders (the “2017 Proxy Statement”). Information regarding our current executive officers is incorporated by reference from information contained under the caption “Executive Officers” in our 2017 Proxy Statement. Information regarding Section 16 reporting compliance is incorporated by reference from information contained under the caption “Section 16(a) Beneficial Ownership Reporting Compliance” in our 2017 Proxy Statement. Information regarding the Audit Committee of our Board of Directors and information regarding an Audit Committee financial expert is incorporated by reference from information contained under the caption “Meetings and Committees of the Board of Directors” in our 2017 Proxy Statement. Information regarding our code of ethics is incorporated by reference from information contained under the caption “Meetings and Committees of the Board of Directors” in our 2017 Proxy Statement. Information regarding our implementation of procedures for stockholder nominations to our Board of Directors is incorporated by reference from information contained under the caption “Meetings and Committees of the Board of Directors” in our 2017 Proxy Statement.

We intend to disclose any amendment to our code of ethics, or waiver from, certain provisions of our code of ethics as applicable for our directors and executive officers, including our principal executive officer, principal financial and accounting officer, chief accounting officer and controller, or persons performing similar functions, by posting such information on our website at www.efi.com.

Item 11: Executive Compensation

The information required by this item is incorporated by reference from the information contained under the captions “Compensation Discussion and Analysis” and “Executive Compensation” in our 2017 Proxy Statement.

Item 12: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Other than information regarding securities authorized for issuance under equity compensation plans, which is set forth below, the information required by this item is incorporated by reference from the information contained under the caption “Security Ownership” in our 2017 Proxy Statement.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table sets forth information as of December 31, 2016 concerning securities that are authorized under equity compensation plans:

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights			Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column 1)
Equity compensation plans approved by stockholders		2,399,075	$	13.86	(1)		4,081,835	(2)
Equity compensation plans not approved by stockholders		—		—			—
Total		2,399,075	$	13.86			4,081,835

⁽¹⁾ Calculated without taking into account 2,083,075 RSUs that will become issuable as those units vest, without any cash consideration or other payment required for such shares.

⁽²⁾ Includes 1,660,761 shares available under the 2009 Plan, 1,234,744 treasury shares available due to net share settlement, and 1,186,330 shares available under the ESPP.

150

Item 13: Certain Relationships and Related Transactions, and Director Independence

The information required by this item is incorporated by reference from the information contained under the caption “Certain Relationships and Related Transactions, and Director Independence” in our 2016 Proxy Statement.

Item 14: Principal Accountant Fees and Services

The information required by this item is incorporated by reference from the information contained under the caption “Principal Accountant Fees and Services” in our 2016 Proxy Statement.

PART IV

Item 15: Exhibits and Financial Statement Schedules

(a) Documents Filed as Part of this Report

(1) Index to Financial Statements

The Financial Statements required by this item are submitted in Item 8 of this Annual Report on Form 10-K as follows:

	Page
Report of Independent Registered Public Accounting Firm		84
Consolidated Balance Sheets as of December 31, 2016 and 2015		85
Consolidated Statements of Operations for the Years Ended December 31, 2016, 2015, and 2014		86
Consolidated Statements of Comprehensive Income for the Years Ended December  31, 2016, 2015, and 2014		87
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2016, 2015, and 2014		88
Consolidated Statements of Cash Flows for the Years Ended December 31, 2016, 2015, and 2014		89
Notes to Consolidated Financial Statements		90

(2) Financial Statement Schedule

Schedule II—Valuation and Qualifying Accounts 155

(All other schedules are omitted because of the absence of conditions under which they are required or because the necessary information is provided in the consolidated financial statements or notes thereto in Item 8 of this Annual Report on Form 10-K.)

151

(3) Exhibits

Exhibit No.	Description
3.1	Amended and Restated Certificate of Incorporation
3.2	Amended and Restated By-Laws of Electronics For Imaging, Inc., (as amended August 12, 2009) (1)
4.1	Specimen Common Stock Certificate of the Company (2)
4.2	Indenture (including Form of Notes) with respect to the Company’s 0.75% Convertible Senior Notes due 2019, dated as of September 9, 2014, between the Company and U.S. Bank National Association, as trustee (14)
10.1*	Agreement dated December 6, 2000, by and between Adobe Systems Incorporated and the Company (3)
10.2*	Electronics For Imaging, Inc. 2009 Equity Incentive Award Plan Stock Option Grant Notice and Stock Option Agreement (1)
10.3*	Electronics For Imaging, Inc. 2009 Equity Incentive Award Plan Restricted Stock Unit Award Grant Notice and Restricted Stock Unit Award Grant Agreement (1)
10.4*	Electronics For Imaging, Inc. 2009 Equity Incentive Award Plan Restricted Stock Award Grant Notice and Restricted Stock Award Grant Agreement (1)
10.5*	Electronics For Imaging, Inc. 2009 Equity Incentive Award Plan (4)
10.6*	Form of Indemnification Agreement (2)
10.7*	Form of Indemnity Agreement (5)
10.8+	OEM Distribution and License Agreement dated September 19, 2005 by and among Adobe Systems Incorporated, Adobe Systems Software Ireland Limited and the Company, as amended by Amendment No. 1 dated as of October 1, 2005 (6)
10.9+	Amendment No. 2 to OEM Distribution and License Agreement by and among Adobe Systems Incorporated, Adobe Systems Software Ireland Limited and the Company, effective as of October 1, 2005 (7)
10.10+	Amendment No. 4 to OEM Distribution and License Agreement by and among Adobe Systems Incorporated, Adobe Systems Software Ireland Limited and the Company, effective as of January 1, 2006 (8)
10.11	Purchase and Sale Agreement between Electronics for Imaging, Inc. and John Arrillaga Survivor’s Trust, represented by John Arrillaga, Trustee, and Richard T. Peery Separate Property Trust, represented by Richard T. Peery, Trustee, dated April 19, 2013 (9)
10.12	Lease Agreement between Electronics for Imaging, Inc. and John Arrillaga Survivor’s Trust, represented by John Arrillaga, Trustee, and Richard T. Peery Separate Property Trust, represented by Richard T. Peery, Trustee, dated April 19, 2013 (9)
10.13*	EFI 2016 Bonus Program (10)
10.14*	EFI 2016 Performance Accelerator Bonus Program (10)
10.15*	Employment Agreement Effective January 27, 2014 by and between the Company and Guy Gecht (11)
10.16*	Employment Agreement Effective April 22, 2015 by and between the Company and Marc Olin (12)

152

Exhibit No.	Description
10.17	Form of Call Option Confirmation relating to the Company’s 0.75% Convertible Senior Notes due 2019 (13)
10.18	Form of Warrant Confirmation relating to the Company’s 0.75% Convertible Senior Notes due 2019 (13)
12.1	Computation of Ratios of Earnings to Fixed Charges
21	List of Subsidiaries
23.1	Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm
24.1	Power of Attorney (see signature page of this Annual Report on Form 10-K)
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Chief Executive Officer Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

* Management contracts or compensatory plan or arrangement

+ The Company has received confidential treatment with respect to portions of these documents

⁽¹⁾ Filed as an exhibit to the Company’s Current Report on Form 8-K filed on August 17, 2009 and incorporated herein by reference.

⁽²⁾  Filed as an exhibit to the Company’s Registration Statement on Form S-1 (No. 33-50966) and incorporated herein by reference.

⁽³⁾  Filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000 (File No. 18805) and incorporated herein by reference.

⁽⁴⁾  Filed as an exhibit to the Company’s Current Report on Form 8-K filed on June 6, 2013 (File No. 18805) and incorporated herein by reference.

⁽⁵⁾  Filed as an exhibit to the Company’s Current Report on Form 8-K filed on February 15, 2008 (File No. 18805) and incorporated herein by reference.

⁽⁶⁾  Filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005 (File No. 18805) and incorporated herein by reference.

⁽⁷⁾  Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006 (File No. 18805) and incorporated herein by reference.

⁽⁸⁾  Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006 (File No. 18805) and incorporated herein by reference.

⁽⁹⁾  Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013. (File No. 18805) and incorporated herein by reference.

153

⁽¹⁰⁾  Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016. (File No. 18805) and incorporated herein by reference.

⁽¹¹⁾  Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014. (File No. 18805) and incorporated herein by reference.

⁽¹²⁾  Filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. (File No. 18805) and incorporated herein by reference.

⁽¹³⁾  Filed as an exhibit to the Company’s Current Report on Form 8-K filed on September 9, 2014 (File No. 000-18805) and incorporated herein by reference.

(b) List of Exhibits

See Item 15(a).

(c) Consolidated Financial Statement Schedule II for the years ended December 31, 2016, 2015, and 2014.

Item 16: Form 10-K Summary

None.

154

ELECTRONICS FOR IMAGING, INC.

Schedule II

Valuation and Qualifying Accounts

(in thousands)	Balance at beginning of period		Charged to revenue and expenses		Charged to (from) other accounts		Deductions			Balance at end of period
Year Ended December 31, 2016
Allowance for bad debts and sales-related allowances	$	21,993	$	10,678	$	—	$	(9,341	)	$	23,330
Year Ended December 31, 2015
Allowance for bad debts and sales-related allowances		17,517		7,536		—		(3,060	)		21,993
Year Ended December 31, 2014
Allowance for bad debts and sales-related allowances		16,433		7,408		—		(6,324	)		17,517

155

SIGNATURES

Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ELECTRONICS FOR IMAGING, INC.
February 21, 2017	By:	/s/    GUY GECHT
		Guy Gecht,
		Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENT, that each person whose signature appears below constitutes and appoints Guy Gecht and Marc Olin jointly and severally, his attorneys-in-fact, each with the power of substitution, for him in any and all capacities, to sign any amendments to the Form 10-K Annual Report and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/S/    GUY GECHT	Chief Executive Officer, Director	February 21, 2017
Guy Gecht	(Principal Executive Officer)
/S/    MARC OLIN	Chief Financial Officer (Principal	February 21, 2017
Marc Olin	Financial and Accounting Officer)
/s/    ERIC BROWN	Director	February 21, 2017
Eric Brown
/s/    GILL COGAN	Director	February 21, 2017
Gill Cogan
/s/    THOMAS GEORGENS	Director	February 21, 2017
Thomas Georgens
/s/    RICHARD A. KASHNOW	Director	February 21, 2017
Richard A. Kashnow
/s/    DAN MAYDAN	Director	February 21, 2017
Dan Maydan

156

Exhibit Index

Exhibit No.	Description
3.1	Amended and Restated Certificate of Incorporation
3.2	Amended and Restated By-Laws of Electronics For Imaging, Inc., (as amended August  12, 2009) (1)
4.1	Specimen Common Stock Certificate of the Company (2)
4.2	Indenture (including Form of Notes) with respect to the Company’s 0.75% Convertible Senior Notes due 2019, dated as of September 9, 2014, between the Company and U.S. Bank National Association, as trustee (14)
10.1*	Agreement dated December 6, 2000, by and between Adobe Systems Incorporated and the Company (3)
10.2*	Electronics For Imaging, Inc. 2009 Equity Incentive Award Plan Stock Option Grant Notice and Stock Option Agreement (1)
10.3*	Electronics For Imaging, Inc. 2009 Equity Incentive Award Plan Restricted Stock Unit Award Grant Notice and Restricted Stock Unit Award Grant Agreement (1)
10.4*	Electronics For Imaging, Inc. 2009 Equity Incentive Award Plan Restricted Stock Award Grant Notice and Restricted Stock Award Grant Agreement (1)
10.5*	Electronics For Imaging, Inc. 2009 Equity Incentive Award Plan (4)
10.6*	Form of Indemnification Agreement (2)
10.7*	Form of Indemnity Agreement (5)
10.8+	OEM Distribution and License Agreement dated September 19, 2005 by and among Adobe Systems Incorporated, Adobe Systems Software Ireland Limited and the Company, as amended by Amendment No. 1 dated as of October 1, 2005 (6)
10.9+	Amendment No. 2 to OEM Distribution and License Agreement by and among Adobe Systems Incorporated, Adobe Systems Software Ireland Limited and the Company, effective as of October 1, 2005 (7)
10.10+	Amendment No. 4 to OEM Distribution and License Agreement by and among Adobe Systems Incorporated, Adobe Systems Software Ireland Limited and the Company, effective as of January 1, 2006 (8)
10.11	Purchase and Sale Agreement between Electronics for Imaging, Inc. and John Arrillaga Survivor’s Trust, represented by John Arrillaga, Trustee, and Richard T. Peery Separate Property Trust, represented by Richard T. Peery, Trustee, dated April 19, 2013 (9)
10.12	Lease Agreement between Electronics for Imaging, Inc. and John Arrillaga Survivor’s Trust, represented by John Arrillaga, Trustee, and Richard T. Peery Separate Property Trust, represented by Richard T. Peery, Trustee, dated April 19, 2013 (9)
10.13*	EFI Section 16 2016 Bonus Program (10)
10.14*	EFI 2016 Performance Accelerator Bonus Program (10)
10.15*	Employment Agreement Effective January 27, 2014 by and between the Company and Guy Gecht (11)
10.16*	Employment Agreement Effective April 22, 2015 by and between the Company and Marc Olin (12)
10.17	Form of Call Option Confirmation relating to the Company’s 0.75% Convertible Senior Notes due 2019 (13)

Exhibit No.	Description
10.18	Form of Warrant Confirmation relating to the Company’s 0.75% Convertible Senior Notes due 2019 (13)
12.1	Computation of Ratios of Earnings to Fixed Charges
21	List of Subsidiaries
23.1	Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm
24.1	Power of Attorney (see signature page of this Annual Report on Form 10-K)
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Chief Executive Officer Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

* Management contracts or compensatory plan or arrangement

+ The Company has received confidential treatment with respect to portions of these documents

⁽¹⁾ Filed as an exhibit to the Company’s Current Report on Form 8-K filed on August 17, 2009 and incorporated herein by reference.

⁽²⁾ Filed as an exhibit to the Company’s Registration Statement on Form S-1 (No. 33-50966) and incorporated herein by reference.

⁽³⁾ Filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000 (File No. 000-18805) and incorporated herein by reference.

⁽⁴⁾ Filed as an exhibit to the Company’s Current Report on Form 8-K filed on June 6, 2013 (File No. 18805) and incorporated herein by reference.

⁽⁵⁾ Filed as an exhibit to the Company’s Current Report on Form 8-K filed on February 15, 2008 (File No. 18805) and incorporated herein by reference.

⁽⁶⁾ Filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005 (File No. 18805) and incorporated herein by reference.

⁽⁷⁾ Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006 (File No. 18805) and incorporated herein by reference.

⁽⁸⁾ Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006 (File No. 18805) and incorporated herein by reference.

⁽⁹⁾ Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013. (File No. 18805) and incorporated herein by reference.

⁽¹⁰⁾ Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016. (File No. 18805) and incorporated herein by reference.

⁽¹¹⁾ Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014. (File No. 18805) and incorporated herein by reference.

⁽¹²⁾ Filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 (File No. 18805) and incorporated herein by reference.

⁽¹³⁾ Filed as an exhibit to the Company’s Current Report on Form 8-K filed on September 9, 2014 (File No. 000-18805) and incorporated herein by reference.

EX-3.1

Exhibit 3.1

STATE OF DELAWARE

SECRETARY OF STATE

DIVISION OF CORPORATIONS

FILED 02:00 PM 10/09/1992

922875005 – 2178816

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

OF

ELECTRONICS FOR IMAGING, INC.

Electronics for Imaging, Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware (the “Corporation”) does hereby certify that:

FIRST: The Amended and Restated Certificate of Incorporation of the Corporation, in the form attached hereto as Exhibit 1, has been duly adopted in accordance with the provisions of Sections 242 and 245 of the General Corporation Law of the State of Delaware, by the Board of Directors of the Corporation at a meeting duly called and held on July 30, 1992.

SECOND: The Amended and Restated Certificate of Incorporation of the Corporation, in the form attached hereto as Exhibit 1, has been duly approved by the written consent of a majority of the stockholders of the Corporation and by a majority of the holders of each class entitled to a class vote thereon in accordance with the provisions of Section 228, 242 and 245 of the General Corporation Law of the State of Delaware, and written notice of such consent has been given to all stockholders who have not consented in writing to said amendment and restatement.

THIRD: The Amended and Restated Certificate of Incorporation so adopted reads in full as set forth in Exhibit 1 attached hereto and incorporated herein by reference.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed and attested by its duly authorized officers this 9th day of October, 1992.

ELECTRONICS FOR IMAGING, INC.
By:	/s/ Efi Araz

Attest:

/s/ Lawrence B. Levy

Exhibit 1

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

OF

ELECTRONICS FOR IMAGING, INC.

1. The name of the corporation is Electronics For Imaging, Inc.

2. The address of the registered office of the corporation in the State of Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of the registered agent at such address is The Corporation Trust Company.

3. The nature of the business or purposes to be conducted or promoted is:

To engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware.

4. The total number of shares of all classes of stock which the Corporation shall have authority to issue is 30,000,000 shares, divided into two classes consisting of 25,000,000 shares of common stock, par value $.01 per share (“Common Stock”), and 5,000,000 shares of preferred stock, par value $.01 per share (“Preferred Stock”).

A. The Board of Directors shall have authority by resolution to issue the shares of Preferred Stock from time to time on such terms as it may determine and to divide the Preferred Stock into one or more series and, in connection with the creation of any such series, to determine and fix by the resolution or resolutions providing for the issuance of shares thereof:

(1) the distinctive designation of such series, the number of shares which shall constitute such series, which number may be increased or decreased (but not below the number of shares then outstanding) from time to time by action of the Board of Directors, and the stated value thereof if different from the par value thereof;

(2) the dividend rate, the times of payment of dividends on the shares of such series, whether dividends shall be cumulative, and, if so, from what date or dates, and the preference or relation which such dividends will bear to the dividends payable

on any shares of stock of any other class or any other series of this class;

(3) the price or prices at which, and the terms and conditions on which, the shares of such series may be redeemed;

(4) whether the shares of such series shall be entitled to the benefit of a retirement or sinking fund to be applied to the purchase or redemption of such shares and, if so entitled, the amount of such fund and the terms and provisions relative to the operation thereof;

(5) whether the shares of such series shall be convertible into, or exchangeable for, any other shares of stock of the Corporation or any other securities and, if so convertible or exchangeable, the conversion price or prices, or the rates of exchange, and any adjustments thereof, at which such conversion or exchange may be made, and any other terms and conditions of such conversion or exchange;

(6) the rights of the shares of such series in the event of voluntary or involuntary liquidation, dissolution or winding up or upon any distribution of the assets, of the Corporation;

(7) whether the shares of such series shall have priority over or parity with or be junior to the shares of any other class or series in any respect, or shall be entitled to the benefit of limitations restricting (i) the creation of indebtedness of the Corporation, (ii) the issuance of shares of any other class or series having priority over or being on a parity with the shares of such series in any respect or (iii) the payment of dividends on, the making of other distributions in respect of, or the purchase or redemption of shares of any other class or series on parity with or ranking junior to the shares of such series as to dividends or assets, and the terms of any such restrictions, or any other restriction with respect to shares of any other class or series on parity with or ranking junior to the shares of such series in any respect;

(8) whether such series shall have voting rights, in addition to any voting rights provided by law and, if so, the terms of such voting rights which may be general or limited; and

(9) any other powers, preferences, privileges and relative participating, optional, or other special rights of such series, and the qualifications, limitations or restrictions thereof, to the full extent now or hereafter permitted by law.

B. The powers, preferences and relative participating, option and other special rights of each series of Preferred Stock, and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other series at any time outstanding. All shares of any one series of Preferred Stock shall be identical in all respects with all other shares of such series, except that shares of any one series issued at different times may differ as to the dates from which dividends thereon shall be cumulative.

C. Except when cumulative voting, if authorized by the Certificate of Incorporation or otherwise applicable in accordance with Section 2115 of the General Corporation Law of the State of California, is in effect, each holder of Common Stock shall be entitled to one vote for each share of Common Stock held of record on all matters on which stockholders generally are entitled to vote. Subject to the provisions of law and the rights of the Preferred Stock and any other class or series of stock having a preference as to dividends over the Common Stock then outstanding, dividends may be paid on the Common Stock at such times and in such amounts as the Board of Directors shall determine. Upon the dissolution, liquidation or winding up of the Corporation, after any preferential amounts to be distributed to the holders of the Preferred Stock and any other class or series of stock having a preference over the Common Stock then outstanding have been paid or declared and set apart for payment, the holders of the Common Stock shall be entitled to receive all the remaining assets of the Corporation available for distribution to its stockholders ratably in proportion to the number of shares held by them, respectively.

5. The corporation is to have perpetual existence.

6. In furtherance and not in limitation of the powers conferred upon the board of directors by statute, the board of directors is expressly authorized to make, alter or repeal the By-Laws of the corporation, subject to the power of the stockholders to adopt any By-Laws or to amend or repeal any By-Laws adopted, amended or repealed by the board of directors.

7. Whenever a compromise or arrangement is proposed between this corporation and its creditors or any class of them and/or between this corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this corporation or of any creditors or stockholders thereof or on the application of any receiver or receivers appointed for this corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this corporation under the provisions of Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders, of this corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class or stockholders, of this corporation, as the case may be, and also on this corporation.

8. A director of this corporation shall not be personally liable to the corporation or its stockholders for monetary damages for the breach of any fiduciary duty as a director, except (i) for any breach of the director’s duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit.

9. The corporation shall indemnify each person who is or was a director or officer of the corporation to the fullest extent permitted by Section 145 of the Delaware General Corporation Law.

2

STATE OF DELAWARE

SECRETARY OF STATE

DIVISION OF CORPORATIONS

FILED 10:00 AM 11/08/1995

950258688 – 2178816

CERTIFICATE OF AMENDMENT OF

AMENDED AND RESTATED CERTIFICATE

OF INCORPORATION OF

ELECTRONICS FOR IMAGING, INC.

ELECTRONICS FOR IMAGING, INC., a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), pursuant to the provisions of the General Corporation Law of the State of Delaware (the “GCL”), DOES HEREBY CERTIFY as follows:

FIRST: The Amended and Restated Certificate of Incorporation of the Corporation is hereby amended by deleting the first paragraph of article 4 of the Amended and Restated Certificate of Incorporation in its present form and substituting, therefore, a new first paragraph of article 4 in the following form:

“The total number of shares of all classes of stock which the Corporation shall have authority to issue is 155,000,000 shares, divided into two classes consisting of 150,000,000 shares of common stock, par value $0.01 per share (the “Common Stock”) and 5,000,000 shares of preferred stock, par value $0.01 per share (the “Preferred Stock”).”

SECOND: The amendment to the Amended and Restated Certificate of Incorporation of the Corporation set forth in this Certificate of Amendment has been duly adopted in accordance with the provisions of Section 242 of the GCL (a) the Board of Directors of the Corporation having duly adopted the resolution setting forth such amendment and declaring its advisability and submitting it to the stockholders of the Corporation for their approval, and (b) the stockholders of the Corporation having duly adopted such amendment by a vote of the holders of a majority of the outstanding stock entitled to vote thereon at the Corporation’s special meeting of the stockholders on November 1, 1995.

IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be hereunto affixed and this Certificate of Amendment to be signed by Eric Saltzman, its Vice President of Strategic Relations and attested by Elizabeth R. Flint, its Secretary, this 7th day of November, 1995.

ELECTRONICS FOR IMAGING, INC.
By:	/s/ Eric Saltzman
	Eric Saltzman

ATTEST:
By:	/s/ Elizabeth R. Flint
	Elizabeth R. Flint

STATE OF DELAWARE

SECRETARY OF STATE

DIVISION OF CORPORATIONS

FILED 09:00 AM 12/22/1998

981496311 – 2178816

CERTIFICATE OF OWNERSHIP AND MERGER

MERGING

PIPELINE ASIA, INC.

(a New Jersey corporation)

INTO

ELECTRONICS FOR IMAGING, INC.

(a Delaware corporation)

(Pursuant to Section 253 of the

General Corporation Law of Delaware)

ELECTRONICS FOR IMAGING, INC. (the “Corporation”), a corporation incorporated on November 21, 1988 pursuant to the provisions of the General Corporation law of the State of Delaware, does hereby certify that the Corporation owns all of the issued and outstanding shares of the capital stock of PIPELINE ASIA, INC., a corporation incorporated under the laws of the State of New Jersey (the “New Jersey Subsidiary”), and that the Corporation, by a resolution of its Board of Directors duly adopted on December 22, 1998, determined to merge into itself said Subsidiary, which resolution is in the following words, to wit:

WHEREAS, the Corporation owns all of the issued and outstanding capital stock of the New Jersey Subsidiary, and it is deemed to be in the best interests of the Corporation to merge the New Jersey Subsidiary with and into the Corporation in a statutory short-form merger pursuant to the provisions of Section 253 of the Delaware General Corporation Law and Section 14A of the New Jersey Business Corporation Act, in which the Corporation will be the surviving corporation of such merger;

Now, THEREFORE, BE IT RESOLVED, that the Corporation shall merge into itself the New Jersey Subsidiary, its wholly-owned subsidiary, with the Corporation being the surviving corporation of such merger and acquiring thereby all the assets and properties of the New Jersey Subsidiary and assuming all of the liabilities, including tax liabilities in New Jersey, and obligations of the New Jersey Subsidiary; and

RESOLVED FURTHER, that the appropriate officers of the Corporation are hereby authorized and directed, on behalf of the Corporation, to cause the Corporation to execute, deliver and file a Certificate of Ownership and Merger with the Delaware Secretary of State, and to execute, deliver and file such additional documents or perform such acts as are determined to be necessary or appropriate to carry out the merger of the New Jersey Subsidiary into the Corporation as described above.

IN WITNESS WHEREOF, the Corporation has caused this certificate to be signed by its President and attested by its Secretary this 22 day of December 1998.

ELECTRONICS FOR IMAGING, INC.
By:	/s/ Dan Avida
	Dan Avida
	President

ATTEST:

/s/ Eric Saltzman

Eric Saltzman

Secretary

[Signature Page to Certificate of Ownership and Merger

of Electronics for Imaging, Inc.]

STATE OF DELAWARE

SECRETARY OF STATE

DIVISION OF CORPORATIONS

FILED 09:05 AM 12/22/1998

981496315 – 2178816

CERTIFICATE OF OWNERSHIP AND MERGER

MERGING

PIPELINE ASSOCIATES, INC.

(a New York corporation)

INTO

ELECTRONICS FOR IMAGING, INC.

(a Delaware corporation)

(Pursuant to Section 253 of the

General Corporation Law of Delaware)

ELECTRONICS FOR IMAGING, INC. (the “Corporation”), a corporation incorporated on November 21, 1988 pursuant to the provisions of the General Corporation law of the State of Delaware, does hereby certify that the Corporation owns all of the issued and outstanding shares of the capital stock of PIPELINE ASSOCIATES, INC., a corporation incorporated under the laws of the State of New York (the “New York Subsidiary”), and that the Corporation, by a resolution of its Board of Directors duly adopted on December 22, 1998, determined to merge into itself said Subsidiary, which resolution is in the following words, to wit:

WHEREAS, the Corporation owns all of the issued and outstanding capital stock of the New York Subsidiary, and it is deemed to be in the best interests of the Corporation to merge the New York Subsidiary with and into the Corporation in a statutory short-form merger pursuant to the provisions of Section 253 of the Delaware General Corporation Law and Section 907 of the New York Business Corporation Law, in which the Corporation will be the surviving corporation of such merger;

Now, THEREFORE, BE IT RESOLVED, that the Corporation shall merge into itself the New York Subsidiary, its wholly-owned subsidiary, with the Corporation being the surviving corporation of such merger and acquiring thereby all the assets and properties of the New York Subsidiary and assuming all of the liabilities, including tax liabilities in New York, and obligations of the New York Subsidiary; and

RESOLVED FURTHER, that the appropriate officers of the Corporation are hereby authorized and directed, on behalf of the Corporation, to cause the Corporation to execute, deliver and file a Certificate of Ownership and Merger with the Delaware Secretary of State, and to execute, deliver and file such additional documents or perform such acts as are determined to be necessary or appropriate to carry out the merger of the New York Subsidiary into the Corporation as described above.

IN WITNESS WHEREOF, the Corporation has caused this certificate to be signed by its President and attested by its Secretary this 22 day of December 1998.

ELECTRONICS FOR IMAGING, INC.
By:	/s/ Dan Avida
	Dan Avida
	President

ATTEST:

/s/ Eric Saltzman

Eric Saltzman

Secretary

[Signature Page to Certificate of Ownership and Merger

of Electronics for Imaging, Inc.]

STATE OF DELAWARE SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 09:00 AM 12/27/1999 991562568 – 2178816 CERTIFICATE OF OWNERSHIP AND MERGER MERGING

MANAGEMENT GRAPHICS, INC.

(a Minnesota corporation)

INTO

ELECTRONICS FOR IMAGING, INC.

(a Delaware corporation)

(Pursuant to Section 253 of the

General Corporation Law of Delaware)

Electronics for Imaging, Inc. (the “Corporation”), a corporation incorporated on November 21, 1988 pursuant to the provisions of the General Corporation Law of the State of Delaware, does hereby certify that the Corporation owns all of the issued and outstanding shares of the capital stock of Management Graphics Inc., a corporation incorporated under the laws of the State of Minnesota (“Subsidiary”), and that the Corporation, by a resolution of its Board of Directors duly adopted on December 22, 1999, determined to merge into itself said Subsidiary, which resolution is in the following words, to wit:

WHEREAS, the Corporation owns all of the issued and outstanding capital stock of Management Graphics, Inc. (“Subsidiary”), and it is deemed to be in the best interests of the Corporation to merge Subsidiary with and into the Corporation in a statutory short-form merger pursuant to the provisions of Section 253 of the Delaware General Corporation Law, in which the Corporation will be the surviving corporation of such merger;

NOW, THEREFORE, BE IT RESOLVED, that the Corporation shall merge into itself Subsidiary, its wholly-owned subsidiary, with the Corporation being the surviving corporation of such merger and acquiring thereby all the assets and properties of Subsidiary and assuming all of the liabilities and obligations of Subsidiary;

RESOLVED FURTHER, that the Board of Directors hereby authorizes, approves, adopts, ratifies and confirms that certain Plan of Merger attached hereto as Exhibit A; and

RESOLVED FURTHER, that the officers of the Corporation, each of them with full authority to act without the others, are hereby authorized and directed, on behalf of the Corporation, to cause the Corporation to execute and deliver, and file with the Delaware Secretary of State, a Certificate of Ownership and Merger, and to execute, deliver and file such additional documents or perform such acts as are determined to be necessary or appropriate to carry out the merger of Subsidiary into the Corporation as described above.

IN WITNESS WHEREOF, the Corporation has caused this certificate to be signed by its President and attested by its Secretary, the 22 day of December, 1999.

By:	/s/ Eric Saltzman
	Eric Saltzman
	Chief Financial Officer

ATTEST:

/s/ Joseph Cutts

EXHIBIT A

PLAN OF MERGER

OF

MANAGEMENT GRAPHICS, INC.

INTO

ELECTRONICS FOR IMAGING, INC.

1. The name of the subsidiary corporation is Management Graphics, Inc.

2. The name of the parent and surviving corporation is Electronics for Imaging, Inc.

3. The merger shall be effective when articles of merger are filed with the Secretary of State of the State of Minnesota (the “Effective Date”).

4. Upon the Effective Date, all outstanding shares of each class and series of stock of Management Graphics, Inc. shall be cancelled, and no shares of Electronics for Imaging, Inc. shall be issued in lieu thereof.

5. Upon the Effective Date, the provisions of Section 302A.641, subdivisions 2 and 3 of the Minnesota Business Corporation Act shall apply.

1

STATE OF DELAWARE

SECRETARY OF STATE

DIVISION OF CORPORATIONS

FILED 05:02 PM 10/23/2000

001533177 – 2178816

CERTIFICATE OF OWNERSHIP AND MERGER

of

SPLASH TECHNOLOGY HOLDINGS, INC.

(a Delaware corporation)

into

ELECTRONICS FOR IMAGING, INC.

(a Delaware corporation)

ELECTRONICS FOR IMAGING, INC. (the “Corporation”), a corporation organized and existing under and by virtue of the Delaware General Corporation Law (the “DGCL”), does hereby certify:

1. The Corporation is a corporation of the State of Delaware.

2. The Corporation is the owner of all of the outstanding shares of all outstanding classes of stock of Splash Technology Holdings, Inc., a Delaware corporation (“Splash”), which was the surviving corporation of a merger of Vancouver Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of the Corporation (“Purchaser”), with and into Splash, pursuant to a Agreement and Plan of Merger, dated as of August 30, 2000 (the “Merger Agreement”), by and among the Corporation, Splash and Purchaser, as amended by Amendment No. 1 thereof (the “Amendment”).

3. The following resolutions were adopted on October 18, 2000, by the Board of Directors of the Corporation:

WHEREAS, following the merger of Purchaser with and into Splash, pursuant to the terms of the Merger Agreement, as amended by the Amendment (the “First Merger”), the Corporation will own 100% of the outstanding shares of each class of the stock of Splash; and

WHEREAS, the Board believes that it is advisable, desirable and in the best interests of the Corporation and its stockholders that Splash merge with and into the Corporation (the “Second Merger”) and that the Corporation assume all of the obligations of Splash.

NOW, THEREFORE, BE IT RESOLVED, that, following and conditioned upon the occurrence of the First Merger, the Second Merger be, and it hereby is, expressly declared advisable and in the best interests of the Corporation and its stockholders, recommended by this Board, and approved in all respects; and

FURTHER RESOLVED, that the officers of the Corporation be, and each of them hereby is, authorized and directed, in the name and on behalf of the Corporation, to execute and file with the Secretary of State of the State of Delaware a Certificate of Ownership and Merger, in accordance with Section 253 of the DGCL; and

FURTHER RESOLVED, that the Corporation may amend or terminate the Second Merger at any time before the Certificate of Ownership and Merger is filed with the Secretary of State of the State of Delaware.”

4. The Corporation hereby merges Splash with and into the Corporation effective at 5:02 p.m. Eastern Daylight Savings time on October 23, 2000.

Executed on this 23rd day of October, 2000.

ELECTRONICS FOR IMAGING, INC.
By:	/s/ Guy Gecht
	Name:	Guy Gecht
	Title:	Chief Executive Officer

STATE OF DELAWARE

SECRETARY OF STATE

DIVISION OF CORPORATIONS

FILED 09:00 AM 03/21/2001

010140051 – 2178816

CERTIFICATE OF OWNERSHIP AND MERGER

of

SPLASH TECHNOLOGY, INC.

(a Delaware corporation)

into

ELECTRONICS FOR IMAGING, INC.

(a Delaware corporation)

SPLASH TECHNOLOGY, INC. (the “Corporation”), a corporation organized and existing under and by virtue of the Delaware General Corporation Law (the “DGCL”), does hereby certify:

1. The Corporation is a corporation of the State of Delaware.

2. Electronics for Imaging, Inc., a Delaware corporation (“EFT”), is the owner of all of the outstanding shares of all outstanding classes of stock of the Corporation.

3. The following resolutions were adopted on March 20, 2001, by the Board of Directors of the Corporation:

“WHEREAS, the Board believes that it is advisable, desirable and in the best interests of the Corporation and the Corporation’s sole stockholder that the Corporation be merged with and into Electronics for Imaging, Inc. (“EFT”).

RESOLVED, that, subject to stockholder adoption, the Corporation shall be merged (the “Merger”) with and into EFI, a Delaware corporation effective at 5:00 p.m., New York City time on March 21, 2001 (the “Effective Time”), pursuant to the laws of the State of Delaware and as hereinafter provided; the separate corporate existence of the Corporation shall thereupon cease; EFI shall be the surviving corporation in the Merger and shall continue to be governed by the laws of the State of Delaware and the separate corporate existence of EFI with all its rights, privileges, immunities, powers and franchises shall continue unaffected by the Merger; and

FURTHER RESOLVED, that the officers of the Corporation be, and they hereby are, authorized and directed to make and execute a Certificate of Ownership and Merger setting forth a copy of these resolutions to merge itself with and into EFI and the date of adoption thereof, and to cause the same to be filed and recorded as provided by the DGCL, and to do all acts and things whatsoever, within the State of Delaware and in any other appropriate jurisdiction, necessary or proper to effect the Merger.”

4. The proposed merger of the Corporation with and into EFI has been approved in writing, in accordance with the provisions of Section 228 of the DGCL, by the holders of the requisite number of shares of the Corporation who were entitled to vote.

Executed on this 20th day of March, 2001.

SPLASH TECHNOLOGY, INC.
By:	/s/ Joseph Cutts
	Name:	Joseph Cutts
	Title:	Chief Financial Officer

STATE OF DELAWARE

SECRETARY OF STATE

DIVISION OF CORPORATIONS

FILED 09:00 AM 12/20/2002

020789890 – 2178816

CERTIFICATE OF OWNERSHIP AND MERGER

of

UNIMOBILE, INC.

(a Delaware corporation)

into

ELECTRONICS FOR IMAGING, INC.

(a Delaware corporation)

UNIMOBILE, INC. (the “Subsidiary”), a corporation organized and existing under and by virtue of the Delaware General Corporation Law (the “DGCL”), does hereby certify:

1. The Subsidiary is a corporation of the State of Delaware.

2. Electronics for Imaging, Inc., a Delaware corporation (“Parent”), is the owner of all of the outstanding shares of all outstanding classes of stock of the Subsidiary.

3. The following resolutions were adopted on December 18, 2002, by the Board of Directors of the Subsidiary:

“WHEREAS, the Board believes that it is advisable, desirable and in the best interests of the Subsidiary and the Subsidiary’s sole stockholder that the Subsidiary be merged with and into Electronics for Imaging, Inc. (“Parent”).

RESOLVED, that, subject to stockholder adoption, the Subsidiary shall be merged (the “Merger”) with and into Parent, a Delaware corporation effective at 5:00 p.m., Eastern Standard time on December 19, 2002 (the “Effective Time” for accounting purposes only), pursuant to the laws of the State of Delaware and as hereinafter provided; the separate corporate existence of the Subsidiary shall thereupon cease; Parent shall be the surviving corporation in the Merger and shall continue to be governed by the laws of the State of Delaware and the separate corporate existence of Parent with all its rights, privileges, immunities, powers and franchises shall continue unaffected by the Merger; and

FURTHER RESOLVED, that the officers of the Subsidiary be, and they hereby are, authorized and directed to make and execute a Certificate of Ownership and Merger setting forth a copy of these resolutions to merge itself with and into Parent and the date of adoption thereof, and to cause the same to be filed and recorded as provided by the DGCL, and to do all acts and things whatsoever, within the State of Delaware and in any other appropriate jurisdiction, necessary or proper to effect the Merger.”

4. The proposed merger of the Subsidiary with and into Parent has been approved in writing, in accordance with the provisions of Section 228 of the DGCL, by the holders of the requisite number of shares of the Subsidiary who were entitled to vote.

Executed on this 19th day of December, 2002.

ELECTRONICS FOR IMAGING, INC.
By:	/s/ Joseph Cutts
	Name:	Joseph Cutts
	Title:	Chief Financial Officer

CERTIFICATE OF OWNERSHIP AND MERGER

of

TIDENET, INC.

(a Delaware corporation)

into

ELECTRONICS FOR IMAGING, INC.

(a Delaware corporation)

TIDENET, INC. (the “Corporation”), a corporation organized and existing under and by virtue of the Delaware General Corporation Law (the “DGCL”), does hereby certify:

1. The Corporation is a corporation of the State of Delaware.

2. Electronics for Imaging, Inc., a Delaware corporation (“EFI”), is the owner of all of the outstanding shares of all outstanding classes of stock of the Corporation.

3. The following resolutions were adopted on May 20, 2003, by the Board of Directors of the Corporation:

“WHEREAS, the Board believes that it is advisable, desirable and in the best interests of the Corporation and the Corporation’s sole stockholder that the Corporation be merged with and into Electronics for Imaging, Inc. (“EFI”).

RESOLVED, that, subject to stockholder adoption, the Corporation shall be merged (the “Merger”) with and into EFI, a Delaware corporation effective at 5:00 p.m., New York City time on May 20, 2003 (the “Effective Time”, for bookkeeping purposes), pursuant to the laws of the State of Delaware and as hereinafter provided; the separate corporate existence of the Corporation shall thereupon cease; EFI shall be the surviving corporation in the Merger and shall continue to be governed by the laws of the State of Delaware and the separate corporate existence of EFI with all its rights, privileges, immunities, powers and franchises shall continue unaffected by the Merger; and

FURTHER RESOLVED, that the officers of the Corporation be, and they hereby are, authorized and directed to make and execute a Certificate of Ownership and Merger setting forth a copy of these resolutions to merge itself with and into EFI and the date of adoption thereof, and to cause the same to be filed and recorded as provided by the DGCL, and to do all acts and things whatsoever, within the State of Delaware and in any other appropriate jurisdiction, necessary or proper to effect the Merger.”

4. The proposed merger of the Corporation with and into EFI has been approved in writing, in accordance with the provisions of Section 228 of the DGCL, by the holders of the requisite number of shares of the Corporation who were entitled to vote.

Executed on this 20th day of May, 2003.

TIDENET, INC.
By:	/s/ Joseph Cutts
	Name:	Joseph Cutts
	Title:	Corporate Secretary
	Parent:	Electronics for Imaging, Inc.

State of Delaware

Secretary of State

Division of Corporations

Delivered 05:25 PM 06/02/2003

FILED 05:06 PM 06/02/2003

SRV 030362694 – 2178816 FILE

CERTIFICATE OF MERGER   OF   BESTColor U.S.A. Inc.   AND   Electronics for Imaging, Inc. State of Delaware Secretary of State Division of Corporations Delivered 05:18 PM 11/24/2003 FILED 05:15 PM 11/24/2003 SRV 030756656 – 2178816 FILE

It is hereby certified that:

1. The constituent business corporations participating in the merger herein certified are:

(i) BESTColor U.S.A. Inc., which is incorporated under the laws of the State of New York; and

(ii) Electronics for Imaging, Inc., which is incorporated under the laws of the State of Delaware.

2. An Agreement of Merger has been approved, adopted, certified, executed, and acknowledged by each of the aforesaid constituent corporations in accordance with the provisions of subsection (c) of Section 252 of the Delaware General Corporation Law, to wit, by BESTColor U.S.A. Inc. in accordance with the laws of the State of its incorporation and by Electronics for Imaging, Inc. in the same manner as is provided in Section 251 of the Delaware General Corporation Law.

3. The name of the surviving corporation in the merger herein certified is Electronics for Imaging, Inc., which will continue its existence as said surviving corporation under its present name upon the effective date of said merger pursuant to the provisions of the Delaware General Corporation Law.

4. The Certificate of Incorporation of Electronics for Imaging, Inc., as now in force and effect, shall continue to be the Certificate of Incorporation of said surviving corporation until amended and changed pursuant to the provisions of the Delaware General Corporation Law.

5. The executed Agreement of Merger between the aforesaid constituent corporations is on file at the principal place of business of the aforesaid surviving corporation, the address of which is as follows:

303 Velocity Way

Foster City, CA 94404

6. A copy of the aforesaid Agreement of Merger will be furnished by the aforesaid surviving corporation, on request, and without cost, to any stockholder of each of the aforesaid constituent corporations.

7. The authorized capital stock of BESTColor U.S.A. Inc. consists of 1,000 shares of a par value of $0.01 each.

Executed on this 20th day of November, 2003.

Electronics for Imaging, Inc.
/s/ Joseph Cutts
By:	Joseph Cutts
Title:	Chief Financial Officer

State of Delaware

Secretary of State

Division of Corporations

Delivered 04:41 PM 01/07/2004

FILED 04:41 PM 01/07/2004

SRV 040011747 – 2178816 FILE

CERTIFICATE OF MERGER

OF

T/R SYSTEMS, INC.

AND

ELECTRONICS FOR IMAGING, INC.

It is hereby certified that:

1. The constituent business corporations participating in the merger herein certified are:

(i) T/R Systems, Inc., which is incorporated unclear the laws of the State of Georgia; and

(ii) Electronics for Imaging, Inc., which is incorporated under the laws of the State of Delaware.

2. An Agreement of Merger has been approved, adopted, certified, executed, and acknowledged by each of the aforesaid constituent corporations in accordance with the provisions of subsection (c) of Section 252 of the Delaware General Corporation Law, to wit, by T/R Systems, Inc. in accordance with the laws of the State of its incorporation and by Electronics for Imaging, Inc, in the same manner as is provided in Section 251 of the Delaware General Corporation Law.

3. The name of the surviving corporation in the merger herein certified is Electronics for Imaging, Inc., which will continue its existence as said surviving corporation under its present name upon the effective date of said merger pursuant to the provisions of the Delaware General Corporation Law.

4. The Certificate of Incorporation of Electronics for Imaging, Inc., as now in force and effect, shall continue to be the Certificate of Incorporation of said surviving corporation until amended and changed pursuant to the provisions of the Delaware General Corporation Law.

5. The executed Agreement of Merger between the aforesaid constituent corporations is on file at the principal place of business of the aforesaid surviving corporation, the address of which is as follows:

303 Velocity Way

Foster City, CA 94404

6. A copy of the aforesaid Agreement of Merger will be furnished by the aforesaid surviving corporation, on request, and without cost, to any stockholder of each of the aforesaid constituent corporations.

7. The authorized capital stock of T/R Systems, Inc. consists of 88,000,000 shares of common stock with a par value of $ .01 each and 12,000,000 shares of preferred stock with a par value of $.01 each.

Executed on this 6th day of January, 2004.

Electronics for Imaging, Inc.
/s/ Joseph Cutts
By:	Joseph Cutts
Title:	Chief Financial Officer

State of Delaware

Secretary of State

Division of Corporations

Delivered 07:43 PM 08/09/2004

FILED 07:19 PM 08/09/2004

SRV 040582676 – 2178816 FILE

CERTIFICATE OF OWNERSHIP AND MERGER

MERGING

ADS COMMUNICATIONS, INC.,

a Nevada corporation

and a wholly-owned subsidiary of

ELECTRONICS FOR IMAGING, INC.

WITH AND INTO

ELECTRONICS FOR IMAGING, INC.,

a Delaware corporation

Under Section 253 of the General Corporation Law

of the State of Delaware

The undersigned officer of Electronics For Imaging, Inc. (“EFI”), hereby certifies that:

FIRST: The names and states of incorporation of the constituent corporations are as follows:

Name	State
ADS Communications, Inc.	Nevada
Electronics For Imaging, Inc.	Delaware

SECOND: EFI is the holder of 100% of the outstanding shares of the capital stock of ADS Communications, Inc. (“ADS”).

THIRD: That the resolutions attached hereto as Exhibit A were duly adopted by the unanimous written consent of the Board of Directors of EFI on July 8, 2004, authorizing and approving the merger of ADS with and into EFI, with EFI surviving the merger.

[The Remainder Of This Page Intentionally Left Blank]

IN WITNESS WHEREOF, the undersigned officer, for and on behalf of Electronics For Imaging, Inc., has executed this Certificate of Ownership and Merger this 29th day of July, 2004.

ELECTRONICS FOR IMAGING, INC.
By:	/s/ Joseph Cutts
Name	Joseph Cutts
Title:	COO/CFO

EXHIBIT A

ACTION BY UNANIMOUS CONSENT IN WRITING

AS AND FOR A SPECIAL MEETING OF

THE BOARD OF DIRECTORS OF

ELECTRONICS FOR IMAGING, INC.

Effective as of July 8, 2004

The undersigned, constituting all of the members of the Board of Directors of Electronics For Imaging, Inc., a Delaware corporation (the “Corporation”), by unanimous consent in writing pursuant to the authority contained in Section 141(f) of the General Corporation Law of the State of Delaware, without the formality of convening a meeting, do hereby adopt and approve the following actions of the Corporation:

Merger

WHEREAS, the Board of the Corporation deems it to be in the best interests of the Corporation that ADS Communications, Inc., a Nevada corporation and wholly owned subsidiary of the Corporation (“ADS”), be merged with and into the Corporation with the Corporation surviving the merger; and

WHEREAS, the Board of the Corporation has reviewed the terms and provisions of the Plan of Merger (the “Plan of Merger”), a copy of which is attached hereto as Exhibit A, pursuant to which ADS will merge with and into the Corporation (the “Merger”); and

WHEREAS, the Board of the Corporation deems the Merger and the Plan of Merger to be advisable and in the best interests of the Corporation, and desires to have the Articles of Merger (the “Articles of Merger”) filed with the Secretary of State of the state of Nevada and the Certificate of Ownership and Merger (the “Certificate of Merger”) filed with the Secretary of State of the state of Delaware.

NOW, THEREFORE, BE IT RESOLVED, that the Plan of Merger, the Articles of Merger, and the Certificate of Merger (collectively, the “Merger Documents”) and the transactions contemplated thereby; in, or substantially in, the forms reviewed by the undersigned, be and hereby are, approved in all respects and that the Articles of Merger and the Certificate of Merger be, and hereby are, adopted to effect and reflect the Plan of Merger in accordance with the requirements of the laws of the states of Nevada and Delaware; and it is further

RESOLVED, that the officers of the Corporation be, and each of them hereby is, authorized, empowered and directed in the name and on behalf of the Corporation to enter into, execute and deliver the Merger Documents in substantially the form hereby approved; and it is further

RESOLVED, that in entering into and executing the Articles of Merger and the Certificate of Merger, the appropriate officers of the Corporation be, and each of them hereby is, authorized and empowered to make such changes in, deletions from or additions to the Articles of Merger and the Certificate of Merger, not contrary to the general tenor thereof, as he or she shall approve, such approval to be conclusively evidenced by such execution; and it is further

RESOLVED, that each of the officers of the Corporation be, and each or any one of them hereby is, authorized, empowered and directed to execute and deliver such other and further documents, agreements, certificates or instruments in the form required by law, and to take all steps and perform all such acts and things as may appear in his or her discretion to be necessary or advisable to effectuate and consummate the Merger Documents and all transactions contemplated therein, according to the terms and provisions thereof and as may be required by law; and it is further

RESOLVED, that by virtue of the Merger, each of the issued and outstanding shares of capital stock of ADS owned by the Corporation immediately prior to the Merger shall be cancelled; and it is further

RESOLVED, that any and all acts, instruments, and other writings previously performed or executed and delivered by any one or more of the Corporation’s officers or agents on behalf of the Corporation in connection with the Merger and the Documents, are in all respects ratified, affirmed, and approved.

General

RESOLVED, that each of the officers of the Corporation be, and each or any one of them hereby is, authorized and empowered, for and on behalf of the Corporation, to: (i) execute and deliver any and all applications, agreements, documents, instruments, and certificates; (ii) incur such costs and expenses; and (iii) do any and all acts and things that any one or more of the officers of the Corporation deems, in the exercise of his or her sole discretion, necessary, desirable, or appropriate in connection with these resolutions, the execution and delivery of such applications, agreements, documents, instruments, and certificates, the incurrence of such costs and the taking of all actions to constitute conclusive proof of the appropriateness of such applications, agreements, documents, instruments, and certificates; and it is further

RESOLVED, that the Board of Directors hereby ratifies, approves, and confirms in all respects any and all actions taken on behalf of the Corporation by any officer, director, employee, agent or attorney of, or acting on behalf of the Corporation heretofore and in connection with the foregoing resolutions; and it is further

RESOLVED, that this unanimous written consent may be executed in two or more counterparts, all of which together shall be deemed to be one and the same instrument.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

/s/ Gill Cogan

Gill Cogan

/s/ Jean-Louis Gassée

Jean-Louis Gassée

/s/ Guy Gecht

Guy Gecht

/s/ James S. Greene

James S. Greene

/s/ Dan Maydan

Dan Maydan

/s/ David Peterschmidt

David Peterschmidt

/s/ Fred Rosenzweig

Fred Rosenzweig

/s/ Thomas I. Unterberg

Thomas I. Unterberg

CONSTITUTING ALL OF THE DIRECTORS OF ELECTRONICS FOR IMAGING, INC.

EXHIBIT A

PLAN OF MERGER

MERGING

ADS COMMUNICATIONS, INC.,

A NEVADA CORPORATION,

WITH AND INTO

ELECTRONICS FOR IMAGING, INC.,

A DELAWARE CORPORATION

This Plan of Merger has been prepared in accordance with Section 92A.100 of the Nevada Revised Statutes.

1. The name, address, jurisdiction of organization, and governing law of each of the constituent entities are:

Name and Address	Jurisdiction	Governing Law
ADS Communications, Inc. 4343 N. Scottsdale Road Suite 370 Scottsdale, Arizona 85251	Nevada	Nevada General Corporation Law
Electronics For Imaging, Inc. 303 Velocity Way Foster City, CA 94404	Delaware	Delaware General Corporation Law

2. Upon the terms and conditions hereinafter set forth and in accordance with the Nevada Revised Statutes, ADS Communications, Inc. (“ADS”), shall be merged with and into Electronics For Imaging, Inc., the parent company of ADS (“EFI”) (the “Merger”), and thereupon the separate existence of ADS shall cease, and EFI, as the surviving corporation, shall continue to exist under and be governed by the laws of the state of Delaware.

3. EFI shall possess and be subject to all the rights, privileges, powers, franchises, property (real, personal and mixed), restrictions, disabilities, duties, and liabilities and debts of ADS at the effective time and date of the Merger.

4. The issued shares of ADS shall not be converted in any manner, but each said share which is issued immediately prior to the effective time and date of the Merger shall be surrendered and extinguished.

5. The separate existence of ADS shall cease at the effective time and date of the Merger pursuant to the provisions of the Nevada Revised Statutes; and EFI shall continue its existence as the surviving corporation pursuant to the provisions of the laws of the state of Delaware.

6. The Board of Directors and the proper officers of EFI are hereby authorized, empowered, and directed to do any and all acts and things, and to make, execute, deliver, file, and/or record any and all instruments, papers, and documents which shall be or become necessary, proper or convenient to carry out or put into effect any of the provisions of this Plan of Merger or of the Merger contemplated herein.

State of Delaware

Secretary of State

Division of Corporations

Delivered 06:54 PM 11/29/2004

FILED 06:31 PM 11/29/2004

SRV 040855396 – 2178816 FILE

CERTIFICATE OF MERGER

OF

PRINTCAFE SYSTEMS, INC.

AND

ELECTRONICS FOR IMAGING, INC.

It is hereby certified that:

1. The constituent business corporations participating in the merger herein certified are:

(i) Printcafe Systems, Inc., which is incorporated under the laws of the State of Delaware; and

(ii) Electronics for Imaging, Inc., which is incorporated under the laws of the State of Delaware.

2. An Agreement of Merger has been approved, adopted, certified, executed, and acknowledged by each of the aforesaid constituent corporations in accordance with the provisions of subsection (c) of Section 251 of the Delaware General Corporation Law.

3. The name of the surviving corporation in the merger herein certified is Electronics for Imaging, Inc., which will continue its existence as said surviving corporation under its present name upon the effective date of said merger pursuant to the provisions of the Delaware General Corporation Law.

4. The Certificate of Incorporation of Electronics for Imaging, Inc., as now in force and effect, shall continue to be the Certificate of Incorporation of said surviving corporation until amended and changed pursuant to the provisions of the Delaware General Corporation Law.

5. The executed Agreement of Merger between the aforesaid constituent corporations is on file at the principal place of business of the aforesaid surviving corporation, the address of which is as follows:

303 Velocity Way

Foster City, CA 94404

6. A copy of the aforesaid Agreement of Merger will be furnished by the aforesaid surviving corporation, on request, and without cost, to any stockholder of each of the aforesaid constituent corporations.

Executed on this 4th day of November, 2004.

Electronics for Imaging, Inc.
/s/ Joseph Cutts
By:	Joseph Cutts
Title:	Chief Financial Officer and Chief Operating Officer

State of Delaware

Secretary of State

Division of Corporations

Delivered 06:54 PM 11/29/2004

FILED 06:54 PM 11/29/2004

SRV 040855430 – 2178816 FILE

CERTIFICATE OF MERGER

OF

M DATA, INC

AND

ELECTRONICS FOR IMAGING, INC

It is hereby certified that:

1. The constituent business corporations participating in the merger herein certified are:

(i) M Data, Inc , which is incorporated under the laws of the State of Arizona; and

(ii) Electronics for Imaging, Inc., which is incorporated under the laws of the State of Delaware.

2. An Agreement of Merger has been approved, adopted, certified, executed, and acknowledged by each of the aforesaid constituent corporations in accordance with the provisions of subsection (c) of Section 252 of the Delaware General Corporation Law.

3. The name of the surviving corporation in the merger herein certified is Electronics for Imaging, Inc., which will continue its existence as said surviving corporation under its present name upon the effective date of said merger pursuant to the provisions of the Delaware General Corporation Law.

4. The Certificate of Incorporation of Electronics for Imaging, Inc., as now in force and effect, shall continue to be the Certificate of Incorporation of said surviving corporation until amended and changed pursuant to the provisions of the Delaware General Corporation Law.

5 The authorized stock of the non-Delaware corporation is 2,000,000 shares of common stock, no par value

6. The executed Agreement of Merger between the aforesaid constituent corporations is on file at the principal place of business of the aforesaid surviving corporation, the address of which is as follows:

303 Velocity Way

Foster City, CA 94404

7 A copy of the aforesaid Agreement of Merger will be furnished by the aforesaid surviving corporation, on request, and without cost, to any stockholder of each of the aforesaid constituent corporations.

Executed on this 4th day of November, 2004.

Electronics for Imaging, Inc.
/s/ Joseph Cutts
By:	Joseph Cutts
Title:	Chief Financial Officer and Chief Operating Officer

State of Delaware

Secretary of State

Division of Corporations

Delivered 06:54 PM 11/29/2004

FILED 06:55 PM 11/29/2004

SRV 040855459 – 2178816 FILE

CERTIFICATE OF MERGER

OF

PRINTCAFE IP MANAGEMENT, INC.

AND

ELECTRONICS FOR IMAGING, INC.

It is hereby certified that:

1. The constituent business corporations participating in the merger herein certified are:

(i) Printcafe IP Management, Inc., which is incorporated under the laws of the State of Delaware; and

(ii) Electronics for Imaging, Inc., which is incorporated under the laws of the State of Delaware.

2. An Agreement of Merger has been approved, adopted, certified, executed, and acknowledged by each of the aforesaid constituent corporations in accordance with the provisions of subsection (c) of Section 251 of the Delaware General Corporation Law.

3. The name of the surviving corporation in the merger herein certified is Electronics for Imaging, Inc., which will continue its existence as said surviving corporation under its present name upon the effective date of said merger pursuant to the provisions of the Delaware General Corporation Law.

4. The Certificate of Incorporation of Electronics for Imaging, Inc., as now in force and effect, shall continue to be the Certificate of Incorporation of said surviving corporation until amended and changed pursuant to the provisions of the Delaware General Corporation Law.

5. The executed Agreement of Merger between the aforesaid constituent corporations is on file at the principal place of business of the aforesaid surviving corporation, the address of which is as follows:

303 Velocity Way

Foster City, CA 94404

6. A copy of the aforesaid Agreement of Merger will be furnished by the aforesaid surviving corporation, on request, and without cost, to any stockholder of each of the aforesaid constituent corporations.

Executed on this 4th day of November, 2004.

Electronics for Imaging, Inc.
/s/ Joseph Cutts
By:	Joseph Cutts
Title:	Chief Financial Officer and Chief Operating Officer

State of Delaware

Secretary of State

Division of Corporations

Delivered 02:51 PM 11/26/2014

FILED 02:31 PM 11/26/2014

SRV 141462187 – 2178816 FILE

CERTIFICATE OF OWNERSHIP AND MERGER

OF

SMARTLINC, INC.

WITH AND INTO

ELECTRONICS FOR IMAGING, INC.

Pursuant to Section 253 of the Delaware General Corporation Law (the “DGCL”), ELECTRONICS FOR IMAGING, INC., a Delaware corporation (the “Company”), does hereby certify to the following information relating to the merger (the “Merger”) of SMARTLINC, INC., a Wisconsin corporation (the “Subsidiary”), with and into the Company, with the Company remaining as the surviving entity:

1. The Company owns all of the outstanding shares of each class of capital stock of the Subsidiary.

2. The authorized stock and par value of the non-Delaware corporation is 1,500 shares with no par value.

3. The shares of common stock of the Subsidiary, no par value per share, that are owned by the Company immediately prior to the effectiveness of the Merger shall, by virtue of the Merger and without any action on the part of the holders thereof, automatically be cancelled and retired and shall cease to exist.

4. The Board of Directors of the Company, by resolutions duly adopted by unanimous written consent on November 14, 2014 and attached hereto as Exhibit A, determined to merge the Subsidiary with and into the Company pursuant to Section 253 of the DGCL.

5. The Company shall be the surviving entity of the Merger.

6. The Amended and Restated Certificate of Incorporation of the Company, as amended and as in effect immediately prior to the Merger, shall be the Amended and Restated Certificate of Incorporation of the surviving entity.

7. This Certificate of Ownership and Merger and the Merger shall become effective upon the filing of such Certificate of Ownership and Merger with the Delaware Secretary of State on November 26, 2014.

8. The Agreement and Plan of Merger, dated as of November 26, 2014, by and between the Company and the Subsidiary, is on file at 6750 Dumbarton Circle, Fremont, California 94555, an office of the surviving entity.

9. A copy of the Agreement and Plan of Merger, dated as of November 26, 2014, by and between the Company and the Subsidiary, will be furnished by the surviving entity on request, without cost, to any stockholder of the constituent corporations.

IN WITNESS WHEREOF, the Company has caused this Certificate of Ownership and Merger to be signed by an authorized officer, the 26th OF November, 2014.

ELECTRONICS FOR IMAGING, INC.
	By:	/s/ Brandon Green
	Name:	Brandon Green
	Title:	Chief Accounting Officer

[Certificate of Ownership and Merger — SmartLinc Merger]

EXHIBIT A

UNANIMOUS WRITTEN CONSENT

OF THE

BOARD OF DIRECTORS

OF

ELECTRONICS FOR IMAGING, INC.

(the “Company”)

November 14, 2014

The undersigned, constituting all of the members of the Board of Directors of the Company (the “Board”), hereby consent to the following actions and adopt the following resolutions by unanimous written consent of the Board in lieu of a meeting in accordance with the provisions of Section 141(f) of the General Corporation Law of the State of Delaware and the Amended and Restated Bylaws of the Company, as amended (the “Bylaws”), and hereby waive any and all notice which may be required by statute, the Bylaws or otherwise with respect to the actions taken herein or pursuant hereto:

Merger

WHEREAS, the Company owns all of the issued and outstanding shares of each class of capital stock of SmartLinc, Inc., a Wisconsin corporation (the “Subsidiary”);

WHEREAS, the Board has reviewed the terms and conditions of that certain Agreement and Plan of Merger to be entered into by and between the Company and the Subsidiary (the “Merger Agreement”); and

WHEREAS, the Board deems it advisable and in the best interests of the Company and its stockholders that the Subsidiary merge with and into the Company, with the Company continuing as the surviving company (the “Surviving Company”).

NOW, THEREFORE, BE IT RESOLVED, that the Board hereby adopts and approves that the Subsidiary be merged with and into the Company pursuant to Section 253 of the General Corporation Law of the State of Delaware and in accordance with Section 180.1104 of the Wisconsin Business Corporation Law (the “Merger”), so that the separate existence of the Subsidiary shall cease as soon as the Merger shall become effective, and the Company shall continue as the Surviving Company;

RESOLVED FURTHER, that the Board hereby ratifies, confirms, adopts and approves, and declares to be advisable and in the best interests of the Company and its stockholders, the form, terms and provisions of the Merger Agreement (including all exhibits, schedules and annexes thereto) and has determined that it be advisable and in the best interests of the Company and its stockholders to adopt and approve the entry by the Company into the Merger Agreement;

RESOLVED FURTHER, that the Board hereby adopts and approves that each share of common stock of the Subsidiary, no par value per share, that is owned by the Company, as the sole stockholder, immediately prior to the effectiveness of the Merger shall, by virtue of the Merger and without any action on the part of the holders thereof, automatically be cancelled and retired and shall cease to exist;

RESOLVED FURTHER, that the Board hereby adopts and approves that the Amended and Restated Certificate of Incorporation of the Company, as amended and as in effect immediately prior to the Merger, shall continue as the Amended and Restated Certificate of Incorporation of the Surviving Company;

RESOLVED FURTHER, that the President, Vice President, Treasurer, Secretary and any other officer of the Company, including without limitation, the Chief Accounting Officer (each such person, an “Authorized Officer”) be, and each of them hereby is, authorized to prepare and execute the Merger Agreement and a certificate of ownership and merger (the “Certificate”) setting forth a copy of these resolutions, and to file the Certificate with the Secretary of State of the State of Delaware and pay any fees related to such filing;

RESOLVED FURTHER, that the Authorized Officers be, and each of them hereby is, authorized to prepare and execute articles of merger (the “Articles”) setting forth a copy of these resolutions, and to file the Articles with the Wisconsin Department of Financial Institutions and pay any fees related to such filing; and

RESOLVED FURTHER, that the Board on behalf of the Company, the sole stockholder of the Subsidiary hereby waives, pursuant to Section 180.1104(4) of the Wisconsin Business Corporation Law, the requirement that it be mailed a copy or summary of the plan of merger, the Merger Agreement or any other documentation relating to the Merger.

General

RESOLVED FURTHER, that the Authorized Officers be, and each of them hereby is, authorized and empowered to take all such further action and to execute, deliver and file all such further agreements, certificates, instruments and documents, in the name and on behalf of the Company, and if requested or required, under its corporate seal duly attested by the Secretary or Assistant Secretary; to pay or cause to be paid all expenses; to take all such other actions as they or any one of them shall deem necessary, desirable, advisable or appropriate to consummate, effectuate, carry out or further the transactions contemplated by and the intent and purposes of the foregoing resolutions;

RESOLVED FURTHER, that the actions taken by this Unanimous Written Consent of the Board shall have the same force and effect as if taken by the undersigned at a meeting of the Board of Directors duly called and constituted pursuant to the bylaws of the Company, as applicable, and the applicable laws of the State of Delaware; and

RESOLVED FURTHER, that this Unanimous Written Consent of the Board may be executed in one or more counterparts (including by facsimile or electronic signature), each of which shall be deemed an original for all purposes and all of which together shall constitute one and the same Unanimous Written Consent of the Board.

[Signature Page Follows]

IN WITNESS WHEREOF, the undersigned directors of the Company have hereby executed this Unanimous Written Consent of the Board and directed that it be filed with the minutes of the proceedings of the Board. This consent has been executed effective as of the date first set forth above.

DIRECTORS:

/s/ Eric Brown

Eric Brown

/s/ Gill Cogan

Gill Cogan

/s/ Guy Gecht

Guy Gecht

/s/ Thomas Georgens

Thomas Georgens

/s/ Richard Kashnow

Richard Kashnow

/s/ Dan Maydan

Dan Maydan

State of Delaware

Secretary of State

Division of Corporations

Delivered 05:55 PM 11/26/2014

FILED 05:55 PM 11/26/2014

SRV 141463741 – 2178816 FILE

CERTIFICATE OF OWNERSHIP AND MERGER

OF

LITHOTECHNICS, INC.

WITH AND INTO

ELECTRONICS FOR IMAGING, INC.

Pursuant to Section 253 of the Delaware General Corporation Law (the “DGCL”), ELECTRONICS FOR IMAGING, INC., a Delaware corporation (the “Company”), does hereby certify to the following information relating to the merger (the “Merger”) of LITHOTECHNICS, INC., a Delaware corporation (the “Subsidiary”), with and into the Company, with the Company remaining as the surviving entity:

1. The Company owns all of the outstanding shares of each class of capital stock of the Subsidiary.

2. The authorized stock and par value of the Subsidiary corporation is 1,500 shares with no par value.

3. The shares of common stock of the Subsidiary, no par value per share, that are owned by the Company immediately prior to the effectiveness of the Merger shall, by virtue of the Merger and without any action on the part of the holders thereof, automatically be cancelled and retired and shall cease to exist.

4. The Board of Directors of the Company, by resolutions duly adopted by unanimous written consent on November 14, 2014 and attached hereto as Exhibit A, determined to merge the Subsidiary with and into the Company pursuant to Section 253 of the DGCL.

5. The Company shall be the surviving entity of the Merger.

6. The Amended and Restated Certificate of Incorporation of the Company, as amended and as in effect immediately prior to the Merger, shall be the Amended and Restated Certificate of Incorporation of the surviving entity.

7. This Certificate of Ownership and Merger and the Merger shall become effective upon the filing of such Certificate of Ownership and Merger with the Delaware Secretary of State on November 26, 2014.

8. The Agreement and Plan of Merger, dated November 26, 2014, by and between the Company and the Subsidiary, is on file at 6750 Dumbarton Circle, Fremont, California 94555, an office of the surviving entity.

9. A copy of the Agreement and Plan of Merger, dated November 26, 2014, by and between the Company and the Subsidiary, will be furnished by the surviving entity on request, without cost, to any stockholder of the constituent corporations.

IN WITNESS WHEREOF, the Company has caused this Certificate of Ownership and Merger to be signed by an authorized officer, the 26th OF November, 2014.

ELECTRONICS FOR IMAGING, INC.
	By:	/s/ Brandon Green
	Name:	Brandon Green
	Title:	Chief Accounting Officer

[Certificate of Ownership and Merger — Lithotechnics Merger]

EXHIBIT A

UNANIMOUS WRITTEN CONSENT

OF THE

BOARD OF DIRECTORS

OF

ELECTRONICS FOR IMAGING, INC.

(the “Company”)

November 14, 2014

The undersigned, constituting all of the members of the Board of Directors of the Company (the “Board”), hereby consent to the following actions and adopt the following resolutions by unanimous written consent of the Board in lieu of a meeting in accordance with the provisions of Section 141(f) of the General Corporation Law of the State of Delaware and the Amended and Restated Bylaws of the Company, as amended (the “Bylaws”), and hereby waive any and all notice which may be required by statute, the Bylaws or otherwise with respect to the actions taken herein or pursuant hereto:

Merger

WHEREAS, the Company owns all of the issued and outstanding shares of each class of capital stock of Lithotechnics, Inc., a Delaware corporation (the “Subsidiary”);

WHEREAS, the Board has reviewed the terms and conditions of that certain Agreement and Plan of Merger to be entered into by and between the Company and the Subsidiary (the “Merger Agreement”); and

WHEREAS, the Board deems it advisable and in the best interests of the Company and its stockholders that the Subsidiary merge with and into the Company, with the Company continuing as the surviving company (the “Surviving Company”).

NOW, THEREFORE, BE IT RESOLVED, that the Board hereby adopts and approves that the Subsidiary be merged with and into the Company pursuant to Section 253 of the General Corporation Law of the State of Delaware (the “Merger”), so that the separate existence of the Subsidiary shall cease as soon as the Merger shall become effective, and the Company shall continue as the Surviving Company;

RESOLVED FURTHER, that the Board hereby ratifies, confirms, adopts and approves, and declares to be advisable and in the best interests of the Company and its stockholders, the form, terms and provisions of the Merger Agreement (including all exhibits, schedules and annexes thereto) and has determined that it be advisable and in the best interests of the Company and its stockholders to adopt and approve the entry by the Company into the Merger Agreement;

RESOLVED FURTHER, that the Board hereby adopts and approves that each share of common stock of the Subsidiary, no par value per share, that is owned by the Company, as the sole stockholder, immediately prior to the effectiveness of the Merger shall, by virtue of the Merger and without any action on the part of the holders thereof, automatically be cancelled and retired and shall cease to exist;

RESOLVED FURTHER, that the Board hereby adopts and approves that the Amended and Restated Certificate of Incorporation of the Company, as amended and as in effect immediately prior to the Merger, shall continue as the Amended and Restated Certificate of Incorporation of the Surviving Company;

RESOLVED FURTHER, that the President, Vice President, Treasurer, Secretary and any other officer of the Company, including without limitation, the Chief Accounting Officer (each such person, an “Authorized Officer”) be, and each of them hereby is, authorized to prepare and execute the Merger Agreement and a certificate of ownership and merger (the “Certificate”) setting forth a copy of these resolutions, and to file the Certificate with the Secretary of State of the State of Delaware and pay any fees related to such filing;

General

RESOLVED FURTHER, that the Authorized Officers be, and each of them hereby is, authorized and empowered to take all such further action and to execute, deliver and file all such further agreements, certificates, instruments and documents, in the name and on behalf of the Company, and if requested or required, under its corporate seal duly attested by the Secretary or Assistant Secretary; to pay or cause to be paid all expenses; to take all such other actions as they or any one of them shall deem necessary, desirable, advisable or appropriate to consummate, effectuate, carry out or further the transactions contemplated by and the intent and purposes of the foregoing resolutions;

RESOLVED FURTHER, that the actions taken by this Unanimous Written Consent of the Board shall have the same force and effect as if taken by the undersigned at a meeting of the Board of Directors duly called and constituted pursuant to the bylaws of the Company, as applicable, and the applicable laws of the State of Delaware; and

RESOLVED FURTHER, that this Unanimous Written Consent of the Board may be executed in one or more counterparts (including by facsimile or electronic signature), each of which shall be deemed an original for all purposes and all of which together shall constitute one and the same Unanimous Written Consent of the Board.

[Signature Page Follows]

IN WITNESS WHEREOF, the undersigned directors of the Company have hereby executed this Unanimous Written Consent of the Board and directed that it be filed with the minutes of the proceedings of the Board. This consent has been executed effective as of the date first set forth above.

DIRECTORS:

/s/ Eric Brown

Eric Brown

/s/ Gill Cogan

Gill Cogan

/s/ Guy Gecht

Guy Gecht

/s/ Thomas Georgens

Thomas Georgens

/s/ Richard Kashnow

Richard Kashnow

/s/ Dan Maydan

Dan Maydan

EX-12.1

Exhibit 12.1

Electronics For Imaging, Inc.

Computation of Ratio of Earnings to Fixed Charges

(in thousands, except for ratio of earnings to fixed charges)

	Years Ended December 31,
	2012		2013		2014		2015		2016
Income from continuing operations before income taxes	$	35,023	$	173,138	$	42,087	$	37,522	$	39,382
Fixed charges:
Interest expense		709		3,406		5,859		17,364		17,716
Interest relating to rental expense (1)		1,912		2,024		2,039		2,530		2,924
Total fixed charges		2,621		5,430		7,898		19,894		20,640
Earnings available for fixed charges	$	37,644	$	178,568	$	49,985	$	57,416	$	60,022
Ratio of earnings to fixed charges		14.36		32.89		6.33		2.89		2.91

⁽¹⁾  The representative interest portion of rental expense was deemed to be one-third of all rental expense, except for the rental expense related to the off-balance sheet financing leases, which was deemed to be all interest.

EX-21

Exhibit 21

Name of organization*	Address	Jurisdiction of Incorporation	Doing Business As**
UNITED STATES
EFI CorrSoft LLC	6750 Dumbarton Circle Fremont, CA 94306	California
Jetrion LLC	1260 James L. Hart Parkway Ypsilanti, MI 48197	Michigan
Matan USA Inc.	c/o Arcara Zucarella Lenda & Straka 5214 Main Street Suite 2000 Williamsville NY	Delaware
Rialco Corporation	c/o CT Corporation 2 Office Park Court Suite 103 Columbia SC 29223	South Carolina
OptiTex USA Inc.	339 West 39th Street Suite 301 New York City, NY 10018	Delaware
FOREIGN
Electronics for Imaging Australia Pty Ltd	Unit 1F 24 Macquarie StreetTeneriffe, Queensland 4005 Australia	Australia
EFI Belgium BVBA	Brixtonlaan 9 in 1930 B-1930 Zaventem, Belgium	Belgium
Metrics Sistemas de Informação e Serviços Comércio Ltda.	Rua Cincinato Braga No. 340 Conjuntos 141 e 142 Bela Vista, SP Brazil	Brazil
EFI (Canada), Inc.	c/o Blake, Cassels & Graydon LLP 199 Bay Street Suite 4000 Toronto, Ontario Canada M5L 1A9	Canada
Electronics for Imaging, International	190 Elgin Avenue Georgetown, Grand Cayman KY1-9005 Cayman Islands	Cayman Islands
EFI Cretaprint	Room A101, 102, A107 68 West Jihua Road (Crossing of West Jihua Road and Zidong Road)	China

Name of organization*	Address	Jurisdiction of Incorporation	Doing Business As**
	Chancheng District Foshan City Guangdong Province, China
Electronics for Imaging (France) SARL	23 rue du Roule 75001 Paris France	France	EPLI
alphagraph team GmbH	Kaiserswerther Strasse 115 D-40880 Ratingen Duesseldorf, Germany	Germany
Electronics for Imaging GmbH	Kaiserswertherstr Strasse 115 D-40880 Ratingen Duesseldorf, Germany	Germany	Best GmbH
Electronics for Imaging Hong Kong Limited	Office H, 12/F, Kings Palace Plaza No. 55 King Yip Street Kwun Tong Wun Tong Kowloon Hong Kong	China
Optitex Asia Limited	Unit 6, 11/5, Shun Fat Industrial Building No. 17 Wang Hoi Road Kowloon Bay Hong Kong	China
EFI Hungary Trading Trading LLC	H-1136 Budapest, Hungary Tatra u. 12/B	Hungary
Electronics for Imaging India Private Limited	Kalyani Platina, 4th Floor Block 1, No 24 EPIP Zone Phase II Whitefield, Bangalore India 560 066	India
Optitex India Private Limited	629-620, 6th Floor Som Dutt Chamber-II 9 Bhikaji Cama Place New Delhi—110066, India	India
EFI Ireland Imaging Solutions Investment Company Limited	53 Merrion Square Dublin 2 Ireland	Ireland
Online Print Marketing LTD	3rd Floor Kilmore House Park Lane Spencer Dock Dublin 1 Ireland	Ireland
Electronics for Imaging Israel (2007) Ltd	5b Hanagar Street Hod Hasharon 45240, Israel	Israel

Name of organization*	Address	Jurisdiction of Incorporation	Doing Business As**
EFI Print Israel Ltd.	22 Joseph Rivlin Street, Jerusalem 9424018 Israel	Israel
Matan Print (2001) Ltd.	14 Amal Street Afek Industrial Park Rosh-Ha’ayin, 4809250 Israel	Israel
OptiTex Ltd.	13 Hamelacha Street Afek Industrial Park Rosh-Ha’ayin, 4809250 Israel	Israel
Electronics for Imaging Italia S.r.l	Piazza Filippo Meda 3 20121 Milano Italy	Italy
Reggiani Macchine S.P.A.	Via Zanica No. 17/0 24050 Grassobbio (BG) Italy	Italy
Optitex Italy S.r.L.	Via Pietro Andrea Saccardon 9 Milan, Italy	Italy
EFI K.K. Electronics for Imaging Japan YK	TOC Ohsaki Building 15 Fl. 1-6-1 Osaki-Shinagawa-ku Tokyo 141-0032 Japan	Japan	Electronics for Imaging K,K. Electronics for Imaging Y,K.
Electronics FOR Imaging Korea Co., Ltd.	Kyoho Tower B 13 Fl., 1303-22 Seocho-dong Seocho-gu Seoul 137-920 Korea	Korea
Electronics for Imaging (Luxembourg) S.à r.l.	2, Rue Hackin L-1746 Luxembourg	Luxembourg
Cretaprint Mexico, S. de R.L., de C.V.	Avda. Fundidora, 501—34 Obrera, Monterrey, Nuevo León 64010 México	Mexico
EFI Sales Mexico, S.A. de C.V.	Florencia No. 57, Floor 6-616 Juarez, Liverpool and Londres Cuauhtemoc, C.P. 06600 Federal District, Mexico	Mexico
Electronics for Imaging B.V.	Tupolevlaan 65-75 1119 PA Schiphol-Rijk The Netherlands	The Netherlands

Name of organization*	Address	Jurisdiction of Incorporation	Doing Business As**
Reggiani Holland B.V.	G. van der Muelenweg 2 7443RE Nijverdal The Netherlands	The Netherlands
EFI New Zealand Limited	Unit 3b, Ground Floor 125 The Strand Parnell Auckland, New Zealand	New Zealand
Electronics for Imaging Pte Ltd	50 Raffles Place #32-01 Singapore Land Tower Singapore 048623	Singapore
EFI-Cretaprint Development, S.L. EFI Cretaprint, S.L.	Poligono Industrial Ramonet Carretera Nacional 340, KM 970 Almazora, Castellón (Spain)	Spain
Electronics for Imaging Sweden AB	Frösundaviks allé 15, 4 tr 171 53 Solna Stockholms lan Solna kommun Sweden	Sweden
Electronics for Imaging Holding GmbH	c/o Kunzi Treuhand Controlling and Controlling and Consulting Industriestrasse 33 CH—6300 Zug Switzerland	Switzerland
Reggiani Makina	Nispetiye Cad. Kerem 2 Apt. 30/20 34330 Besiktas Istanbul Turkey	Turkey
Electronics for Imaging United Kingdom Limited Golflane Limited Radius Solutions Limited	Manor Farm High Street Dronfield DerbyshireS18 1PY United Kingdom	United Kingdom
Prism Group Holdings Limited	Midland House 2 nd Floor North Station Road Colchester Essex C01 1RB United Kingdom	United Kingdom
Shuttleworth Business Systems Limited CDM Solutions Limited	Unit 1, Orion Park, Orion Way, Kettering Northamptonshire NN15 6PP United Kingdom	England & Wales

* All of the listed subsidiaries are 100% wholly-owned subsidiaries of EFI.

** “Doing Business As” names above have been listed only where they differ from the name of the subsidiary

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement Nos. 333-136511, 333-147288, 333-148197, 333-149503, 333-156915, 333-160529, 333-176180, and 333-190319 on Form S-8 of our reports dated February 21, 2017, relating to the consolidated financial statements and financial statement schedule of Electronics For Imaging, Inc. and subsidiaries (the “Company”) and the effectiveness of the Company’s internal control over financial reporting, appearing in this Annual Report on Form 10-K of the Company for the year ended December 31, 2016.

/s/    DELOITTE & TOUCHE LLP

San Jose, California

February 21, 2017

EX-31.1

Exhibit 31.1

CERTIFICATION

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Guy Gecht, certify that:

1. I have reviewed this Annual Report on Form 10-K of Electronics For Imaging, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and;

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 21, 2017	/S/    GUY GECHT
	Guy Gecht,
	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Marc Olin, certify that:

1. I have reviewed this Annual Report on Form 10-K of Electronics For Imaging, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and;

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 21, 2017	/S/    MARC OLIN
	Marc Olin,
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the accompanying Annual Report of Electronics For Imaging, Inc. (the “Company”), on Form 10-K for the year ended December 31, 2016 (the “Report”), I, Guy Gecht, Chief Executive Officer of the Company, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that: (1) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: February 21, 2017	/S/    GUY GECHT
	Guy Gecht,
	Chief Executive Officer

CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the accompanying Annual Report of Electronics For Imaging, Inc. (the “Company”), on Form 10-K for the year ended December 31, 2016 (the “Report”), I, Marc Olin, Chief Financial Officer of the Company, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that: (1) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: February 21, 2017	/S/    MARC OLIN
	Marc Olin,
	Chief Financial Officer

XML

Document and Entity Information - USD ($)	12 Months Ended
	Dec. 31, 2016	Jan. 26, 2017	Jun. 30, 2016
Document And Entity Information [Abstract]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	FY
Trading Symbol	EFII
Entity Registrant Name	ELECTRONICS FOR IMAGING INC
Entity Central Index Key	0000867374
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		46,431,857
Entity Public Float			$ 1,986,886,899

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents	$ 164,313	$ 164,091
Short-term investments, available for sale	295,428	333,276
Accounts receivable, net of allowances of $23.3 and $22.0 million, respectively	220,813	193,121
Inventories	99,075	106,378
Income taxes receivable	975	473
Assets held for sale	3,781
Other current assets	31,881	29,675
Total current assets	816,266	827,014
Property and equipment, net	103,304	97,779
Restricted investments and cash equivalents	6,252
Goodwill	359,841	338,793
Intangible assets, net	122,997	135,552
Deferred tax assets	58,477	41,043
Other assets	14,359	9,970
Total assets	1,481,496	1,450,151
Current liabilities:
Accounts payable	114,287	113,541
Accrued and other liabilities	85,505	74,425
Deferred revenue	53,813	48,767
Income taxes payable	10,256	3,594
Total current liabilities	263,861	240,327
Convertible senior notes, net	304,484	290,734
Imputed financing obligation related to build-to-suit lease	14,152	13,480
Noncurrent contingent and other liabilities	42,786	51,101
Deferred tax liabilities	16,351	19,003
Noncurrent income taxes payable	12,030	11,312
Total liabilities	653,664	625,957
Commitments and contingencies (Note 8)
Stockholders' equity:
Preferred stock, $0.01 par value; 5,000 shares authorized; none issued and outstanding
Common stock, $0.01 par value; 150,000 shares authorized; 53,038 and 51,808 shares issued, respectively	530	518
Additional paid-in capital	705,901	657,354
Treasury stock, at cost; 6,457 and 4,476 shares, respectively	(273,730)	(190,439)
Accumulated other comprehensive loss	(24,694)	(17,424)
Retained earnings	419,825	374,185
Total stockholders' equity	827,832	824,194
Total liabilities and stockholders' equity	$ 1,481,496	$ 1,450,151

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions	Dec. 31, 2016	Dec. 31, 2015
Statement of Financial Position [Abstract]
Accounts receivable, allowances	$ 23.3	$ 22.0
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	150,000,000	150,000,000
Common stock, shares issued	53,038,000	51,808,000
Treasury stock, shares	6,457,000	4,476,000

XML

Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands		12 Months Ended
		Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Income Statement [Abstract]
Revenue		$ 992,065	$ 882,513	$ 790,427
Cost of revenue	[1]	483,375	423,129	360,690
Gross profit		508,690	459,384	429,737
Operating expenses:
Research and development	[1]	151,192	141,364	134,732
Sales and marketing	[1]	169,042	156,339	147,383
General and administrative	[1]	85,614	72,797	66,932
Amortization of identified intangibles		39,560	26,510	20,673
Restructuring and other (Note 13)		6,729	5,731	6,578
Total operating expenses		452,137	402,741	376,298
Income from operations		56,553	56,643	53,439
Interest expense		(17,716)	(17,364)	(5,859)
Interest income and other income (expense), net		545	(1,757)	(5,493)
Income before income taxes		39,382	37,522	42,087
Benefit from (provision for) income taxes		6,164	(3,982)	(8,373)
Net income		$ 45,546	$ 33,540	$ 33,714
Net income per basic common share		$ 0.97	$ 0.71	$ 0.72
Net income per diluted common share		$ 0.95	$ 0.70	$ 0.70
Shares used in basic per-share calculation		46,900	47,217	46,866
Shares used in diluted per-share calculation		47,797	48,150	48,406

[1] Includes stock-based compensation expense as follows: 2016 2015 2014 Cost of revenue $ 2,784 $ 2,837 $ 2,562 Research and development 8,968 9,406 8,818 Sales and marketing 7,690 7,602 7,070 General and administrative 12,384 14,226 17,611

XML

Consolidated Statements of Operations (Parenthetical) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Recognized stock-based compensation expense	$ 31,826	$ 34,071	$ 36,061
Cost of Revenue [Member]
Recognized stock-based compensation expense	2,784	2,837	2,562
Research and Development [Member]
Recognized stock-based compensation expense	8,968	9,406	8,818
Sales and Marketing [Member]
Recognized stock-based compensation expense	7,690	7,602	7,070
General and Administrative [Member]
Recognized stock-based compensation expense	$ 12,384	$ 14,226	$ 17,611

XML

Consolidated Statements of Comprehensive Income - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Statement of Comprehensive Income [Abstract]
Net income	$ 45,546,000	$ 33,540,000	$ 33,714,000
Net unrealized investment losses:
Unrealized holding losses, net of tax benefits of less than $0.1, $0.1 and $0.2 million for the years ended December 31, 2016, 2015, and 2014, respectively	(97,000)	(169,000)	(344,000)
Reclassification adjustments included in net income, net of no tax benefit for the year ended December 31, 2016 and less than $0.1 million for the years ended December 31, 2015 and 2014	0	(66,000)	(24,000)
Net unrealized investment losses	(97,000)	(235,000)	(368,000)
Currency translation adjustments, net of tax benefit of $0.5 million for the year ended December 31, 2016, no tax provision for the year ended December 31, 2015, and tax provision of less than $0.1 million for the year ended December 31, 2014	(7,181,000)	(9,872,000)	(5,576,000)
Unrealized gains (losses) on cash flow hedges	8,000	40,000	(25,000)
Comprehensive income	$ 38,276,000	$ 23,473,000	$ 27,745,000

XML

Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Statement of Comprehensive Income [Abstract]
Unrealized holding losses, tax benefit		$ 0.1	$ 0.2
Reclassification adjustments included in net income, net of tax benefits	0.0
Currency translation adjustments, tax benefits	$ 0.5	$ 0.0

XML

Consolidated Statements of Stockholders' Equity - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Treasury Stock [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Retained Earnings [Member]
Balance at Dec. 31, 2013	$ 767,450	$ 474	$ 474,330	$ (12,897)	$ (1,388)	$ 306,931
Balance, shares treasury stock at Dec. 31, 2013				(396)
Balance, shares common stock at Dec. 31, 2013		47,370
Comprehensive income (loss), net of tax	27,745				(5,969)	33,714
Exercise of common stock options	$ 7,695	$ 5	7,690
Exercise of common stock options, shares	490	490
Restricted stock vested		$ 12	(12)
Restricted stock vested, shares		1,174
Equity component of convertible senior notes, net	$ 63,114		63,114
Purchase of note hedges	(63,928)		(63,928)
Issuance of warrants	34,535		34,535
Stock-based compensation	36,061		36,061
Stock repurchases	(101,095)			$ (101,095)
Stock repurchases, shares				(2,340)
Stock issued pursuant to ESPP	8,621	$ 6	8,615
Stock issued pursuant to ESPP, shares		637
Tax benefit from employee stock plans	8,491		8,491
Balance at Dec. 31, 2014	788,689	$ 497	568,896	$ (113,992)	(7,357)	340,645
Balance, shares treasury stock at Dec. 31, 2014				(2,736)
Balance, shares common stock at Dec. 31, 2014		49,671
Comprehensive income (loss), net of tax	23,473				(10,067)	33,540
Exercise of common stock options	$ 1,902	$ 1	1,901
Exercise of common stock options, shares	124	124
Restricted stock vested		$ 9	(9)
Restricted stock vested, shares		925
Common stock issued in connection with business acquisitions	$ 36,567	$ 8	36,559
Common stock issued in connection with business acquisitions, shares		787
Stock-based compensation	33,741		33,741
Non-cash settlement of vacation liabilities by issuing RSUs	1,353		1,353
Stock repurchases	(76,447)			$ (76,447)
Stock repurchases, shares				(1,740)
Stock issued pursuant to ESPP	9,547	$ 3	9,544
Stock issued pursuant to ESPP, shares		301
Tax benefit from employee stock plans	5,369		5,369
Balance at Dec. 31, 2015	$ 824,194	$ 518	657,354	$ (190,439)	(17,424)	374,185
Balance, shares treasury stock at Dec. 31, 2015	(4,476)			(4,476)
Balance, shares common stock at Dec. 31, 2015		51,808
Comprehensive income (loss), net of tax	$ 38,276				(7,270)	45,546
Exercise of common stock options	$ 1,345	$ 1	1,344
Exercise of common stock options, shares	115	115
Restricted stock vested		$ 8	(8)
Restricted stock vested, shares		787
Common stock issued in connection with business acquisitions	$ (73)		(73)
Common stock issued in connection with business acquisitions, shares		30
Stock-based compensation	31,726		31,726
Non-cash settlement of vacation liabilities by issuing RSUs	3,059		3,059
Stock repurchases	(83,291)			$ (83,291)
Stock repurchases, shares				(1,981)
Stock issued pursuant to ESPP	9,759	$ 3	9,756
Stock issued pursuant to ESPP, shares		298
Balance at Dec. 31, 2016	$ 827,832	$ 530	705,901	$ (273,730)	$ (24,694)	419,825
Balance, shares treasury stock at Dec. 31, 2016	(6,457)			(6,457)
Balance, shares common stock at Dec. 31, 2016		53,038
Cumulative effect adjustment upon adoption of ASU 2016-09	$ 2,837		$ 2,743			$ 94

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Cash flows from operating activities:
Net income	$ 45,546	$ 33,540	$ 33,714
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	55,081	40,124	31,099
Deferred taxes	(10,955)	(7,384)	(5,836)
Tax benefit from employee stock plans		5,369	8,491
Provision for bad debts and sales-related allowances	10,678	7,536	7,408
Provision for inventory obsolescence	5,187	5,193	6,300
Stock-based compensation, net of cash settlements	31,726	33,741	36,061
Contingent consideration payments related to businesses acquired	0	0	(3,428)
Non-cash accretion of interest expense on convertible notes and imputed financing obligation	13,489	12,957	4,433
Other non-cash charges and credits	5,443	3,842	(3,608)
Changes in operating assets and liabilities, net of effect of acquired companies:
Accounts receivable	(31,221)	(34,355)	(27,143)
Inventories	4,306	(6,759)	(11,868)
Other current assets	(6,499)	(14,863)	13,409
Accounts payable and accrued liabilities	652	(6,371)	8,729
Income taxes receivable and payable, net	(2,429)	(4,213)	(5,631)
Net cash provided by operating activities	121,004	68,357	92,130
Cash flows from investing activities:
Purchases of short-term investments	(216,349)	(328,911)	(281,962)
Proceeds from sales and maturities of short-term investments	252,856	311,508	139,185
Purchases of restricted investments and cash equivalents	(6,252)	0	0
Purchases, net of proceeds from sales, of property and equipment	(22,373)	(18,449)	(15,900)
Businesses and technology purchased, net of cash acquired	(19,932)	(74,766)	(21,980)
Net cash used for investing activities	(12,050)	(110,618)	(180,657)
Cash flows from financing activities:
Proceeds from issuance of convertible notes, net of debt issuance costs paid	(3)	(58)	336,365
Purchase of convertible note hedges	0	0	(63,928)
Proceeds from issuance of warrants	0	0	34,535
Proceeds from issuance of common stock	11,100	11,450	16,317
Purchases of treasury stock and net share settlements	(83,292)	(76,447)	(101,095)
Repayment of debt assumed through business acquisitions	(8,800)	(22,534)	(564)
Contingent consideration payments related to businesses acquired	(28,111)	(4,093)	(10,594)
Net cash provided by (used for) financing activities	(109,106)	(91,682)	211,036
Effect of foreign exchange rate changes on cash and cash equivalents	374	(99)	(1,460)
Increase (decrease) in cash and cash equivalents	222	(134,042)	121,049
Cash and cash equivalents at beginning of year	164,091	298,133	177,084
Cash and cash equivalents at end of year	$ 164,313	$ 164,091	$ 298,133

XML

The Company and Its Significant Accounting Policies

12 Months Ended

Dec. 31, 2016

Accounting Policies [Abstract]

The Company and Its Significant Accounting Policies

Note 1: The Company and Its Significant Accounting Policies

The Company

We are a world leader in customer-centric digital printing innovation focused on the transformation of the printing, packaging, ceramic tile decoration, and textile industries from the use of traditional analog based printing to digital on-demand printing.

Our products include industrial super-wide and wide format display graphics, textile, label and packaging, and ceramic tile decoration industrial digital inkjet printers that utilize our digital ink, industrial digital inkjet printer parts, and professional services; print production workflow, web-to-print, cross-media marketing, and business process automation solutions; and color printing DFEs creating an on-demand digital printing ecosystem. Our ink includes digital UV curable, LED curable, ceramic, water-based, and thermoforming ink, as well as a variety of textile ink including dye sublimation, pigmented, reactive dye, acid dye, pure disperse dye, and water-based dispersed printing ink. Our award-winning business process automation solutions are integrated from creation to print and are vertically integrated with our industrial digital inkjet printers and products produced by the leading production digital color page printer manufacturers that are driven by our Fiery DFEs.

Our product portfolio includes industrial super-wide and wide format digital inkjet products (“Industrial Inkjet”) including VUTEk and Matan display graphics super-wide and wide format, Reggiani textile, Jetrion label and packaging, and Cretaprint ceramic tile decoration and construction material industrial digital inkjet printers and ink; print production workflow, web-to-print, cross-media marketing, Optitex textile 2D and 3D CAD applications, and business process automation software (“Productivity Software”), which provides corporate printing, label and packaging, publishing, and mailing and fulfillment solutions for the printing and packaging industry; and Fiery DFEs (“Fiery”). Our integrated solutions and award-winning technologies are designed to automate print and business processes, streamline workflow, provide profitable value-added services, and produce accurate digital output.

Significant Accounting Policies

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

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 lease accounting, functional currency determination, and contingencies on an ongoing basis. Estimates are based on historical and current experience, the impact of the current economic environment, and various other assumptions believed to be reasonable under the circumstances at the time of the estimate, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

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 short-term investments. Available-for-sale securities are stated at fair value with unrealized gains and losses reported as a separate component of OCI, adjusted for deferred income taxes. The credit portion of any other-than-temporary impairment is included in net income. Realized gains and losses on sales of financial instruments are recognized upon sale of the investments using the specific identification method.

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

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

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 securities, contingent acquisition-related liabilities, self-insurance liability, derivative instruments, and convertible senior notes are disclosed in Note 6—Investments and Fair Value Measurements of the Notes to Consolidated Financial Statements.

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. As such, revenue is generally recognized when persuasive evidence of an arrangement exists, the product has been delivered or services have been rendered, the fee is fixed or determinable, and collection of the resulting receivable is reasonably assured.

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 events. We may not request collateral from our customers, although down payments or letters of credit are generally required from Industrial Inkjet and Productivity Software customers to ensure payment. If we determine that collection of a fee is not reasonably assured, we defer the fee and recognize revenue when collection becomes reasonably assured, which is generally upon receipt of cash.

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, Software—Revenue Recognition, and if applicable, SAB 104, and ASC 605-25, to all transactions involving the sale of software products and hardware transactions where the software is not incidental.

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 terms and conditions. As a result, significant contract interpretation is sometimes required to determine the appropriate accounting, including whether the deliverables specified in a multiple element arrangement should be treated as separate units of accounting for revenue recognition purposes, and, if so, how the price should be allocated among the elements and when to recognize revenue for each element. We recognize revenue for delivered elements only when the delivered elements have stand-alone value, uncertainties regarding customer acceptance are resolved, and there are no customer-negotiated refund or return rights for the delivered elements. If the arrangement includes a customer-negotiated refund or right of return relative to the delivered item and the delivery and performance of the undelivered item is considered probable and substantially in our control, the delivered element constitutes a separate unit of accounting. We limit revenue recognition for delivered elements to the amount that is not contingent on the future delivery of products or services, future performance obligations, or subject to customer-specified return or refund privileges. Changes in the allocation of the sales price between elements may impact the timing of revenue recognition, but will not change the total revenue recognized on the contract.

Multiple-Deliverable Arrangements

We recognize revenue in multiple element arrangements involving tangible products containing software and non-software components that function together to deliver the product’s essential functionality by applying the relative sales price method of allocation in accordance with ASC 605-25. The sales price for each element is determined using VSOE when available (including post-contract customer support, professional services, hosting, and training). When VSOE is not available, then TPE is used. If VSOE or TPE are not available, then BESP is used when applying the relative sales price method for each unit of accounting. When the arrangement includes software and non-software elements, revenue is first allocated to the non-software and software elements as a group based on their relative sales price. Thereafter, the relative sales price allocated to the software elements as a group is further allocated to each unit of accounting in accordance with ASC 985-605. We then defer revenue with respect to the relative sales price that was allocated to any undelivered element.

We have calculated BESP for software licenses and non-software deliverables. We considered several different methods of establishing BESP including cost plus a reasonable margin, stand-alone sales price of the same or similar products, and if available, targeted rate of return, list price less discount, and company published list prices to identify the most appropriate representation of the estimated sales price of our products. Due to the wide range of pricing offered to our customers, we determined that sales price of the same or similar products, list price less discount, and company published list prices were not appropriate methods to determine BESP for our products. Cost plus a reasonable margin and targeted rate of return were eliminated due to the difficulty in determining the cost associated with the intangible elements of each product’s cost structure. As a result, management believes that the best estimate of the sales price of an element is the median sales price of deliverables sold in stand-alone transactions and/or separately priced deliverables contained in bundled arrangements. Elements sold as stand-alone transactions and in bundled arrangements during the four quarters immediately preceding the end of each reporting period were included in the calculation of BESP.

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, Certain Revenue Arrangements that Include Software Elements, determined that tangible products containing software and non-software components that function together to deliver the product’s essential functionality are not required to follow the software revenue recognition guidance in ASC 985-605 as long as the hardware components of the tangible product substantively contribute to its functionality. In addition, hardware components of tangible products containing software components shall always be excluded from the guidance in ASC 985-605. Non-software elements are accounted for in accordance with SAB 104.

Multiple element arrangements containing only software elements remain subject to the provisions of ASC 985-605 and must follow the residual method. When several elements of a multiple element arrangement, including software licenses, post-contract customer support, hosting, and professional services, are sold to a customer through a single contract, the revenue from such multiple element arrangements are allocated to each element using the residual method in accordance with ASC 985-605. Revenue is allocated to the support elements and professional service elements of an agreement using VSOE and to the software license elements of the agreement using the residual method. We have established VSOE for professional services and hosting based on the rates charged to our customers in stand-alone orders. We have also established VSOE for post-contract customer support based on substantive renewal rates. Accordingly, software license fees are recognized under the residual method for arrangements in which the software was licensed with maintenance and/or professional services, and where the maintenance and professional services were not essential to the functionality of the delivered software.

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, Revenue Recognition—Construction-Type and Production-Type Contracts. These services require that we perform significant, extensive, and complex design, development, modification, or implementation activities of our customers’ systems. Performance will often extend over long periods, and our right to receive future payment depends on our future performance in accordance with these agreements.

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

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

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

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

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

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, Transfers and Servicing, trade receivables are derecognized from our Consolidated Balance Sheet when sold to third parties upon determining that such receivables are presumptively beyond the reach of creditors in a bankruptcy proceeding. The recourse obligation is measured using market data from similar transactions and the servicing liability is determined based on the fair value that a third party would charge to service these receivables. These liabilities were determined to not be material at December 31, 2016 and 2015.

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 are generally stated at standard cost, which approximates the lower of actual cost, using the first-in, first-out cost flow assumption, or market. We periodically review our inventories for potential excess or obsolete items and write down specific items to net realizable value as appropriate. Work-in-process inventories consist of our product at various levels of assembly and include materials, labor, and manufacturing overhead. Finished goods inventory represents completed products awaiting shipment.

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 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 lease (forty years), and purchased buildings (forty years). When assets are disposed, the asset and accumulated depreciation are removed from our records and the related gain or loss is recognized in our results of operations.

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

In accordance with ASC 350-40, Intangibles—Goodwill and Other—Internal-Use Software, software development costs, including costs incurred to purchase third party software, are capitalized during the application development stage when certain factors are present including, among others, that technology exists to achieve the performance requirements, management has committed to funding the project, and conceptual formulation, design, and testing of possible software alternatives (preliminary project phase) have all been completed. Costs incurred during the preliminary project phase, post-implementation /operational phase, process re-engineering, training, and maintenance must be expensed as incurred. The accumulation of software costs to be capitalized ceases when the software is substantially developed and is ready for its intended use. Capitalized internal use software is amortized over an estimated useful life of three to five years using the straight-line method.

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, a two-step impairment test of goodwill is required, unless the simplified method is elected. In the first step, the fair value of each reporting unit is compared to its carrying value. If the fair value exceeds carrying value, goodwill is not impaired and further testing is not required. If the carrying value exceeds fair value, then the second step of the impairment test is required to determine the implied fair value of the reporting unit’s goodwill. The implied fair value of goodwill is calculated by deducting the fair value of all tangible and intangible net assets of the reporting unit, excluding goodwill, from the fair value of the reporting unit as determined in the first step. If the carrying value of the reporting unit’s goodwill exceeds its implied fair value, then an impairment loss must be recorded equal to the difference. We have not been required to perform this second step of the process because the fair value of our reporting units have exceeded their carrying value as of December 31, 2016, 2015, and 2014.

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 of the useful life of the technology with a $1.6 million impact on amortization expense. No changes have been made to the useful lives of amortizable identifiable intangible assets in 2015 or 2014. Intangible amortization expense was $39.6, $26.5, and $20.7 million for the years ended December 31, 2016, 2015, or 2014, respectively.

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

Our Industrial Inkjet printers are generally accompanied by a 12-month limited warranty, which covers both parts and labor. Our Fiery DFE limited warranty is 12 to 15 months. Estimated future hardware and software warranty costs are recorded as a cost of product revenue when the related revenue is recognized based on historical and projected warranty claim rates, historical and projected cost-per-claim, and knowledge of specific product failures that are outside our typical experience. Factors that affect our warranty liability include the number of installed units subject to warranty protection, product failure rates, estimated material costs, estimated distribution costs, and estimated labor costs.

Warranty reserves were $10.3 and $9.6 million as of December 31, 2016 and 2015, respectively.

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 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 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 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

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

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, Simplifying the Accounting for Measurement Period Adjustments; and

• 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

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, Stock Compensation—Improvements to Employee Share Based Payment Accounting, in 2016, we elected to account for forfeitures when they occur instead of estimating the expected forfeiture rate.

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

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 assets, liabilities, and capital accounts, which are remeasured at historical exchange rates. Revenue and expenses are remeasured at monthly exchange rates, which approximate average exchange rates in effect during each period. Gains or losses from foreign currency remeasurement are included in interest income and other income (expense), net. Net gains or losses resulting from foreign currency transactions, including hedging gains and losses, are reported in interest income and other income (expense), net, and were losses of $3.8, $4.2, and $6.8 million for the years ended December 31, 2016, 2015, and 2014, respectively.

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, Foreign Currency Matters, we consider the U.S. dollar to be the functional currency for each of our international subsidiaries except for our Brazilian subsidiary, Metrics, for which we consider the Brazilian real to be the subsidiary’s functional currency; our German subsidiaries, EFI GmbH and Alphagraph, for which we consider the Euro to be the subsidiaries’ functional currency; our Italian subsidiary, Reggiani, for which we consider the Euro to be the functional currency; our Spanish subsidiary, Cretaprint, for which we consider the Euro to be the subsidiary’s functional currency; our U.K. subsidiaries, Electronics For Imaging United Kingdom Limited, Shuttleworth, and Rialco, for which we consider the British pound sterling to be the subsidiaries’ functional currency; our Israeli subsidiary, Matan, for which we consider the shekel to be the functional currency; our Japanese subsidiary, Electronics For Imaging Japan KK, for which we consider the Japanese yen to be the subsidiary’s functional currency; our New Zealand subsidiary contains the Prism Group Holdings Limited (“Prism”) operations in New Zealand for which we consider the New Zealand dollar to be the functional currency; our Australian subsidiary contains the Prism, OPS, and Metrix operations in Australia for which we consider the Australian dollar to be the functional currency; and our subsidiary in the People’s Republic of China, which contains the operations of our Cretaprint sales and support center and our Industrial Inkjet demonstration center for which we consider the renminbi to be the functional currency. Optitex generates revenue and incurs operating expenses primarily in local currencies. Upon consideration of the salient economic indicators, we consider the local currency in each of Optitex’s primary locations (shekel, rupee, Euro, and U.S. dollar) to be the functional currencies for Optitex.

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 shares of restricted stock having a dilutive effect, non-vested restricted stock for which the performance criteria have been met, shares to be purchased under our ESPP having a dilutive effect, the assumed issuance at the beginning of 2016 of shares potentially issued from escrow related to the acquisition of CTI, the assumed issuance at the beginning of 2016 of shares issued from escrow during 2016 related to the acquisition of Reggiani, the assumed conversion of our Notes having a dilutive effect using the treasury stock method, as well as the dilutive effect of our warrants when the stock price exceeds the conversion price of the Notes. Any potential shares that are anti-dilutive as defined in ASC 260, Earnings Per Share, are excluded from the effect of dilutive securities.

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

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 derivative instruments in earnings in the period of change. Gains and losses on foreign currency forward contracts used to hedge balance sheet exposures are recognized in interest income and other income (expense), net, in the same period as the remeasurement gain or loss of the related foreign currency denominated assets and liabilities.

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

In accordance with the Variable Interest Entities (“VIE”) sub-section of ASC 810, Consolidation, we perform a formal assessment at each reporting period regarding whether any consolidated entity is considered the primary beneficiary of a VIE based on the power to direct activities that most significantly impact the economic performance of the entity and the obligation to absorb losses or rights to receive benefits that could be significant to us. We do not have any arrangements that meet the definition of a VIE.

Recent Accounting Pronouncements

Debt Issuance Costs. In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, which is effective in the first quarter of 2016. ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt, which is consistent with the presentation of debt discounts and premiums. Retrospective application is required, which resulted in the reclassification of $5.8 million of debt issuance costs from other current assets and other assets to a direct reduction of our 7.5% Convertible Senior Notes, net, due 2019 (“Notes”) in our Consolidated Balance Sheet as of December 31, 2015.

Inventory Valuation. In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory, which is effective in the first quarter of 2017. ASU 2015-11 requires that inventory be valued at the lower of cost or net realizable value, which is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. We currently value inventory at the lower of cost or net realizable value less a reasonable profit margin as allowed by the current inventory valuation guidance. The adoption of ASU 2015-11 is expected to increase our inventory valuation in 2017.

Measurement Period Adjustments. In September 2015, the FASB issued ASU 2015-16, Simplifying the Accounting for Measurement Period Adjustments. The acquirer of a business is required to retrospectively adjust provisional amounts recognized at the acquisition date with a corresponding adjustment to goodwill. Those adjustments are required when new information is obtained about facts and circumstances that existed as of the acquisition date and, if known, would have affected the measurement of the amounts initially recognized or would have resulted in the recognition of additional assets or liabilities. Under current guidance, the acquirer also must revise comparative prior period information, including depreciation, amortization, or other income affects as a result of changes made to provisional amounts. To simplify the accounting for measurement period adjustments, ASU 2015-16 eliminates the requirement to retrospectively account for those adjustments. The impact on our financial statements will be determined in the future if measurement period adjustments are identified.

Lease Arrangements. Under current guidance, the classification of a lease by a lessee as either an operating lease or a capital lease determines whether an asset and liability is recognized on the balance sheet. ASU 2016-02, issued in February 2016 and effective in the first quarter of 2019, requires that a lessee recognize an asset and liability on its balance sheet related to all leases with terms in excess of one year. For all leases, a lessee will be required to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the statement of financial position. The right-to-use asset represents the right to use the underlying asset during the lease term.

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 asset in the statement of operations. Principal repayments are classified within financing activities and interest payments are classified as operating activities in the statement of cash flows.

• 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 lease accounting guidance will be rescinded by the new guidance, although simplified guidance will remain regarding lessee control during the construction period. Consequently, the accounting for build-to-suit leases will be the same as finance leases unless the lessee control provisions are applicable.

We have not quantified the impact, but we expect our consolidated financial position and results of operations to be materially effected.

Principal vs Agent. In March 2016, the FASB issued ASU 2016-08, Principal vs. Agent Considerations (Reporting Revenue Gross vs Net), streamlining and clarifying the criteria for identifying whether an entity is satisfying a performance obligation as the principal or agent in the transaction. The entity that is responsible for fulfilling the contractual obligations related to the good or service is acting as the principal and recognizes the gross amount of consideration. The entity that is responsible only for arranging delivery to the customer is acting as the agent and recognizes revenue in the amount of the fee or commission related to arranging for the delivery of the good or service.

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. In March 2016, the FASB issued ASU 2016-09, which is effective in the first quarter of 2017 with early adoption permitted. We elected to early adopt this standard in the second quarter of 2016, which required retroactive application of this standard as of the first quarter in 2016 resulting in the following:

• 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 capital in the first quarter of 2016 were reversed upon adoption. We recorded $2.2 million of deferred tax assets related to excess tax benefits for federal research and development income tax credits not previously benefitted.

• 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. In June 2016, the FABS issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, amending current guidance regarding other-than-temporary impairment of available-for-sale debt securities. The new guidance requires an estimate of the expected credit loss when fair value is below the amortized cost of the asset without regard for the length of time that the fair value has been below the amortized cost or the historical or implied volatility of the asset. Credit losses on available-for-sale debt securities will be limited to the difference between the security’s amortized cost basis and its fair value. The use of an allowance to record estimated credit losses (and subsequent recoveries) will also be required under the new guidance.

ASU 2016-13 will be effective in the first quarter of 2020. We are evaluating its impact on the carrying value of our available-for-sale securities and results of operations.

Settlement of Convertible Debt. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments, requiring that cash settlements of principal amounts of debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the debt must classify the portion of the principal payment attributable to the accreted interest related to the debt discount as cash outflows from operating activities. This is consistent with the classification of the coupon interest payments.

ASU 2016-15 will be effective in the first quarter of 2018. Accordingly, $63.6 million debt discount attributable to the difference between the 0.75% coupon interest rate on our Notes and the 4.98% (5.46% inclusive of debt issuance costs) effective interest rate will be classified as an operating cash outflow in the Consolidated Statement of Cash Flows upon cash settlement in 2019.

Restricted Cash. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows: Restricted Cash, requiring that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows.

ASU 2016-18 will be effective in the first quarter of 2018. We are evaluating its impact on our statement of cash flows.

Revenue Recognition. ASU 2014-09, Revenue from Contracts with Customers, issued in May 2014, enhances the comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets. The principles-based guidance provides a framework for addressing revenue recognition issues comprehensively. The standard requires that revenue should be recognized in an amount that reflects the consideration that the entity expects to be entitled in exchange for goods or services, which are referred to as performance obligations.

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 will be effective in the first quarter of 2018. Two adoption methods are allowed under ASU 2014-09. Under the full retrospective method, the revised guidance is applied to all contracts in all reporting periods presented in the financial statements, subject to certain allowable exceptions. Retained earnings is adjusted for the cumulative effect of the change as of January 1, 2016. Under the modified retrospective method, the revised guidance is applied to all contracts existing as of January 1, 2018, with an adjustment to beginning retained earnings for the cumulative effect of the change and providing additional disclosures comparing results to previous guidance. We continue to evaluate the available adoption methods.

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.

Supplemental Disclosure of Cash Flow Information

	For the years ended December 31,
(in thousands)	2016			2015			2014
Net cash paid for income taxes	$	6,812		$	8,512		$	6,157
Cash paid for interest expense	$	2,975		$	2,945		$	128
Acquisitions of businesses and technology:
Cash paid for businesses and technology purchased, excluding contingent consideration	$	21,560		$	82,446		$	23,888
Cash acquired in business acquisitions		(1,628	)		(7,680	)		(1,908	)
Net cash paid for business acquisitions	$	19,932		$	74,766		$	21,980
Common stock issued in connection with business acquisitions	$	73		$	36,567		$	—
Non-cash investing and financing activities:
Non-cash settlement of vacation liabilities by issuing RSUs		3,059		$	1,353		$	—
Property and equipment received, but not paid		1,257			1,684			2,275
	$	4,316		$	3,037		$	2,275

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Earnings Per Share

12 Months Ended

Dec. 31, 2016

Earnings Per Share [Abstract]

Earnings Per Share

Note 2: Earnings Per 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 shares of restricted stock having a dilutive effect, non-vested restricted stock for which the performance criteria have been met, shares to be purchased under our ESPP having a dilutive effect, the assumed issuance at the beginning of 2016 of shares potentially issued from escrow related to the acquisition of CTI, the assumed issuance at the beginning of 2016 of shares issued from escrow during 2016 related to the acquisition of Reggiani, the assumed conversion of our Notes having a dilutive effect using the treasury stock method, as well as the dilutive effect of our warrants when the stock price exceeds the conversion price of the Notes. Any potential shares that are anti-dilutive as defined in ASC 260 are excluded from the effect of dilutive securities.

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. Accordingly, performance-based RSUs, which vested on various dates during the years ended December 31, 2016, 2015, and 2014 based on achievement of specified performance criteria related to revenue, cash flows from operating activities, and non-GAAP operating income targets; market-based RSUs, which vested during the year ended December 31, 2015 based on achievement of specified stock prices for defined periods; and performance-based stock options, which vested during the year ended December 31, 2016 are included in the determination of net income per diluted common share as of the beginning of each respective year.

Basic and diluted earnings per share for the years ended December 31, 2016, 2015, and 2014 are reconciled as follows (in thousands, except for per share amounts):

	2016		2015		2014
Basic net income per share:
Net income available to common shareholders	$	45,546	$	33,540	$	33,714
Weighted average common shares outstanding		46,900		47,217		46,866
Basic net income per share	$	0.97	$	0.71	$	0.72
Dilutive net income per share:
Net income available to common shareholders	$	45,546	$	33,540	$	33,714
Weighted average common shares outstanding		46,900		47,217		46,866
Dilutive stock options, restricted stock, and ESPP purchase rights		897		933		1,540
Weighted average common shares outstanding for purposes of computing diluted net income per share		47,797		48,150		48,406
Dilutive net income per share	$	0.95	$	0.70	$	0.70

Potential shares of common stock that are not included in the determination of diluted net income per share because they are anti-dilutive for the periods presented consist of ESPP purchase rights having an anti-dilutive effect of less than 0.1 million shares for the years ended December 31, 2016, 2015 and 2014 and the assumed vesting of RSUs having an anti-dilutive effect of less than 0.1 million shares for the year ended December 31, 2016.

The weighted-average number of common shares outstanding does not include the effect of the potential common shares from conversion of our Notes and exercise of our Warrants, which were issued in September 2014. The effects of these potentially outstanding shares were not included in the calculation of diluted net income per share because the effect would have been anti-dilutive since the conversion price of the Notes and the strike price of the Warrants exceeded the average market price of our common stock. We have the option to pay cash, issue shares of common stock, or any combination thereof for the aggregate amount due upon conversion of the Notes. Our intent is to settle the principal amount of the Notes in cash upon conversion. As a result, only amounts payable in excess of the principal amount of the Notes are considered in diluted net income per share under the treasury stock method. The Note Hedges are also not included in the calculation of diluted net income per share because the effect of any exercise of the Note Hedges would be anti-dilutive. Please refer to Note 7—Convertible Senior Notes, Note Hedges, and Warrants of the Notes to Consolidated Financial Statements for additional information.

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Business Acquisitions

12 Months Ended

Dec. 31, 2016

Business Combinations [Abstract]

Business Acquisitions

Note 3: Business Acquisitions

We acquired Optitex Ltd. (“Optitex”) and Rialco Limited (“Rialco”) during 2016, which have been included in our Productivity Software and Industrial Inkjet operating segments, respectively. Post-acquisition revenue was $19.8 million in 2016 related to these two acquisitions. We acquired Reggiani and Matan during 2015, which has been included in our Industrial Inkjet operating segment, and two business process automation businesses, which have been included in our Productivity Software operating segment. Post-acquisition revenue was $88.4 million in 2015 related to these four acquisitions. We acquired four business process automation businesses during 2014, which have been included in our Productivity Software operating segment. Acquisition-related transaction costs were $2.2, $5.5, and $1.5 million during the years ended December 31, 2016, 2015, and 2014, respectively.

These acquisitions were accounted for as purchase business combinations. We allocated the purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed on the basis of their estimated fair value on their respective acquisition dates. Excess purchase consideration was recorded as goodwill. Factors contributing to a purchase price that results in goodwill include, but are not limited to, the retention of research and development personnel with skills to develop future technology, manufacturing capacity in the Industrial Inkjet operating segment, support personnel to provide maintenance services related to the products, a trained sales force capable of selling current and future products, the opportunity to cross-sell products of the acquired businesses to existing customers, the positive reputation of each of these businesses in the market, the opportunity to sell our Productivity Software Suite to customers of the acquired businesses, the opportunity to expand our presence in the digital inkjet textile printing market through the acquisition of the Reggiani digital inkjet textile printer business, and the synergy of Optitex technology with Reggiani digital inkjet textile printers. Rialco’s technical and commercial capabilities benefit the Industrial Inkjet operating segment in the sourcing, specification, and purification of high quality dyes and expand our research, development, and innovation base to develop ink for the signage, ceramic, and packaging markets.

We engaged a third party valuation firm to aid management in its analyses of the fair value of these acquired businesses. All estimates, key assumptions, and forecasts were either provided by or reviewed by us. While we chose to utilize a third party valuation firm, the fair value analyses and related valuations represent the conclusions of management and not the conclusions or statements of any third party.

The purchase price allocations for the 2016 purchase business combinations are preliminary and subject to change within the respective measurement periods as valuations are finalized. We expect to continue to obtain information to assist us in finalizing the fair value of the net assets acquired during the respective measurement periods, which end at various dates in 2017. Measurement period adjustments will be recognized in the reporting period in which the adjustment amounts are determined.

2016 Acquisitions

Industrial Inkjet Operating Segment

Rialco, a private limited liability company incorporated in England and Wales and headquartered in Bradford, U.K., was acquired on March 1, 2016. Rialco has been included in the Industrial Inkjet operating segment.

We purchased Rialco for cash consideration of $8.4 million, net of cash acquired, plus an additional potential future cash earnout, which is contingent on achieving certain revenue and gross profit performance targets over three consecutive 12-month periods. Rialco is a leading European supplier of dye powders and color products for the textile, digital print, and other decorating industries. Rialco’s pure disperse dyes are particularly important in the manufacture of high-quality dye sublimation inkjet inks for textile applications, which is a key growth area in the global migration from analog to digital print.

The fair value of the earnout related to the Rialco acquisition is estimated to be $2.3 million at December 31, 2016, by applying the income approach in accordance with ASC 805-30-25-5, adjusted for the impact of post-acquisition foreign currency translation changes. Key assumptions include a risk-free discount rate of 0.8% and probability-adjusted revenue and gross profit levels. Probability-adjusted revenue and gross profit are significant inputs that are not observable in the market, which ASC 820-10-35 refers to as Level 3 inputs. This contingent liability is reflected in the Consolidated Balance Sheet as of December 31, 2016, as a current and noncurrent liability of $1.2 and $1.1 million, respectively, with the first payment due in the third quarter of 2017, if earned. In accordance with ASC 805-30-35-1, changes in the fair value of contingent consideration subsequent to the acquisition date are recognized in general and administrative expenses.

Productivity Software Segment

Optitex, a privately-held Israeli company headquartered in Rosh Ha’Ayin, Israel, was acquired on June 16, 2016. Optitex has been included in the Productivity Software operating segment.

We purchased Optitex for cash consideration of $11.6 million, net of cash acquired, plus an additional potential future cash earnout, which is contingent on achieving certain revenue and operating profit performance targets over three consecutive 12-month periods. Optitex has developed and markets integrated 2D and 3D CAD software that is shortening the design cycle, reducing our customers’ costs, and accelerating the adoption of fast fashion.

The fair value of the earnout related to the Optitex acquisition is estimated to be $24.4 million at December 31, 2016, by applying the income approach in accordance with ASC 805-30-25-5, adjusted for the impact of post-acquisition foreign currency translation changes. Key assumptions include a risk-free discount rate of 2.3% and probability-adjusted revenue and operating profit levels. Probability-adjusted revenue and operating profit are significant inputs that are not observable in the market, which ASC 820-10-35 refers to as Level 3 inputs. This contingent liability is reflected in the Consolidated Balance Sheet as of December 31, 2016, as a current and noncurrent liability of $8.4 and $16.0 million, respectively, with the first payment due in the fourth quarter of 2017, if earned. In accordance with ASC 805-30-35-1, changes in the fair value of contingent consideration subsequent to the acquisition date are recognized in general and administrative expenses.

2015 Acquisitions

Industrial Inkjet Operating Segment

On July 1, 2015, we acquired privately-held Reggiani, a societa per azioni headquartered in Bergamo, Italy, and privately-held Matan, an Israeli company headquartered in Rosh Ha’Ayin, Israel, which have been included in the Industrial Inkjet operating segment.

We purchased Matan for cash consideration of approximately $38.9 million, net of cash acquired. Matan super-wide format digital inkjet roll-to-roll printers, including advanced material handling features such as in-line cutting and slitting, expand our offerings in this market.

We purchased Reggiani for cash consideration of approximately $26.6 million, net of cash acquired, the issuance of 0.6 million shares of EFI common stock valued at $26.9 million, plus a potential future cash earnout, which is contingent on achieving certain revenue and earnings before interest and tax (“EBIT”) performance targets over consecutive 18 and 12-month periods. Reggiani industrial digital inkjet textile printers address the full scope of advanced textile printing with versatile printers suitable for pigmented, reactive dye, acid dye, and water-based dispersed printing ink. This acquisition expands our presence in the digital inkjet textile printing market.

The fair value of the earnout related to the Reggiani acquisition is estimated to be $22.8 million at December 31, 2016, by applying the income approach in accordance with ASC 805-30-25-5, which is net of an earnout payment, which was accelerated into 2016 of $23.8 million. Key assumptions include a risk-free discount rate of 4.98%, a probability-adjusted revenue level, and probability-adjusted EBIT. Probability-adjusted revenue and EBIT are significant inputs that are not observable in the market, which ASC 820-10-35, refers to as Level 3 inputs. This contingent liability is reflected in the Consolidated Balance Sheet as of December 31, 2016, as a current and noncurrent liability of $7.1 and $15.7 million, respectively.

Productivity Software Operating Segment

We acquired privately-held CTI and Shuttleworth, which have been included in our Productivity Software operating segment, for aggregate cash consideration of $9.3 million, net of cash acquired, the issuance of 0.2 million shares of EFI common stock valued at $9.7 million, plus a potential future cash earnout, which is contingent on achieving certain performance targets.

CTI, a California limited liability company headquartered in San Diego, California, was acquired on October 6, 2015 and provides manufacturing execution software for the corrugated packaging industry, including business and management capabilities, with a customer base including sheet feeders, sheet plants, and full corrugated box plants.

Shuttleworth, a private limited liability company incorporated in England and Wales and headquartered in Kettering, U.K., was acquired on November 4, 2015, and provides business process automation solutions to the signage and packaging digital print industries. Support and operations of Shuttleworth were included in the Productivity Software operating segment, which provides Pace, Monarch, and Radius products to the Shuttleworth customer base, while continuing to support existing Shuttleworth customers.

The fair value of the CTI and Shuttleworth earnouts are estimated to be $6.8 million at December 31, 2016, by applying the income approach in accordance with ASC 805-30-25-5. Key assumptions include risk-free discount rates of 0.6% to 1.3% and probability-adjusted revenue levels. Probability-adjusted revenue is a significant input that is not observable in the market, which ASC 820-10-35, refers to as a Level 3 input. This contingent liability is reflected in the Consolidated Balance Sheet as of December 31, 2016, as a current and noncurrent liability of $2.4 and $4.4 million, respectively.

2014 Acquisitions

Productivity Software Operating Segment

We acquired privately-held SmartLinc, Rhapso, DirectSmile, and DIMS, which have been included in our Productivity Software operating segment, for aggregate cash consideration of $20.4 million, net of cash acquired, plus additional potential future cash earnouts, which were contingent on achieving certain performance targets. Earnout payments related to the 2014 acquisitions were $4.0 and $0.3 million at December 31, 2016 and 2015, respectively.

SmartLinc, a Wisconsin corporation headquartered in Milwaukee, Wisconsin, was acquired on January 16, 2014, and provides business process automation software for shipping and logistics operations.

Rhapso, a societe anonyme organized under French law headquartered in Les Ulis, France, was acquired on April 14, 2014, and provides printing, packaging, and scheduling software to European customers in the corrugated packaging market sector.

DirectSmile, a limited liability company under German law headquartered in Berlin, Germany, was acquired on July 18, 2014, and provides software solutions for variable data printing, cross media marketing automation, and image personalization technologies.

DIMS, a limited liability company under Dutch law headquartered in Lichtenvoorde, Netherlands, was acquired on September 15, 2014, and is a leading supplier of business process automation software for high end, multilingual, and multi-national print and packaging companies with a large portion of its installed base in Europe.

Valuation Methodologies

Intangible assets acquired in 2016, 2015, and 2014 consist of customer relationships, trade names, existing technology, backlog, and IPR&D. Each intangible asset valuation methodology for each acquisition assumes discount rates between 16% and 30%.

Customer Relationships and Backlog were valued using the excess earnings method, which is an income approach. The value of customer relationships lies in the generation of a consistent and predictable revenue source and the avoidance of costs associated with developing the relationships. Customer relationships were valued by estimating the revenue attributable to existing customer relationships and probability-weighting each forecast year to reflect the uncertainty of maintaining existing relationships based on historical attrition rates.

Backlog represents unfulfilled customer purchase orders at the acquisition date that will provide a relatively secure revenue stream, subject only to potential customer cancellation.

Trade Names were valued using the relief from royalty method, which is an income approach, with royalty rates based on various factors including an analysis of market data, comparable trade name agreements, and consideration of historical advertising dollars spent supporting the trade name.

Existing Technology was valued using the relief from royalty method based on royalty rates for similar technologies. The value of existing technology is derived from consistent and predictable revenue, including the opportunity to cross-sell to existing customers and the avoidance of the costs associated with developing the technology. Revenue related to existing technology was adjusted in each forecast year to reflect the evolution of the technology and the cost of sustaining research and development required to maintain the technology.

Rialco existing technology was valued using the cost approach. The value of existing technology is estimated based on the historical time and cost to develop the technology, the estimated man-years required to recreate the technology, historical employee compensation and benefits, and a reasonable mark-up based on profit for companies with similar operations.

IPR&D was valued using the relief from royalty method by estimating the cost to develop purchased IPR&D into commercially viable products, estimating the net cash flows resulting from the sale of those products, and discounting the net cash flows back to their present value. Project schedules were based on management’s estimate of tasks completed and tasks to be completed to achieve technical and commercial feasibility.

	Matan			Reggiani			CTI			Shuttleworth			DIMS
Discount rate for IPR&D		16	%		21	%		18	%		20	%		20	%
IPR&D percent complete at acquisition date		33	%		70	%		75	%		17	%		76	%
IPR&D percent complete at December 31, 2016		88	%		100	%		95	%		100	%		93	%
Acquisition-date valuation (in thousands)	$	3,190		$	10,879		$	150		$	555		$	389

IPR&D is subject to amortization after product completion over the product life or otherwise assessed for impairment in accordance with acquisition accounting guidance. Additional costs incurred to complete IPR&D after the acquisition are expensed.

The allocation of the purchase price to the assets acquired and liabilities assumed (in thousands) with respect to each of these acquisitions at their respective acquisition dates is summarized as follows:

	2016 Acquisitions									2015 Acquisitions															2014 Acquisitions
	Industrial Inkjet				Productivity Software					Industrial Inkjet										Productivity Software					Productivity Software
	Rialco				Optitex					Matan					Reggiani					CTI and Shuttleworth					SmartLinc, Rhapso, DirectSmile, DIMS
	Weighted average useful life		Purchase Price Allocation		Weighted average useful life		Purchase Price Allocation			Weighted average useful life		Purchase Price Allocation			Weighted average useful life		Purchase Price Allocation			Weighted average useful life		Purchase Price Allocation			Weighted average useful  life		Purchase Price Allocation
Customer relationships		6 years	$	2,512		3-4 years	$	8,890			6 years	$	6,630			4 years	$	12,187			3-4 years	$	5,001			5 years	$	8,569
Existing technology		5 years		846		5 years		7,760			5 years		8,790			4 years		33,118			5 years		5,634			4 years		4,890
Trade names		5 years		763		4 years		2,020			5 years		2,570			5 years		11,964			4 years		1,357			4 years		1,231
IPR&D		—		—		—		—			—		3,190			—		10,879			—		705			—		389
Backlog		< one year		56		< one year		370			< one year		70			< one year		704			< one year		132			—		—
Goodwill				1,426				28,147					26,609					61,341					17,790					21,078
				5,603				47,187					47,859					130,193					30,619					36,157
Net tangible assets (liabilities)				5,177				(11,924	)				(4,945	)				(32,571	)				(3,611	)				(3,758	)
Total purchase price			$	10,780			$	35,263				$	42,914				$	97,622				$	27,008				$	32,399

The initial preliminary purchase price allocations were adjusted by $0.8, $3.8, and $0.2 million during 2016, 2015, and 2014, respectively, primarily related to certain current assets and deferred tax liabilities. Pro forma results of operations for Optitex and Rialco have not been presented because their pre-acquisition revenue and net income are not material to our Consolidated Results of Operations for the year ended December 31, 2016.

Goodwill, which represents the excess of the purchase price over the net tangible and intangible assets acquired is not deductible for tax purposes with the exception of Optitex and Matan. Goodwill that was generated by our acquisitions of Optitex and Matan is deductible for U.S. tax purposes, but is not deductible for tax purposes in Israel. Pre-acquisition goodwill acquired in the Rhapso acquisition is deductible in Germany.

Rialco generates revenue and incurs operating expenses primarily in British pounds sterling. Upon consideration of the salient economic indicators discussed in ASC 830-10-55-5, we consider the British pounds sterling to be the functional currency for Rialco.

Optitex generates revenue and incurs operating expenses primarily in local currencies. Upon consideration of the salient economic indicators, we consider the local currency in each of Optitex’s primary locations (shekel, rupee, Euro, and U.S. dollar) to be the functional currencies for Optitex.

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Balance Sheet Components

12 Months Ended

Dec. 31, 2016

Text Block [Abstract]

Balance Sheet Components

Note 4: Balance Sheet Components

Inventories

Inventories, net of allowances, as of December 31, 2016 and 2015 are as follows (in thousands):

	2016		2015
Raw materials	$	45,798	$	53,783
Work in process		7,362		6,646
Finished goods		45,915		45,949
	$	99,075	$	106,378

Property and Equipment, Net

Property and equipment, net, as of December 31, 2016 and 2015 are as follows (in thousands):

	2016			2015
Land, buildings, and improvements (including build-to-suit lease)	$	67,841		$	72,373
Equipment and purchased software		86,495			69,748
Furniture and leasehold improvements		18,713			17,449
		173,049			159,570
Less accumulated depreciation and amortization		(69,745	)		(61,791	)
	$	103,304		$	97,779

We lease approximately 59,000 square feet in Fremont, California, under a 15-year lease agreement. The leased facility was a cold shell requiring additional build-out and tenant improvements. As explained in Note 8—Commitments and Contingencies of the Notes to Consolidated Financial Statements, we are deemed to be the accounting owner of the facility. The capitalized cost under the build-to-suit lease was $10.3 and $10.6 million as of December 31, 2016 and 2015, respectively, based on the estimated replacement cost, including capitalized interest, which has been reduced by accumulated depreciation.

Accrued and Other Liabilities

Accrued and other liabilities as of December 31, 2016 and 2015 are as follows (in thousands):

	2016		2015
Accrued compensation and benefits	$	30,609	$	31,104
Warranty provision—current		10,054		9,635
Accrued royalty payments		4,994		5,305
Contingent consideration—current		19,244		4,545
Short-term financing obligations		98		4,469
Deferred rent		2,938		3,367
Restructuring and other		1,824		3,019
Sales tax liabilities		1,997		655
Other accrued liabilities		13,747		12,326
	$	85,505	$	74,425

Accumulated Other Comprehensive Income (Loss) (“OCI”)

OCI classified within stockholders’ equity in our Consolidated Balance Sheets as of December 31, 2016 and 2015 are as follows (in thousands):

	2016			2015
Net unrealized investment losses	$	(473	)	$	(376	)
Currency translation losses		(24,230	)		(17,049	)
Net unrealized gains on cash flow hedges		9			1
	$	(24,694	)	$	(17,424	)

There were no amounts reclassified out of OCI for the year ended December 31, 2016, and less than $0.1 million, net of tax, for the years ended December 31, 2015 and 2014, consisting of unrealized gains and losses from investments in debt securities reported within interest income and other income (expense), net, in our Consolidated Statements of Operations.

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Goodwill and Long-Lived Intangible Assets

12 Months Ended

Dec. 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Long-Lived Intangible Assets

Note 5: Goodwill and Long-Lived Intangible Assets

Purchased Intangible Assets

Our purchased identified intangible assets resulting from acquisitions that closed during the years ended December 31, 2016 and 2015 are as follows (in thousands, except for weighted average useful life):

			December 31, 2016									December 31, 2015
	Weighted average useful life (years)		Gross carrying amount		Accumulated amortization			Weighted remaining average useful life (years)		Net carrying amount		Gross carrying amount		Accumulated amortization			Net carrying amount
Goodwill		—	$	359,841	$	—			—	$	359,841	$	338,793	$	—		$	338,793
Customer relationships and other		5.1	$	88,557	$	(49,527	)		2.8	$	39,030	$	75,145	$	(36,625	)	$	38,520
Existing technology		4.0		173,543		(122,654	)		2.7		50,889		161,441		(114,018	)		47,423
Trademarks and trade names		11.1		67,701		(38,300	)		6.3		29,401		65,395		(30,949	)		34,446
IPR&D		—		3,677		—			—		3,677		15,163		—			15,163
Amortizable intangible assets		5.7	$	333,478	$	(210,481	)		3.8	$	122,997	$	317,144	$	(181,592	)	$	135,552

Acquired customer relationships and other, existing technology, and trademarks and trade names are amortized over their estimated useful lives of two to sixteen years using the straight-line method, which approximates the pattern in which the economic benefits of the identified intangible assets are realized. The useful life of certain developed technology was reduced during 2016 based on a re-assessment of the useful life of the technology with a $1.6 million impact on amortization expense. No changes have been made to the useful lives of amortizable identifiable intangible assets in 2015 or 2014. Aggregate amortization expense was $39.6, $26.5, and $20.7 million for the years ended December 31, 2016, 2015, and 2014, respectively.

IPR&D is subject to amortization after product completion over the product life or otherwise assessed for impairment in accordance with acquisition accounting guidance.

As of December 31, 2016, future estimated amortization expense for each of the next five years and thereafter related to the amortization of identified intangible assets is as follows (in thousands):

For the years ended December 31,	Future amortization expense
2017	$	39,613
2018		35,264
2019		26,780
2020		10,256
2021		3,991
Thereafter		7,093
	$	122,997

Goodwill Rollforward

The goodwill rollforward for the years ended December 31, 2016 and 2015 as required by ASC 805 is as follows (in thousands):

	Industrial Inkjet			Productivity Software			Fiery			Total
Ending Balance, December 31, 2014	$	59,124		$	121,486		$	64,833		$	245,443
Additions (Reggiani, Matan, CTI, and Shuttleworth acquisitions)	$	91,776		$	17,790		$	—		$	109,566
Opening balance sheet adjustment		(3,826	)		(13	)		—			(3,839	)
Foreign currency adjustments		(4,891	)		(6,135	)		(1,351	)		(12,377	)
Ending Balance, December 31, 2015	$	142,183		$	133,128		$	63,482		$	338,793
Additions (Rialco and Optitex acquisitions)	$	1,426		$	28,147		$	—		$	29,573
Opening balance sheet adjustment		(171	)		(663	)		—			(834	)
Foreign currency adjustments		(2,370	)		(5,137	)		(184	)		(7,691	)
Ending Balance, December 31, 2016	$	141,068		$	155,475		$	63,298		$	359,841
Accumulated Impairment as of December 31, 2016, recognized in 2008	$	103,991		$	—		$	—		$	103,991

Goodwill Assessment

ASU 2011-08, Intangibles—Goodwill and Other (ASC 350): Testing Goodwill for Impairment, provides that a simplified analysis of goodwill impairment may be performed consisting of a qualitative assessment to determine whether further impairment testing is necessary. Due to the significant additions to goodwill resulting from the business combinations completed during 2016 and 2015 and because our reporting units are susceptible to fair value fluctuations, we determined that the quantitative analysis should be performed.

A two-step impairment test of goodwill is required by ASC 350-20-35. In the first step, the fair value of each reporting unit is compared to its carrying value. If the fair value exceeds carrying value, goodwill is not impaired and further testing is not required. If the carrying value exceeds fair value, then the second step of the impairment test is required to determine the implied fair value of the reporting unit’s goodwill. The implied fair value of goodwill is calculated by deducting the fair value of all tangible and intangible net assets of the reporting unit, excluding goodwill, from the fair value of the reporting unit as determined in the first step. If the carrying value of the reporting unit’s goodwill exceeds its implied fair value, then an impairment loss must be recorded equal to the difference.

Our goodwill valuation analysis is based on our respective reporting units (Industrial Inkjet, Productivity Software, and Fiery), which are consistent with our operating segments identified in Note 14—Segment Information, Geographic Regions, and Major Customers of the Notes to Consolidated Financial Statements. We determined the fair value of our reporting units as of December 31, 2016 by equally weighting the market and income approaches. Under the market approach, we estimated fair value based on market multiples of revenue or earnings of comparable companies. Under the income approach, we estimated fair value based on a projected cash flow method using a discount rate determined by our management to be commensurate with the risk inherent in our current business model. Based on our valuation results, we have determined that the fair values of our Industrial Inkjet, Productivity Software, and Fiery reporting units exceed their carrying values by $575, $444, and $515 million, respectively, or 151%, 267%, and 533%, respectively.

To identify suitable comparable companies under the market approach, consideration was given to the financial condition and operating performance of the reporting unit being evaluated relative to companies operating in the same or similar businesses, potentially subject to corresponding economic, environmental, and political factors and considered to be reasonable investment alternatives. Consideration was given to the investment characteristics of the subject companies relative to those of similar publicly traded companies (i.e., guideline companies), which are actively traded. In applying the Public Company Market Multiple Method, valuation multiples were derived from historical and projected operating data of guideline companies and applied to the appropriate operating data of our reporting units to arrive at an indication of fair value. Five suitable guideline companies were identified for the Industrial Inkjet, reporting unit. Six suitable guideline companies were identified for the Productivity Software and Fiery reporting units, respectively.

As part of this process, we engaged a third party valuation firm to assist management in its analysis. All estimates, key assumptions, and forecasts were either provided by or reviewed by us. While we chose to utilize a third party valuation firm, the impairment analysis and related valuations represent the conclusions of management and not the conclusions or statements of any third party.

Solely for purposes of establishing inputs for the income approach to assess the fair value of the Industrial Inkjet, Productivity Software, and Fiery reporting units, we made the following assumptions:

• Industrial Inkjet revenue growth of 26% in 2016 exceeded historical normalized growth rates for the Industrial Inkjet operating segment due to the Reggiani, Matan, and Rialco acquisitions.

• Productivity Software revenue growth of 12% in 2016 approximated historical normalized growth rates for the Productivity Software operating segment.

• Fiery revenue declined by 7% in 2016 primarily due to weak APAC demand, especially in China, reduced end user demand associated with the Drupa trade show in June 2016, which occurs every four years, caused by end users delaying purchasing decisions until new printer models are available, and decreased sales to one significant printer manufacturer purchasing less inventory. Fiery revenue growth of 2% to 3% is assumed in the forecast horizon as printer distributor / manufacturer inventories and end user demand return to normal levels and APAC demand recovers.

• Despite ongoing economic uncertainty, our reporting units’ revenue is assumed to grow at historical normalized rates between 2017 and 2022 for the following primary reasons:

^¡   Our Industrial Inkjet revenue is positioned to outpace the slow economy due to the ongoing transition from solvent-based to UV curable-based printing and from UV curing to UV/LED curing. This transition is expected to continue through the forecast horizon.

^¡   Our acquisitions of Rialco in 2016 and Reggiani and Matan in 2015 will enable us to continue to achieve historical normalized Industrial Inkjet revenue growth rates through the forecast horizon.

^¡   Our acquisitions of Optitex in 2016 and CTI and Shuttleworth in 2015 will enable us to continue to achieve historical normalized Productivity Software revenue growth rates through the forecast horizon.

^¡   Our acquisition strategy in the Productivity Software reporting unit will enable us to achieve historical normalized revenue growth rates through the forecast horizon. Our intention is to continue to explore additional acquisition opportunities in this operating segment to further consolidate the business process automation and cloud-based order entry and order management software industries.

^¡   Long-term industry growth after 2022.

^¡   Gross profit percentages will approximate historical average levels in the Industrial Inkjet, Productivity Software and Fiery reporting units.

Our discounted cash flow projections are six-year financial forecasts, which were based on annual financial forecasts developed internally by management for use in managing our business and through discussions with the valuation firm engaged by us. The significant assumptions utilized in these conservative six-year financial forecasts included consolidated annual revenue growth rates ranging from 6% to 10% which equates to a consolidated compound annual growth rate of 8%. The upper end of the range exceeds our historical normalized growth rates due to the addition of the Reggiani textile and Optitex software businesses to our portfolio. Future cash flows were discounted to present value using a mid-year convention and a consolidated discount rate of 10%. Terminal values were calculated using the Gordon growth methodology with a consolidated long-term growth rate of 4%, except for Fiery at 2.5%. The sum of the fair values of the Industrial Inkjet, Productivity Software, and Fiery reporting units was reconciled to our current market capitalization (based on our stock price) plus an estimated control premium. Percentages of revenue over the six-year forecast horizon were compared to approximate percentages realized by the guideline companies. To assess the reasonableness of the estimated control premium of 13.2%, we examined the most similar transactions in relevant industries and determined the average premium indicated by the transactions deemed to be most similar to a hypothetical transaction involving our reporting units. We examined the weighted average and median control premiums offered in relevant industries, industry specific control premiums, and specific transaction control premiums to conclude that our estimated control premium is reasonable.

We assess the impairment of identifiable intangibles and long-lived assets whenever events or changes in circumstances indicate the carrying value may not be recoverable or the life of the asset may need to be revised. Factors considered important that could trigger an impairment review include:

• significant negative industry or economic trends,

• significant decline in our stock price for a sustained period,

• our market capitalization relative to net book value,

• significant changes in the manner of our use of the acquired assets,

• significant changes in the strategy for our overall business, and

• our assessment of growth and profitability in each reporting unit over the coming years.

Given the uncertainty of the economic environment and the potential impact on our business, there can be no assurance that our estimates and assumptions regarding the duration of the ongoing economic downturn, or the period or strength of recovery, made for purposes of our goodwill impairment testing at December 31, 2016 will prove to be accurate predictions of the future. If our assumptions regarding forecasted revenue or gross profit rates are not achieved, we may be required to record additional goodwill impairment charges in future periods relating to any of our reporting units, whether in connection with the next annual impairment testing in the fourth quarter of 2017 or prior to that, if any such change constitutes an interim triggering event. It is not possible to determine if any such future impairment charge would result or, if it does, whether such charge would be material.

Long-Lived Assets

We evaluate potential impairment with respect to long-lived assets whenever events or changes in circumstances indicate their carrying amount may not be recoverable. No asset impairment charges were recognized during the years ended December 31, 2016, 2015, or 2014.

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Investments and Fair Value Measurements

12 Months Ended

Dec. 31, 2016

Text Block [Abstract]

Investments and Fair Value Measurements

Note 6: Investments and Fair Value Measurements

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 short-term investments. Available-for-sale securities are stated at fair value with unrealized gains and losses reported as a separate component of OCI, adjusted for deferred income taxes. The credit portion of any other-than-temporary impairment is included in net income. Realized gains and losses on sales of financial instruments are recognized upon sale of the investments using the specific identification method.

Our available-for-sale short-term investments as of December 31, 2016 and 2015 are as follows (in thousands):

	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
December 31, 2016
U.S. Government and sponsored entities	$	70,893	$	49	$	(348	)	$	70,594
Corporate debt securities		198,166		102		(621	)		197,647
Municipal government		1,278		—		(1	)		1,277
Asset-backed securities		24,233		79		(17	)		24,295
Mortgage-backed securities—residential		1,615		3		(3	)		1,615
Total short-term investments	$	296,185	$	233	$	(990	)	$	295,428
December 31, 2015
U.S. Government and sponsored entities	$	98,411	$	12	$	(137	)	$	98,286
Corporate debt securities		198,498		20		(510	)		198,008
Asset-backed securities		35,276		195		(174	)		35,297
Mortgage-backed securities—residential		1,689		2		(6	)		1,685
Total short-term investments	$	333,874	$	229	$	(827	)	$	333,276

The fair value and duration that investments, including cash equivalents, have been in a gross unrealized loss position as of December 31, 2016 and 2015 are as follows (in thousands):

	Less than 12 Months					More than 12 Months					TOTAL
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
December 31, 2016
U.S. Government and sponsored entities	$	39,810	$	(348	)	$	—	$	—		$	39,810	$	(348	)
Corporate debt securities		133,382		(581	)		13,158		(40	)		146,540		(621	)
Municipal government		1,268		(1	)		—		—			1,268		(1	)
Asset-backed securities		4,540		(7	)		4,611		(10	)		9,151		(17	)
Mortgage-backed securities—residential		428		(1	)		153		(2	)		581		(3	)
Total	$	179,428	$	(938	)	$	17,922	$	(52	)	$	197,350	$	(990	)
December 31, 2015
U.S. Government and sponsored entities	$	82,366	$	(137	)	$	—	$	—		$	82,366	$	(137	)
Corporate debt securities		136,274		(448	)		16,940		(62	)		153,214		(510	)
Asset-backed securities		27,928		(103	)		7,131		(71	)		35,059		(174	)
Mortgage-backed securities—residential		764		(2	)		269		(4	)		1,033		(6	)
Total	$	247,332	$	(690	)	$	24,340	$	(137	)	$	271,672	$	(827	)

For fixed income securities that have unrealized losses as of December 31, 2016, we have determined that we do not have the intent to sell any of these investments and it is not more likely than not that we will be required to sell any of these investments before recovery of the entire amortized cost basis. We have evaluated these fixed income securities and determined that no credit losses exist. Accordingly, management has determined that the unrealized losses on our fixed income securities as of December 31, 2016 were temporary in nature.

Amortized cost and estimated fair value of investments at December 31, 2016 are summarized by maturity date as follows (in thousands):

	Amortized cost		Fair value
Mature in less than one year	$	107,033	$	106,918
Mature in one to three years		189,152		188,510
Total short-term investments	$	296,185	$	295,428

For the year ended December 31, 2016, net realized gains of $0.4 million were recognized, which were comprised of $0.4 million in realized gains from sale of investments, partially offset by less than $0.1 million in realized losses. For the year ended December 31, 2015, net realized gains of $0.1 million were recognized, which were comprised of $0.2 million in realized gains from sale of investments, partially offset by $0.1 million in realized losses. For the year ended December 31, 2014, net realized gains of less than $0.1 million were recognized. As of December 31, 2016 and 2015, net unrealized losses of $0.8 and $0.6 million, respectively, were included in OCI in the accompanying Consolidated Balance Sheets.

Fair Value Measurements

ASC 820 identifies fair value as the exchange price, or exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a three-tier fair value hierarchy as follows:

Level 1: Inputs that are quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date;

Level 2: Inputs that are other than quoted prices included within Level 1, that are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date for the duration of the instrument’s anticipated life or by comparison to similar instruments; and

Level 3: Inputs that are unobservable or that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. These include management’s own judgments about market participant assumptions developed based on the best information available in the circumstances.

We utilize the market approach to measure the fair value of our fixed income securities. The market approach is a valuation technique that uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The fair value of our fixed income securities is obtained using readily-available market prices from a variety of industry standard data providers, large financial institutions, and other third-party sources for the identical underlying securities. The fair value of our investments in certain money market funds is expected to maintain a Net Asset Value of $1 per share and, as such, is priced at the expected market price.

We obtain the fair value of our Level 2 financial instruments from several third party asset managers, custodian banks, and the accounting service providers. Independently, these service providers use professional pricing services to gather pricing data, which may include quoted market prices for identical or comparable instruments or inputs other than quoted prices that are observable either directly or indirectly. As part of this process, we engaged a pricing service to assist management in its pricing analysis and assessment of other-than-temporary impairment. All estimates, key assumptions, and forecasts were either provided by or reviewed by us. While we chose to utilize a third party pricing service, the impairment analysis and related valuations represent conclusions of management and not conclusions or statements of any third party.

Our investments and liabilities measured at fair value have been presented in accordance with the fair value hierarchy specified in ASC 820 as of December 31, 2016 and 2015 in order of liquidity as follows (in thousands):

	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
December 31, 2016
Assets:
Money market funds	$	23,575	$	23,575	$	—	$	—
U.S. Government and sponsored entities		70,594		51,870		18,724		—
Corporate debt securities		197,647		—		197,647		—
Municipal government		1,277		—		1,277		—
Asset-backed securities		24,295		—		24,228		67
Mortgage-backed securities—residential		1,615		—		1,615		—
	$	319,003	$	75,445	$	243,491	$	67
Liabilities:
Contingent consideration, current and noncurrent	$	56,463	$	—	$	—	$	56,463
Self-insurance		1,542		—		—		1,542
	$	58,005	$	—	$	—	$	58,005
December 31, 2015
Assets:
Money market funds	$	13,221	$	13,221	$	—	$	—
U.S. Government and sponsored entities		98,286		34,712		63,574		—
Corporate debt securities		198,778		—		198,778		—
Asset-backed securities		35,297		—		35,113		184
Mortgage-backed securities—residential		1,684		—		1,684		—
	$	347,266	$	47,933	$	299,149	$	184
Liabilities:
Contingent consideration, current and noncurrent	$	54,796	$	—	$	—	$	54,796
Self-insurance		1,268		—		—		1,268
	$	56,064	$	—	$	—	$	56,064

Money market funds consist of $23.6 and $13.2 million, which have been classified as cash equivalents as of December 31, 2016 and 2015, respectively. Corporate debt securities include $0.7 million, which have been classified as cash equivalents at December 31, 2015.

Investments are generally classified within Level 1 or Level 2 of the fair value hierarchy because they are valued using quoted market prices or alternative pricing sources with reasonable levels of price transparency. Investments in U.S. Treasury obligations and overnight money market mutual funds have been classified as Level 1 because these securities are valued based on quoted prices in active markets or are actively traded at $1.00 Net Asset Value. There have been no transfers between Level 1 and 2 during the years ended December 31, 2016 and 2015.

Government agency investments and corporate debt instruments, including investments in asset-backed and mortgage-backed securities, have generally been classified as Level 2 because markets for these securities are less active or valuations for such securities utilize significant inputs, which are directly or indirectly observable. We hold asset-backed securities with income payments derived from and collateralized by a specified pool of underlying assets. Asset-backed securities in the portfolio are predominantly collateralized by credit cards and auto loans. We also hold two asset-backed securities collateralized by mortgage loans, which have been fully reserved.

Liabilities for Contingent Consideration

Acquisition-related liabilities for contingent consideration (i.e., earnouts) are related to the purchase business combinations of Optitex and Rialco in 2016; Shuttleworth, CTI, and Reggiani in 2015; DIMS, DirectSmile, and SmartLinc in 2014; Metrix, GamSys, and PrintLeader Software (“PrintLeader”) in 2013; and Technique in 2012.

The fair value of these earnouts is estimated to be $56.5 and $54.8 million as of December 31, 2016 and 2015, respectively, by applying the income approach in accordance with ASC 805-30-25-5. Key assumptions include risk-free discount rates between 0.6% and 4.98% (Monte Carlo valuation method) and discount rates between 4.2% and 6.0% (probability-adjusted method), as well as probability-adjusted revenue and EBIT levels. Probability-adjusted revenue, gross margin, and EBIT are significant inputs that are not observable in the market, which ASC 820-10-35 refers to as Level 3 inputs. These contingent liabilities have been reflected in the Consolidated Balance Sheet as of December 31, 2016 as current and noncurrent liabilities of $19.3 and $37.2 million, respectively.

The fair value of contingent consideration increased by $6.8 million, including $2.7 million of earnout interest accretion during the year ended December 31, 2016 related to all acquisitions. The Rialco, Optitex, Reggiani, DirectSmile, and CTI earnout performance probabilities increased while the DIMS and Shuttleworth earnout performance probabilities decreased or were not achieved in 2016. The fair value of contingent consideration decreased by $2.1 million, net of $1.4 million of earnout interest accretion during the year ended December 31, 2016 related to all acquisitions. The DIMS, DirectSmile, GamSys, and Metrix, earnout performance probability percentages were reduced or not achieved in 2015. In accordance with ASC 805-30-35-1, changes in the fair value of contingent consideration subsequent to the acquisition date have been recognized in general and administrative expense.

Earnout payments during the year ended December 31, 2016 of $23.8, $3.6, $0.4, and $0.2 million are primarily related to the previously accrued Reggiani, DirectSmile, SmartLinc, and Metrix contingent consideration liabilities, respectively. Earnout payments during the year ended December 31, 2015 of $2.0, $1.1, $0.6, and $0.3 million are primarily related to the previously accrued Technique, GamSys, Metrix, and SmartLinc contingent consideration liabilities, respectively.

Changes in the contingent liability for contingent consideration during the years ended December 31, 2016 and 2015 are summarized as follows:

Fair value of contingent consideration at December 31, 2014	$	12,277
Fair value of Reggiani contingent consideration at July 1, 2015		43,170
Fair value of CTI contingent consideration at October 6, 2015		2,551
Fair value of Shuttleworth contingent consideration at November 4, 2015		5,077
Changes in valuation		(2,135	)
Payments		(4,093	)
Foreign currency adjustment		(2,051	)
Fair value of contingent consideration at December 31, 2015	$	54,796
Fair value of Rialco contingent consideration at March 1, 2016		2,109
Fair value of Optitex contingent consideration at June 16, 2016		22,300
Changes in valuation		6,813
Payments		(28,111	)
Foreign currency adjustment		(1,444	)
Fair value of contingent consideration at December 31, 2016	$	56,463

A narrative description of the sensitivity of recurring fair value measurements to changes in unobservable inputs is required if a change in those inputs might result in a significantly higher or lower fair value measurement. Since the most significant inputs to the fair value measurement of the contingent consideration liability are the probability-adjusted revenue and discount rate, we reviewed the sensitivity of the fair value measurement to changes in these inputs. We assessed the probability of achieving the revenue performance targets for the contingent consideration associated with each acquisition at percentage levels between 50% and 100% as of each respective acquisition date based on an assessment of the historical performance of each acquired entity, our current expectations of future performance, and other relevant factors. A change in probability-adjusted revenue of five percentage points from the level assumed in the current valuations would result in an increase in the fair value of contingent consideration of $1.2 million or a decrease of $3.6 million resulting in a corresponding adjustment to general and administrative expense. A change in the discount rate of one percentage point results in an increase in the fair value of contingent consideration of $0.5 million or a decrease of $0.8 million. The potential undiscounted amount of future contingent consideration cash payments that we could be required to make related to our business acquisitions, beyond amounts currently accrued, is $14.6 million as of December 31, 2016.

Fair Value of Derivative Instruments

We utilize the income approach to measure the fair value of our derivative assets and liabilities. The income approach uses pricing models that rely on market observable inputs such as yield curves, currency exchange rates, and forward prices, and are therefore classified as Level 2 measurements. The notional amount of our derivative assets and liabilities was $161.8 and $118.6 million as of December 31, 2016 and 2015, respectively. The fair value of our derivative assets and liabilities that were designated for cash flow hedge accounting treatment having notional amounts of $3.2 million as of December 31, 2016 and 2015, respectively, was not material.

Fair Value of Convertible Senior Notes

In September 2014, we issued $345 million aggregate principal amount of 0.75% Convertible Senior Notes due 2019 (“Notes”). The Notes are carried at their original issuance value, net of unamortized debt discount, and are not marked to market each period. The approximate fair value of the Notes as of December 31, 2016 was approximately $355 million and was considered a Level 2 fair value measurement. Fair value was estimated based upon actual quotations obtained at the end of the reporting period or the most recent date available. A substantial portion of the market value of our Notes in excess of the outstanding principal amount relates to the conversion premium.

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Convertible Senior Notes, Note Hedges, and Warrants

12 Months Ended

Dec. 31, 2016

Debt Disclosure [Abstract]

Convertible Senior Notes, Note Hedges, and Warrants

Note 7: Convertible Senior Notes, Note Hedges, and Warrants

0.75% Convertible Senior Notes Due 2019

In September 2014, we completed a private placement of $345 million principal amount of 0.75% Convertible Senior Notes due 2019 (“Notes”). The Notes were sold to the initial purchasers for resale to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. The net proceeds from this offering were approximately $336.3 million, after deducting the initial purchasers’ commissions and the offering expenses paid by us. We used approximately $29.4 million of the net proceeds to purchase the Note Hedges described below, net of the proceeds from the Warrant transactions also described below.

The Notes are senior unsecured obligations of EFI with interest payable semiannually in arrears on March 1 and September 1 of each year, commencing March 1, 2015. The Notes are not callable and will mature on September 1, 2019, unless previously purchased or converted in accordance with their terms prior to such date. Holders of the Notes who convert in connection with a “fundamental change,” as defined in the indenture governing the Notes (“Indenture”), may require us to purchase for cash all or any portion of their Notes at a purchase price equal to 100 percent of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any.

The initial conversion rate is 18.9667 shares of common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $52.72 per share of common stock. Upon conversion of the Notes, holders will receive cash, shares of common stock or a combination thereof, at our election. Our intent is to settle the principal amount of the Notes in cash upon conversion. If the conversion value exceeds the principal amount, we would deliver shares of our common stock for our conversion obligation in excess of the aggregate principal amount. As of December 31, 2016, none of the conditions allowing holders of the Notes to convert had been met.

Throughout the term of the Notes, the conversion rate may be adjusted upon the occurrence of certain events. Holders of the Notes will not receive any cash payment representing accrued and unpaid interest upon conversion of a Note. Holders may convert their Notes only under the following circumstances:

• during any calendar quarter commencing after the calendar quarter ending on December 31, 2014 (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;

• during the five business day period after any five consecutive trading day period (“Notes Measurement Period”) in which the “trading price” (as the term is defined in the Indenture) per $1,000 principal amount of notes for each trading day of such Notes Measurement Period was less than 98% of the product of the last reported stock price on such trading day and the conversion rate on each such trading day;

• upon the occurrence of specified corporate events; or

• at any time on or after March 1, 2019 until the close of business on the second scheduled trading day immediately preceding the maturity date.

We separated the Notes into liability and equity components. The carrying amount of the liability component was calculated by measuring the estimated fair value of a similar liability that does not have an associated convertible feature. The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the face value of the Notes as a whole. The excess of the principal amount of the liability component over its carrying amount (“debt discount”) is amortized to interest expense over the term of the Notes using the effective interest method with an effective interest rate of 4.98% per annum (5.46% inclusive of debt issuance costs). The equity component is not remeasured as long as it continues to meet the conditions for equity classification.

We allocated the total transaction costs incurred by the Notes issuance to the liability and equity components based on their relative values. Issuance costs of $7.0 million attributable to the $281.4 million liability component are being amortized to expense over the term of the Notes, and issuance costs of $1.6 million attributable to the $63.6 million equity component were offset against the equity component in stockholders’ equity. Additionally, we recorded a deferred tax liability of $23.7 million on the debt discount, which is not deductible for tax purposes.

The Notes consist of the following at December 31, 2016 and 2015 (in thousands):

	2016			2015
Liability component	$	345,000		$	345,000
Debt discount, net of amortization		(36,115	)		(48,515	)
Debt issuance costs, net of amortization		(4,401	)		(5,751	)
Net carrying amount	$	304,484		$	290,734
Equity component	$	63,643		$	63,643
Less: debt issuance costs allocated to equity		(1,582	)		(1,582	)
Net carrying amount	$	62,061		$	62,061

Upon adoption of ASU 2015-03, $5.8 million of debt issuance costs have been reclassified from other current assets and other assets to a direct reduction of convertible senior notes, net, in our Consolidated Balance Sheet as of December 31, 2015.

Interest expense recognized related to the Notes during the years ended December 31, 2016, 2015, and 2014 was as follows (in thousands):

	2016		2015		2014
0.75% coupon	$	2,588	$	2,595	$	798
Amortization of debt issuance costs		1,350		1,396		419
Amortization of debt discount		12,400		11,667		3,461
	$	16,338	$	15,658	$	4,678

Note Hedges

We paid an aggregate of $63.9 million in convertible note hedge transactions with respect to our common stock (“Note Hedges”) in September 2014. The Note Hedges will expire upon maturity of the Notes. The Note Hedges are intended to offset the potential dilution upon conversion and/or offset any cash payments we are required to make in excess of the principal amount upon conversion of the Notes in the event that the market value per share of our common stock, as measured under the terms of the Note Hedges, is greater than the strike price of the Note Hedges. The strike price of the Note Hedges initially correspond to the conversion price of the Notes and is subject to anti-dilution adjustments substantially similar to those applicable to the conversion price of the Notes. The Note Hedges are separate transactions and are not part of the Notes. Holders of the Notes will not have any rights with respect to the Note Hedges.

Warrants

Concurrently with entering into the Note Hedges, we separately entered into warrant transactions (“Warrants”), whereby we sold warrants to acquire shares of our common stock at a strike price of $68.86 per share. We received aggregate proceeds of $34.5 million from the sale of the Warrants. If the average market value per share of our common stock for the reporting period, as measured under the Warrants, exceeds the strike price of the Warrants, the Warrants will have a dilutive effect on our earnings per share. The Warrants are separate transactions and are not part of the Notes or the Note Hedges and are accounted for as a component of additional paid-in capital. Holders of the Notes and Note Hedges will not have any rights with respect to the Warrants.

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Commitments and Contingencies

12 Months Ended

Dec. 31, 2016

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 8: Commitments and Contingencies

Contingent Consideration

We are required to make payments to the former stockholders of acquired companies based on the achievement of specified performance targets as more fully explained in Note 6—Investments and Fair Value Measurements.

Purchase Commitments

We subcontract with other companies to manufacture our products. During the normal course of business, our subcontractors procure components based on orders placed by us. If we cancel all or part of our orders, we may still be liable to the subcontractors for the cost of the components they purchased to manufacture our products. We periodically review the potential liability compared to the adequacy of the related allowance.

Lease Commitments

As of December 31, 2016, we lease certain of our current facilities under noncancellable operating lease agreements. We are required to pay property taxes, insurance, and nominal maintenance costs for certain of these facilities and any increases over the base year of these expenses on the remainder of our facilities.

Future minimum lease payments under noncancellable operating leases, including our build-to-suit lease, and future minimum sublease receipts, for each of the next five years and thereafter as of December 31, 2016 are as follows (in thousands):

	Future Minimum		Future Minimum
Fiscal Year	Lease Payments		Sublease Receipts
2017	$	9,097	$	370
2018		8,240		313
2019		7,848		166
2020		6,570		—
2021		5,355		—
Thereafter		33,894		—
Total	$	71,004	$	849

Rent expense was approximately $8.8, $8.0, and $6.1 million for the years ended December 31, 2016, 2015, and 2014, respectively.

Off-Balance Sheet Financing

On August 26, 2016, we entered into a lease agreement and have accounted for a lease term of 48.5 years, inclusive of two renewal options of 5.0 and 3.5 years, with the City of Manchester to lease 16.9 acres of land adjacent to the Manchester Regional Airport. The land is subleased to BTMU during the term of the lease related to the manufacturing facility that is being constructed on the site, which is described below. Minimum lease payments are $13.1 million during the 48.5 year term of the land lease, excluding four months of the land lease that is financed into the manufacturing facility lease.

On August 26, 2016, we entered into a six-year lease with BTMU whereby a 225,000 square foot manufacturing and warehouse facility is under construction related to our super-wide format industrial digital inkjet printer business in the Industrial Inkjet operating segment at a projected cost of $40 million and a construction period of 18 months. Minimum lease payments during the initial term are $1.8 million. Upon completion of the initial term, we have the option to renew the lease, purchase the facility, or return the facility to BTMU subject to an 89% residual value guarantee under which we would recognize additional rent expense in the form of a variable rent payment. We have assessed our exposure in relation to the residual value guarantee and believe that there is no deficiency to the guaranteed value with respect to funds expended by BTMU as of December 31, 2016. We are treated as the owner of the facility for federal income tax purposes.

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 will be restricted during the construction period. Upon completion of construction, the funds will be released as cash and cash equivalents. The portion of released funds that represents 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.

The funds pledged as collateral are invested in U.S. government securities and cash equivalents as of December 31, 2016, and are classified as Level 1 in the fair value hierarchy as more fully defined in Note 6—Investments and Fair Value Measurements. Net unrealized losses of less than $0.1 million were included in OCI in the accompanying Consolidated Balance Sheet as of December 31, 2016.

We have applied the accounting and disclosure requirements set forth in ASC 810-10 for VIEs. We have evaluated the BTMU lease agreement to determine if the arrangement qualifies as a VIE under ASC 810-10. We have determined that the lease agreement does not qualify as a VIE and, as such, we are not required to consolidate the VIE in our consolidated financial statements.

Assets Held for Sale

Management has approved a plan to sell approximately 5.6 acres of land and the office building located at 1340 Corporate Center Curve, Eagan, Minnesota, consisting of 43,682 square feet. We intend to enter into a lease agreement with the purchaser of the facility whereby we will lease 22,000 square feet under a ten-year lease agreement at market rental rates. The gain on the sale of the facility and land will be deferred over the lease term.

Assets held for sale of $3.8 million have been reclassified to other current assets as of December 31, 2016 consisting of $2.9 million net book value of the facility and $0.9 million of related land. Management expects the sale and related lease-back to be completed in the next nine months.

Build-to-Suit Lease Arrangement

We entered into a 15-year lease agreement pursuant to which we leased approximately 59,000 square feet of a building located in Fremont, California. The lease commenced on September 1, 2013. Minimum lease payments are $18.5 million, net of full abatement of rent for the first three years of the lease term. During the initial lease term, we also have certain rights of first refusal to (i) lease the remaining portion of the facility and/or (ii) purchase the facility. This location contains the engineering, marketing, and administrative operations for our Fiery operating segment. We relocated our former corporate headquarters to the adjacent building, which we purchased during the fourth quarter of 2013.

The leased facility was a cold shell requiring additional build-out and tenant improvements. The landlord paid the costs of the build-out up to $4.5 million, including all structural improvements, and we paid the costs of tenant improvements beyond that amount. We paid $5.3 million of tenant improvements, including furniture and equipment and capitalized interest. The landlord is responsible for costs related to force majeure events that result in any damage to the facility. We were responsible for cost over-runs, if any, related to force majeure events including strikes, war, and material availability. Since we were responsible for cost overruns related to certain force majeure events, we were in substance offering an indemnification for events outside of our control. As such, we are deemed to be the accounting owner of the facility. As of December 31, 2016 and 2015, we have capitalized $10.3 and $10.6 million, respectively, in property and equipment based on the estimated replacement cost of the portion of the building that we occupy, including capitalized interest, reduced by accumulated depreciation.

Monthly lease payments are allocated between the land element of the lease, which is accounted for as an operating lease upon lease execution, and the imputed financing obligation. The imputed financing obligation is being amortized upon lease commencement in accordance with the effective interest method using the interest rate determined in accordance with the requirements of sale leaseback accounting. The imputed interest cost incurred during the construction period was capitalized as a component of the construction cost upon lease commencement. As of December 31, 2016, the imputed financing obligation in connection with the facility was $14.2 million, including accrued interest, which was classified as a noncurrent imputed financing obligation in our Consolidated Balance Sheet. If the requirements of sale leaseback accounting are satisfied, or at the end of the initial lease term, we will reverse the net book value of the building and the corresponding imputed financing obligation.

Guarantees and Product Warranties

Guarantees must be disclosed upon issuance and a liability recognized for the fair value of obligations we assume under such guarantees in accordance with ASC 460, Guarantees, which applies to both general guarantees and product warranties.

Our Industrial Inkjet printers are generally accompanied by a 12-month limited warranty, which covers both parts and labor. Our Fiery DFE products limited warranty is generally 12 to 15 months. In accordance with ASC 450-30, an accrual is established when the warranty liability is estimable and probable based on historical experience. A provision for the estimated warranty costs relating to products that have been sold is recorded in cost of revenue upon recognition of revenue and the resulting accrual is reviewed regularly and periodically adjusted to reflect changes in warranty estimates.

The changes in product warranty reserve for the years ended December 31, 2016 and 2015 were as follows (in thousands):

	2016			2015
Balance at January 1,	$	9,635		$	9,682
Liability assumed through business acquisitions		—			1,006
Provisions, net of releases		12,715			11,839
Settlements		(12,031	)		(12,892	)
Balance at December 31,	$	10,319		$	9,635

Indemnifications

In the normal course of business and in an effort to facilitate the sales of our products, we sometimes indemnify other parties, including customers, lessors, and parties to other transactions with us. When we indemnify these parties, typically those provisions protect other parties against losses arising from our infringement of third party intellectual property rights or other claims made by third parties arising from the use or distribution of our products. Those provisions often contain various limitations including limits on the amount of protection provided.

As permitted under Delaware law, pursuant to our bylaws, charter, and indemnification agreements with our current and former executive officers, directors, and general counsel, we are required, subject to certain limited qualifications, to indemnify our executive officers, directors, and general counsel for certain events or occurrences while the executive officer, director, or general counsel is or was serving at our request in such capacity. The indemnification period covers all pertinent events and occurrences during the executive officer’s, director’s, or general counsel’s lifetime. The maximum potential future payments we may be obligated to make under these indemnification agreements is unlimited; however, we have director and officer insurance coverage that limits our exposure and may enable us to recover a portion of any future amounts paid.

Legal Proceedings

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.

As of December 31, 2016, we are subject to the matter discussed below.

MDG Matter

EFI acquired Matan in 2015 from sellers (the “2015 Sellers”) that acquired Matan Digital Printing Ltd. from other sellers in 2001 (the “2001 Sellers”). The 2001 Sellers have asserted a claim against the 2015 Sellers and Matan asserting that they are entitled to a portion of the 2015 Sellers’ proceeds from EFI’s acquisition. The 2015 Sellers dispute any such claim and have fully indemnified EFI against the 2001 Sellers’ claim.

Although we are fully indemnified and we do not believe that it is probable that we will incur a loss, it is reasonably possible that our financial statements could be materially affected by an unfavorable resolution of this matter. Accordingly, it is reasonably possible that we could incur a material loss in this matter. We estimate the range of loss to be between one dollar and $10.1 million. If we incur a loss in this matter, it will be offset by an indemnification receivable of an equal amount representing a claim against the escrow account established in connection with the Matan acquisition.

Other Matters

As of December 31, 2016, we were subject to various other claims, lawsuits, investigations, and proceedings in addition to the matter discussed above. There is at least a reasonable possibility that additional losses may be incurred in excess of the amounts that we have accrued. However, we believe that these claims are not material to our financial statements or the range of reasonably possible losses is not reasonably estimable. Litigation is inherently unpredictable, and while we believe that we have valid defenses with respect to legal matters pending against us, our financial statements could be materially affected in any particular period by the unfavorable resolution of one or more of these contingencies or because of the diversion of management’s attention and the incurrence of significant expenses.

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Common Stock Repurchase Programs

12 Months Ended

Dec. 31, 2016

Equity [Abstract]

Common Stock Repurchase Programs

Note 9: Common Stock Repurchase Programs

On November 6, 2013, the board of directors approved the repurchase of $200 million of outstanding common stock. Under this publicly announced plan, we repurchased 1.8 and 1.5 million shares for an aggregate purchase price of $74.2 and $65.7 million during the years ended December 31, 2016 and 2015, respectively.

On November 9, 2015, the board of directors cancelled $54.9 million remaining for repurchase under the 2013 authorization and approved a new authorization to repurchase $150 million of outstanding common stock commencing January 1, 2016. This authorization expires December 31, 2018.

Our employees have the option to surrender shares of common stock to satisfy their tax withholding obligations that arise on the vesting of RSUs. In connection with stock option exercises, certain employees can surrender shares to satisfy the exercise price of certain stock options and any tax withholding obligations incurred in connection with such exercises. Employees surrendered 0.2 and 0.2 million shares for an aggregate purchase price of $9.1 and $10.7 million for the years ended December 31, 2016 and 2015, respectively.

These repurchased shares reduce shares outstanding and are recorded as treasury stock under the cost method thereby reducing stockholders’ equity by the cost of the repurchased shares. Our buyback program is limited by SEC regulations and is subject to compliance with our insider trading policy.

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Derivatives and Hedging

12 Months Ended

Dec. 31, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives and Hedging

Note 10: 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. dollar-denominated revenue in Europe, the U.K., Latin America, China, Israel, Australia, New Zealand, Canada, and to non-U.S. dollar-denominated operating expenses in Europe, India, Japan, the U.K., China, Israel, Brazil, and Australia. We hedge our operating expense cash flow exposure in Indian rupees. We hedge balance sheet remeasurement exposure associated with 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-denominated net monetary assets.

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 by the counterparty associated with these instruments because, by policy, we deal with counterparties having a minimum investment grade or better credit rating. Credit risk is managed through the continuous monitoring of exposures to such counterparties.

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 derivative instruments in earnings in the period of change. Gains (losses) on foreign currency forward contracts used to hedge balance sheet exposures are recognized in interest income and other income (expense), net, in the same period as the remeasurement gain (loss) of the related foreign currency denominated assets and liabilities. Forward contracts not designated as hedging instruments consist of hedges of Brazilian real, British pound sterling, Israeli shekel, Australian dollar, Japanese yen, Chinese renminbi, and Euro-denominated intercompany balances with notional amounts of $90.7 and $63.7 million at December 31, 2016 and 2015, respectively, hedges of Brazilian real, British pound sterling, Australian dollar, Israeli shekel, and Euro-denominated trade receivables with notional amounts of $39.8 and $49.1 million at December 31, 2016 and 2015, respectively, and hedges of British pounds sterling, Indian rupee, and Euro-denominated other net monetary assets with notional amounts of $28.2 and $2.6 million at December 31, 2016 and 2015, respectively.

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Income Taxes

12 Months Ended

Dec. 31, 2016

Income Tax Disclosure [Abstract]

Income Taxes

Note 11: Income Taxes

The components of income before income taxes for the years ended December 31, 2016, 2015, and 2014 are as follows (in thousands):

	2016		2015		2014
U.S.	$	8,254	$	9,311	$	15,090
Foreign		31,128		28,211		26,997
Total	$	39,382	$	37,522	$	42,087

The provision for (benefit from) income taxes for the years ended December 31, 2016, 2015, and 2014 is summarized as follows (in thousands):

	2016			2015			2014
Current:
U.S. Federal	$	(7,593	)	$	3,755		$	5,050
State		662			1,813			1,237
Foreign		11,722			5,798			7,922
Total current		4,791			11,366			14,209
Deferred:
U.S. Federal		(4,276	)		(3,119	)		(94	)
State		(567	)		(583	)		846
Foreign		(6,112	)		(3,682	)		(6,588	)
Total deferred		(10,955	)		(7,384	)		(5,836	)
Provision for (benefit from) income taxes	$	(6,164	)	$	3,982		$	8,373

The reconciliation of the income tax provision (benefit) computed at the federal statutory rate to the actual tax provision (benefit) for the years ended December 31, 2016, 2015, and 2014 is as follows (in thousands):

	2016					2015					2014
Tax provision at federal statutory rate	$	13,783		35.0	%	$	13,133		35.0	%	$	14,731		35.0	%
State income taxes, net of federal benefit		62		0.2			800		2.1			360		0.9
Research and development credits		(2,627	)	(6.7	)		(4,217	)	(11.2	)		(2,629	)	(6.2	)
Effect of foreign operations		(3,439	)	(8.7	)		(3,483	)	(9.3	)		(2,293	)	(5.4	)
Increase in value of intangible assets		—		—			—		—			(3,130	)	(7.4	)
Reduction in accrual for estimated potential tax assessments		(15,404	)	(39.1	)		(4,808	)	(12.7	)		(2,088	)	(5.0	)
Non-deductible stock-based compensation pursuant to ASC 718-740		1,288		3.3			3,244		8.6			2,793		6.6
Domestic manufacturing deduction		(831	)	(2.1	)		(878	)	(2.3	)		(598	)	(1.4	)
Other		1,004		2.4			191		0.4			1,227		2.8
Provision for (benefit from) income taxes	$	(6,164	)	(15.7	)%	$	3,982		10.6	%	$	8,373		19.9	%

During the year ended December 31, 2016, we recognized a $16.6 million tax benefit (including state tax benefit) from the release of previously unrecognized tax benefits due to the expiration of U.S. federal, state, and foreign statutes of limitations, of which $10.3 million related to the 2012 sale of our Foster City building and land.

During the year ended December 31, 2014, we recognized a $3.1 million tax benefit related to the increased valuation of intangible assets for Brazilian tax reporting resulting from the merger of our Brazilian subsidiaries.

We earn a significant amount of our operating income outside the U.S., which is deemed to be permanently reinvested in foreign jurisdictions. Of the income generated in jurisdictions with tax rates materially lower than the statutory U.S. tax rate of 35%, most is earned in the Netherlands, Spain, United Kingdom, Italy, and the Cayman Islands. Our effective tax rate could fluctuate significantly and be adversely impacted if anticipated earnings in the Netherlands, Spain, and the Cayman Islands are proportionally lower than current projections and earnings in all other jurisdictions are proportionally higher than current projections.

While we currently do not foresee a need to repatriate the earnings of foreign operations, should we require more capital in the U.S. than is generated by our U.S. operations, we may elect to repatriate funds held in our foreign jurisdictions or raise capital in the U.S. through debt or equity issuances. These alternatives could result in higher effective tax rates, the cash payments of taxes and/or increased interest expense. As of December 31, 2016, we have permanently reinvested $164.6 million of unremitted foreign earnings. Should these earnings be remitted to the U.S., the tax on these earnings would be $34.6 million.

In Altera Corp.v. Commissioner, the U.S Tax Court issued an opinion on July 27, 2015, related to the treatment of stock-based compensation expense in an intercompany cost-sharing arrangement. To date, the U.S. Department of the Treasury has not withdrawn the requirement to include stock-based compensation in intercompany cost-sharing arrangements from its regulations. Due to the uncertainty related to the status of the current regulations and the ultimate outcome of the appeal, we have not recorded any benefit as of December 31, 2016 in our Consolidated Statement of Operations. We will continue to monitor ongoing developments and potential impacts to our consolidated financial statements.

The tax effects of temporary differences that give rise to deferred tax assets (liabilities) as of December 31, 2016 and 2015 are as follows (in thousands):

	2016			2015
Reserves and accruals not currently deductible for tax purposes	$	14,079		$	13,804
Net operating loss carryforwards		10,055			10,409
Tax credit carryforwards		63,985			44,176
Deferred revenue		1,642			3,778
Stock-based compensation		8,487			8,309
Other		6,222			5,099
Gross deferred tax assets		104,470			85,575
Depreciation and amortization		(17,845	)		(24,042	)
State Taxes		(2,092	)		(1,841	)
Gross deferred tax liabilities		(19,937	)		(25,883	)
Deferred tax valuation allowance		(42,406	)		(37,652	)
Net deferred tax assets	$	42,127		$	22,040

We have $16.1 million ($54.8 million for state tax purposes) and $42.3 million ($37.3 million for state tax purposes) of loss and credit carryforwards at December 31, 2016 for U.S. federal tax purposes. A majority of these federal and state losses and credits will expire between 2022 and 2027. A significant portion of these net operating loss and credit carryforwards relate to recent acquisitions. Utilization of these loss and credit carryforwards will be subject to an annual limitation under the Internal Revenue Code (“IRC”). We also have a valuation allowance related to California and Luxembourg deferred tax assets.

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 valuation allowances on deferred tax assets related to California, Luxembourg, Israel, Netherlands, and Turkey deferred tax assets that will not be realized based on the size of the net operating loss and research and development credits being generated, 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 will include an expense within the tax benefit in the Consolidated Statement of Operations in the period in which such determination is made.

A reconciliation of the change in the gross unrecognized tax benefits from January 1, 2014 to December 31, 2016 is as follows (in millions):

	Federal, State, and Foreign Tax			Accrued Interest  and Penalties			Gross Unrecognized Income Tax Benefits
Balance at January 1, 2014	$	32.4		$	0.6		$	33.0
Additions for tax positions of prior years		0.9			0.4			1.3
Additions for tax positions related to 2014		3.6			—			3.6
Reductions due to lapse of applicable statute of limitations		(2.7	)		(0.2	)		(2.9	)
Balance at December 31, 2014	$	34.2		$	0.8		$	35.0
Additions for tax positions of prior years		14.1			0.2			14.3
Additions for tax positions related to 2015		4.7			—			4.7
Reductions due to lapse of applicable statute of limitations		(6.9	)		(0.5	)		(7.4	)
Balance at December 31, 2015	$	46.1		$	0.5		$	46.6
Additions for tax positions of prior years		1.8			0.2			2.0
Additions for tax positions related to 2016		3.9			—			3.9
Reductions due to lapse of applicable statute of limitations		(16.4	)		(0.2	)		(16.6	)
Balance at December 31, 2016	$	35.4		$	0.5		$	35.9

As of December 31, 2016, 2015, and 2014, gross unrecognized benefits that would affect the effective tax rate if recognized were $32.0, $43.5, and $32.1 million, respectively, offset by deferred tax benefits of $1.1, $1.0, and $0.7 million related to the federal tax effect of state income taxes for the same periods. Over the next twelve months, our existing tax positions will continue to generate increased liabilities for unrecognized tax benefits. It is reasonably possible that our gross unrecognized tax benefits will decrease up to $3.5 million in the next twelve months. These adjustments, if recognized, would positively impact our effective tax rate, and would be recognized as additional tax benefits in our Consolidated Statements of Operations.

In accordance with ASU 2013-11, we recorded $20.0 million of gross unrecognized tax benefits as an offset to deferred tax assets as of December 31, 2016, and the remaining $12.0 million has been recorded as noncurrent income taxes payable.

We recognize potential accrued interest and penalties related to unrecognized tax benefits in income tax expense. At December 31, 2016, 2015, and 2014, we have accrued $0.5, $0.5, and $0.9 million, respectively, for potential payments of interest and penalties.

In accordance with ASU 2016-09, which was adopted in the second quarter of 2016, we recorded $2.2 million of deferred tax assets related to excess tax benefits for federal research and development income tax credits not previously benefitted and $0.6 million of deferred tax assets for the tax benefit on the cumulative effect adjustment associated with the change in accounting for RSU forfeitures.

We are subject to examination by the Internal Revenue Service (“IRS”) for the 2013-2015 tax years, state tax jurisdictions for the 2012-2015 tax years, the Netherlands tax authority for the 2014-2015 tax years, the Spanish tax authority for the 2012-2015 tax years, and the Italian tax authority for the 2012-2015 tax years.

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Employee Benefit Plans

12 Months Ended

Dec. 31, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Employee Benefit Plans

Note 12: Employee Benefit Plans

Equity Incentive Plans

As of December 31, 2016, we had outstanding equity awards under our 2009 Plan, which is defined below. No awards may be granted under our 2007 Stock Plan. Our primary equity incentive plans are summarized as follows:

2009 Stock Plan

As most recently amended on June 4, 2013, our stockholders approved amendments to the Amended and Restated 2009 Equity Incentive Award Plan (“2009 Plan”) to increase the number of shares of common stock reserved under the plan for future issuance up to 11.6 million shares and authorize the granting of performance-based awards under the plan through the 2018 annual meeting of stockholders.

The 2009 Plan provides for grants of stock options (both incentive and nonqualified stock options), restricted stock awards, stock appreciation rights, performance shares, performance stock units, dividend equivalents, stock payments, deferred stock, RSUs, and performance-based awards. Options and awards generally vest over a period of one to four years from the date of grant and generally expire seven to ten years from the date of the grant. The terms of the 2009 Plan provide that an option price shall not be less than 100% of fair value on the date of the grant. Our board of directors may grant a stock bonus or stock unit award under the 2009 Plan in lieu of all or a portion of any cash bonus that a participant would have otherwise received for the related performance period.

The shares of common stock covered by the 2009 Plan may be treasury shares, authorized but unissued shares, or shares purchased in the open market. If an award under the 2009 Plan is forfeited (including a reimbursement of a non-vested award upon a participant’s termination of employment at a price equal to the par value of the common stock subject to the award) or expired, any shares of common stock subject to the award may be used again for new grants under the 2009 Plan.

The 2009 Plan is administered by the Compensation Committee of the Board of Directors (“Committee”). The Committee has the exclusive authority to administer the 2009 Plan, including the power to (i) designate participants under the 2009 Plan, (ii) determine the types of awards granted to participants under the 2009 Plan, the number of such awards, and the number of shares of our common stock that is subject to such awards, (iii) determine and interpret the terms and conditions of any awards under the 2009 Plan, including the vesting schedule, exercise price, whether to settle or accept the payment of any exercise price, in cash, common stock, other awards, or other property, and whether an award may be cancelled, forfeited, or surrendered, (iv) prescribe the form of each award agreement, and (v) adopt rules for the administration, interpretation, and application of the 2009 Plan.

Persons eligible to participate in the 2009 Plan include all of our employees, directors, and consultants, as determined by the Committee. As of December 31, 2016, approximately 3,600 employees and consultants and 5 non-employee directors were eligible to participate in the 2009 Plan.

There were 2.4, 2.3, and 2.5 million shares outstanding and 1.7, 2.7, and 3.4 million shares available for grant under the 2009 Plan as of December 31, 2016, 2015, and 2014, respectively.

Amended and Restated 2000 Employee Stock Purchase Plan

As most recently amended on June 4, 2013, our stockholders approved the Amended and Restated 2000 Employee Stock Purchase Plan that increased the number of shares authorized for issuance pursuant to such plan by 2 million shares. The share increase was intended to ensure that we continue to have a sufficient reserve of common stock available under the ESPP to provide our eligible employees with the opportunity to acquire our common stock through participation in a payroll deduction-based ESPP designed to operate in compliance with Section 423 of the IRC. The ESPP does not provide for an automatic increase in the number of shares reserved for issuance under the ESPP.

The ESPP is qualified under Section 423 of the IRC. Eligible employees may contribute from one to ten percent of their base compensation. Employees are not able to purchase more than the number of shares having a value greater than $25,000 in any calendar year, as measured at the beginning of the offering period under the ESPP. The purchase price shall be the lesser of 85% of the fair value of the stock, either on the offering date or on the purchase date. The offering period shall not exceed 27 months beginning with the offering date. The ESPP provides for offerings of four consecutive, overlapping six-month offering periods, with a new offering period commencing on the first trading day on or after February 1 and August 1 of each year.

During each of the years ended December 31, 2016, 2015, and 2014, there were 0.3, 0.3, and 0.6 million shares issued under the ESPP at an average purchase price of $32.88, $31.66, and $13.54, respectively. As of December 31, 2016, there was $0.5 million of total unrecognized compensation cost related to stock-based compensation arrangements granted under the ESPP, which is expected to be recognized over a period of 1.8 years. At December 31, 2016, 2015, and 2014, there were 1.2, 1.5, and 1.8 million shares, respectively, of our common stock reserved for issuance under the ESPP.

Employee 401(k) Plan

We sponsor a 401(k) Savings Plan (“401(k) Plan”) that provides retirement and incidental benefits for our employees. Employees may contribute from 1% to 40% of their annual compensation to the 401(k) Plan, limited to a maximum annual amount as set periodically by the IRS. In 2014, the maximum employee contribution was increased from 40% to 75%. We match 50% of U.S. employee contributions, up to a maximum of the first 4% of the employee’s compensation contributed to the plan, subject to IRS limitations. All matching contributions vest over four years starting with the hire date of the individual employee. Our matching contributions to the 401(k) Plan totaled $2.2, $2.3, and $2.1 million during the years ended December 31, 2016, 2015, and 2014, respectively. The employees’ contributions and our contributions are invested in mutual funds managed by a fund manager, or in self-directed retirement plans.

Valuation and Expense Information under ASC 718

We account for stock-based payment awards in accordance with ASC 718, which requires the measurement and recognition of compensation expense for all equity awards granted to our employees and directors, including employee stock options, RSUs, and ESPP purchase rights related to all stock-based compensation plans based on the fair value of such awards on the date of grant. We amortize stock-based compensation cost on a graded vesting basis over the vesting period reduced by forfeitures, after assessing the probability of achieving the requisite performance criteria with respect to performance-based awards. Stock-based compensation cost is recognized over the requisite service period for each separately vesting tranche of the award as though the award were, in substance, multiple awards. Prior to adoption of ASU 2016-09 in the first quarter of 2016 as explained more fully in Note 1—The Company and Its Significant Accounting Policies, stock-based compensation expense included estimated forfeitures.

We use the BSM option pricing model to value stock-based compensation for all equity awards, except market-based awards. We value market-based awards using a Monte Carlo valuation model.

The BSM model determines the fair value of stock-based payment awards based on the stock price on the date of grant and is affected by assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, our expected stock price volatility over the term of the awards, expected term, interest rates, and actual and projected employee stock option exercise behavior. 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 upon management’s consideration of the historical life, vesting period, and 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.

Stock-based compensation expense related to stock options, RSUs, ESPP purchase rights, and stock options under ASC 718 for the years ended December 31, 2016, 2015, and 2014 is summarized as follows (in thousands):

	2016			2015			2014
RSUs		28,952			29,671			32,429
ESPP purchase rights		2,795			4,003			3,368
Employee stock options		79			397			264
Total stock-based compensation		31,826			34,071			36,061
Income tax benefit		(10,342	)		(9,436	)		(10,045	)
Stock-based compensation expense, net of tax	$	21,484		$	24,635		$	26,016

Valuation Assumptions for Stock Options and ESPP Purchases

Our determination of the fair value of stock-based payment awards on the date of grant using BSM is affected by various assumptions including volatility, expected term, and interest rates. Expected volatility is based on the historical volatility of our stock over a preceding period commensurate with the expected term of the stock option. The expected term is based on management’s consideration of the historical life of the stock options, the vesting period of the stock options granted, and the contractual period of the stock options granted. The risk-free interest rate for the expected term of the stock options 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.

Stock options were not granted during the years ended December 31, 2016, 2015, and 2014. The estimated weighted average fair value per share of ESPP purchase rights issued and the assumptions used to estimate fair value for the years ended December 31, 2016, 2015, and 2014 are as follows:

	2016			2015			2014
Weighted average fair value per share	$	10.69		$	10.28		$	11.12
Expected volatility		22% - 32	%		19% - 28	%		25% - 28	%
Risk-free interest rate		0.4% - 0.8	%		0.1% - 0.7	%		0.1% - 0.5	%
Expected term (in years)		0.5 - 2.0			0.5 - 2.0			0.5 - 2.0

Stock Option Activity

Stock options outstanding and exercisable, including performance-based and market-based options, as of December 31, 2016, 2015, and 2014 and activity for each of the years then ended are summarized as follows (in thousands, except weighted average exercise price and remaining contractual term):

	Shares			Weighted average exercise price		Weighted average remaining contractual term (years)		Aggregate intrinsic value
Options outstanding at January 1, 2014		1,060		$	14.66
Options forfeited and expired		(4	)		25.63
Options exercised		(490	)		15.72
Options outstanding at December 31, 2014		566		$	13.67
Options exercised		(124	)		15.35
Options outstanding at December 31, 2015		442		$	13.20
Options forfeited and expired		(12	)		10.77
Options exercised		(115	)		11.64
Options outstanding at December 31, 2016		315		$	13.86		1.46	$	9,480
Options vested and expected to vest at December 31, 2016		315		$	13.86		1.46	$	9,480
Options exercisable at December 31, 2016		315		$	13.86		1.46	$	9,480

Aggregate stock option intrinsic value represents the difference between the closing price per share of our common stock on the last trading day of the fiscal period and the exercise price of the underlying awards for the options that were in the money at December 31, 2016, 2015, and 2014. The total intrinsic value of options exercised, determined as of the date of option exercise, was $3.8, $3.7, and $13.2 million for the years ended December 31, 2016, 2015, and 2014, respectively. There was no unrecognized compensation cost related to stock options expected to vest as of December 31, 2016. The weighted average exercise price ranges between $11.40 and $16.57. The weighted average remaining contractual term ranges between 0.64 and 2.68 years.

Non-vested RSUs

Non-vested RSUs were awarded to employees under our equity incentive plans. Non-vested RSUs do not have the voting rights of common stock and the shares underlying non-vested RSUs are not considered issued and outstanding. Non-vested RSUs generally vest over a service period of one to four years. The compensation expense incurred for these service-based awards is based on the closing market price of our stock on the date of grant and is amortized on a graded vesting basis over the requisite service period. The weighted average fair value of RSUs granted during the years ended December 31, 2016, 2015, and 2014 were $43.35, $41.61, and $41.71, respectively.

Non-vested RSUs, including performance-based and market-based RSUs, as of December 31, 2016, 2015, and 2014, and activity for each of the years then ended, are summarized as follows (shares in thousands):

	Shares			Weighted average  grant date fair value
Non-vested at January 1, 2014		2,089		$	23.44
Restricted stock granted		1,272			41.71
Restricted stock vested		(1,174	)		21.94
Restricted stock forfeited		(184	)		23.62
Non-vested at December 31, 2014		2,003		$	35.91
Restricted stock granted		1,104			41.61
Restricted stock vested		(925	)		32.39
Restricted stock forfeited		(368	)		39.08
Non-vested at December 31, 2015		1,814		$	40.53
Restricted stock granted		1,359			43.35
Restricted stock vested		(787	)		38.34
Restricted stock forfeited		(303	)		39.54
Non-vested at December 31, 2016		2,083		$	43.34

Vested RSUs

Performance-based RSUs that vested based on annual financial results are included in the period that the performance criteria were met. The grant date fair value of RSUs that vested during the years ended December 31, 2016, 2015, and 2014 were $38.34, $32.39, and $21.94 million, respectively. Aggregate intrinsic value of RSUs vested and expected to vest at December 31, 2016 was $79.1 million calculated as the closing price per share of our common stock on the last trading day of the fiscal period multiplied by 1.8 million RSUs vested and expected to vest at December 31, 2016. RSUs expected to vest represent time-based RSUs unvested and outstanding at December 31, 2016, and performance-based RSUs for which the requisite service period has not been rendered, but are expected to vest based on the achievement of performance conditions. There was approximately $33.9 million of unrecognized compensation costs related to RSUs expected to vest as of December 31, 2016. That cost is expected to be recognized over a weighted average period of 1.33 years.

Performance-based and Market-based RSUs and Stock Options

Performance-based and market-based RSUs included in the tables above as of December 31, 2016, 2015, and 2014, and activity for each of the years then ended, are summarized below (in thousands):

	Performance-based						Market-based
	RSUs			Stock Options			RSUs
Non-vested at January 1, 2014		680			16			—
Granted		709			—			34
Vested		(403	)		—			—
Forfeited		(134	)		—			—
Non-vested at December 31, 2014		852			16			34
Granted		569			—			18
Vested		(284	)		—			(3	)
Forfeited		(217	)		—			(26	)
Non-vested at December 31, 2015		920			16			23
Granted		821			—			—
Vested		(226	)		(4	)		—
Forfeited		(250	)		(12	)		—
Non-vested at December 31, 2016		1,265			—			23

Approximately 21% of the non-vested performance-based RSUs at December 31, 2016 subsequently vested during the first quarter of 2017 based on achievement of specified performance criteria related to revenue and non-GAAP operating income targets.

We use the BSM option pricing model to value performance-based awards. We use a Monte Carlo option pricing model to value market-based awards. The estimated grant date fair value per share of performance-based and market-based RSUs granted and the assumptions used to estimate grant date fair value for the years ended December 31, 2016, 2015, and 2014 are as follows:

	Performance-based				Market-based
	RSUs				RSUs
	Short-term		Long-term
Year ended December 31, 2016 Grants
Grant date fair value per share	$	39.79	$	45.76
Service period (years)		1.0		2.0 - 3.0
Year ended December 31, 2015 Grants
Grant date fair value per share	$	38.77	$	42.82	$	33.84
Service period (years)		1.0		2.0 - 3.0
Derived service period (years)						1.60
Implied volatility						30.0	%
Risk-free interest rate						1.7	%
Year ended December 31, 2014 Grants
Grant date fair value per share	$	42.04	$	40.30	$	32.10
Service period (years)		1.0		4.0
Derived service period (years)						1.53
Implied volatility						35.0	%
Risk-free interest rate						2.3	%

Our performance-based RSUs generally vest when specified performance criteria are met based on bookings, revenue, cash provided by operating activities, non-GAAP operating income, non-GAAPearnings per share, revenue growth compared to market comparables, non-GAAP earnings per share growth compared to cash flow from operating activities growth, or other targets during the service period; otherwise, they are forfeited. Non-GAAP operating income is defined as operating income determined in accordance with GAAP, adjusted to remove the impact of certain expenses as defined in Unaudited Non-GAAP Financial Information. Non-GAAP earnings per share is defined as net income determined in accordance with GAAP, adjusted to remove the impact of certain expenses, divided by the weighted average number of common shares and dilutive potential common shares outstanding during the period as more fully defined in Note 2—Earnings Per Share of the Notes to Consolidated Financial Statements.

The grant date fair value per share determined in accordance with the BSM valuation model is being amortized over the service period of the performance-based awards. The probability of achieving the awards was determined based on review of the actual results achieved thus far by each business unit compared with the operating plan during the pertinent service period as well as the overall strength of the business unit. Stock-based compensation expense was adjusted based on this probability assessment. As actual results are achieved during the service period, the probability assessment is updated and stock-based compensation expense adjusted accordingly.

Market-based awards vest when our average closing stock price exceeds defined multiples of the closing stock price on a specified date for 90 consecutive trading days. If these multiples were not achieved by another specified date, the awards are forfeited. The grant date fair value is being amortized over the average derived service period of the awards. The average derived service period and total fair value were determined using a Monte Carlo valuation model based on our assumptions, which include a risk-free interest rate and implied volatility.

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Restructuring and Other

12 Months Ended

Dec. 31, 2016

Restructuring and Related Activities [Abstract]

Restructuring and Other

Note 13: Restructuring and Other

During the years ended December 31, 2016, 2015, and 2014, cost reduction actions lowered our operating expense run rate as we continue to analyze our cost structure and re-align our cost structure following our business acquisitions. These charges primarily relate to cost reduction actions undertaken to integrate recently acquired businesses, consolidate facilities, and lower our operating expense run rate. Restructuring and other consists primarily of restructuring, severance, retention, facility downsizing and relocation, and acquisition integration expenses. Our restructuring and other plans are accounted for in accordance with ASC 420, ASC 712, and ASC 820.

Restructuring and other costs for the years ended December 31, 2016, 2015, and 2014 were $6.7, $5.7, and $6.6 million, respectively. Restructuring and other charges include severance costs of $4.1, $3.0, and $3.2 million related to head count reductions of 128, 99, and 130 for the years ended December 31, 2016, 2015, and 2014, respectively. Severance costs include severance payments, related employee benefits, retention bonuses, outplacement fees, and relocation costs.

Facilities relocation and downsizing costs for the years ended December 31, 2016, 2015, and 2014 were $0.5, $0.9, and $2.0 million, respectively. Facilities restructuring and other costs are primarily related to the relocation of certain manufacturing and administrative locations to accommodate additional space requirements in 2016 and 2015, and consolidation of our German operations in 2014. Integration expenses for the years ended December 31, 2016, 2015, and 2014 of $2.1, $1.8, and $1.4 million, respectively, were required to integrate our business acquisitions.

Restructuring and other reserve activities for the years ended December 31, 2016 and 2015 are summarized as follows (in thousands):

	2016			2015
Reserve balance at January 1	$	3,019		$	2,102
Restructuring charges		2,808			3,109
Other charges		3,921			2,622
Non-cash restructuring and other		(403	)		—
Cash payments		(7,521	)		(4,814	)
Reserve balance at December 31	$	1,824		$	3,019

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Segment Information, Geographic Regions, and Major Customers

12 Months Ended

Dec. 31, 2016

Segment Reporting [Abstract]

Segment Information, Geographic Regions, and Major Customers

Note 14: Segment Information, Geographic Regions, and Major Customers

Operating Segments

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.

We classify our revenue, operating segment profit (i.e., gross profit), assets, and liabilities in accordance with our operating segments as follows:

Industrial Inkjet, which consists of our VUTEk and Matan super-wide and wide format display graphics, Reggiani textile, Jetrion label and packaging, and Cretaprint ceramic tile decoration and construction material industrial digital inkjet printers; UV curable, LED curable, ceramic, water-based, and thermoforming ink, as well as a variety of textile ink including dye sublimation, pigmented, reactive dye, acid dye, pure disperse dye, and water-based dispersed printing ink; digital inkjet printer parts; and professional services. Printing surfaces include paper, vinyl, corrugated, textile, glass, plastic, aluminum composite, ceramic tile, wood, and many other flexible and rigid substrates.

Productivity Software, which consists of a complete software suite that enables efficient and automated end-to-end business and production workflows for the print and packaging industry. This Productivity Suite also provides tools to enable revenue growth, efficient scheduling, and optimization of processes, equipment, and personnel. Customers are provided the financial and technical flexibility to deploy locally within their business or to be hosted in the cloud. The Productivity Suite addresses all segments of the print industry and consists of the: (i) Packaging Suite, with Radius at its core, for tag & label, cartons, and flexible packaging businesses; (ii) Corrugated Packaging Suite, with CTI at its core, for corrugated packaging businesses; (iii) Enterprise Commercial Print Suite, with Monarch at its core, for enterprise print businesses; (iv) Publication Print Suite, with Monarch or Technique at its core, for publication print businesses; (v) Mid-market Print Suite, with Pace at its core, for medium size print businesses; (vi) Quick Print Suite, with PrintSmith at its core, for small printers and in-plant sites; and (vii) Value Added Products, available with the suite and standalone, such as web-to-print, e-commerce, cross media marketing, warehousing, fulfillment, shop floor data collection, and shipping to reduce costs, increase profits, and offer new products and services to their existing and future customers. We also market Optitex fashion CAD software, which facilitates fast fashion and increased efficiency in the textile and fashion industries.

Fiery, which consists of digital front ends (“DFEs”) that transform digital copiers and printers into high performance networked printing devices for the office, industrial, and commercial printing markets. This operating segment is comprised of (i) stand-alone DFEs connected to digital printers, copiers, and other peripheral devices, (ii) embedded DFEs and design-licensed solutions used in digital copiers and multi-functional devices, (iii) optional software integrated into our DFE solutions such as Fiery Central and Graphics Arts Package, (iv) Fiery Self Serve, our self-service and payment solution, (v) PrintMe, our mobile printing application, and (vi) stand-alone software-based solutions such as our proofing and scanning solutions.

Our CODM evaluates the performance of our operating segments based on net sales and gross profit. Gross profit for each operating segment includes revenue from sales to third parties and related cost of revenue attributable to the operating segment. Cost of revenue for each operating segment excludes certain expenses managed outside the operating segments consisting primarily of stock-based compensation expense. Operating income is not reported by operating segment because operating expenses include significant shared expenses and other costs that are managed outside of the operating segments. Such operating expenses include various corporate expenses such as stock-based compensation, corporate sales and marketing, research and development, income taxes, various non-recurring charges, and other separately managed general and administrative expenses.

Operating segment profit (i.e., gross profit), excluding stock-based compensation expense, for the years ended December 31, 2016, 2015, and 2014 is summarized as follows (in thousands):

	2016			2015			2014
Industrial Inkjet
Revenue	$	562,583		$	447,705		$	379,170
Gross profit		199,448			152,918			143,981
Gross profit percentages		35.5	%		34.2	%		38.0	%
Productivity Software
Revenue	$	151,737		$	135,350		$	130,743
Gross profit		114,179			99,278			94,733
Gross profit percentages		75.2	%		73.3	%		72.5	%
Fiery
Revenue	$	277,745		$	299,458		$	280,514
Gross profit		198,322			210,140			193,585
Gross profit percentages		71.4	%		70.2	%		69.0	%

Operating segment profit (i.e., gross profit) for the years ended December 31, 2016, 2015, and 2014 is reconciled to the Consolidated Statements of Operations as follows (in thousands):

	2016			2015			2014
Segment gross profit	$	511,949		$	462,336		$	432,299
Stock-based compensation expense		(2,784	)		(2,837	)		(2,562	)
Other items excluded from segment profit		(475	)		(115	)		—
Gross profit	$	508,690		$	459,384		$	429,737

Tangible and intangible assets, net of liabilities, are summarized by operating segment as of December 31, 2016 and 2015 as follows (in thousands):

	Industrial Inkjet		Productivity Software			Fiery		Corporate and Unallocated Net Assets		Total
December 31, 2016
Goodwill	$	141,068	$	155,475		$	63,298	$	—	$	359,841
Identified intangible assets, net		84,465		38,440			92		—		122,997
Tangible assets, net of liabilities		156,202		(27,689	)		33,325		183,156		344,994
Net tangible and intangible assets	$	381,735	$	166,226		$	96,715	$	183,156	$	827,832
December 31, 2015
Goodwill	$	142,183	$	133,128		$	63,482	$	—	$	338,793
Identified intangible assets, net		101,623		33,432			497		—		135,552
Tangible assets, net of liabilities		102,351		(10,023	)		23,954		233,567		349,849
Net tangible and intangible assets	$	346,157	$	156,537		$	87,933	$	233,567	$	824,194

Corporate and unallocated assets consist of cash and cash equivalents, short-term investments, restricted investments and cash equivalents, corporate headquarters facility, convertible notes, imputed financing obligation, income taxes receivable, and income taxes payable.

Geographic Regions

Our revenue originates in the U.S., China, the Netherlands, Germany, Italy, France, the U.K., Spain, Israel, Brazil, Australia, and New Zealand. We report revenue by geographic region based on ship-to destination. Shipments to some of our significant printer manufacturer/distributor customers are made to centralized purchasing and manufacturing locations, which in turn sell through to other locations. As a result of these factors, we believe that sales to certain geographic locations might be higher or lower, as the ultimate destinations are difficult to ascertain.

Our revenue by ship-to destination for the years ended December 31, 2016, 2015, and 2014 was as follows (in thousands):

	2016		2015		2014
Americas	$	500,411	$	473,599	$	438,421
EMEA		360,305		291,103		244,545
APAC		131,349		117,811		107,461
Total Revenue	$	992,065	$	882,513	$	790,427

Our tangible long-lived assets consist primarily of property and equipment, net, of $103.3 million. Of this amount, $88.5 million resides in the Americas, $12.9 million resides in EMEA, consisting primarily of Cretaprint and Reggiani equipment and leasehold improvements, and $1.9 million resides in APAC, consisting primarily of India leasehold improvements and equipment.

Major Customers

No customer accounted for more than 10% of our revenue for the year ended December 31, 2016. One customer, Xerox, provided revenue in excess of 10% of consolidated revenue by providing 12% and 11% of our consolidated revenue for the years ended December 31, 2015 and 2014, respectively. Xerox accounts receivable balance was 10% of our net consolidated accounts receivables at December 31, 2015.

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Subsequent Events

12 Months Ended

Dec. 31, 2016

Subsequent Events [Abstract]

Subsequent Events

15. Subsequent Events

Acquisition of the Freeflow Business from Xerox Corporation. (“Xerox”). On January 31, 2017, we acquired certain assets comprising Xerox’s FreeFlow Print Server DFE business for approximately $23.9 million in cash consideration.

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Quarterly Consolidated Financial Information

12 Months Ended

Dec. 31, 2016

Quarterly Financial Information Disclosure [Abstract]

Quarterly Consolidated Financial Information

Unaudited Quarterly Consolidated Financial Information

The following table presents our operating results for each of the quarters in the years ended December 31, 2016 and 2015. The information for each of these quarters is unaudited, but has been prepared on the same basis as our audited consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K. In the opinion of management, all necessary adjustments (consisting only of normal recurring adjustments) have been included that are required to state fairly our unaudited quarterly results when read in conjunction with our audited consolidated financial statements and the notes thereto appearing in this Annual Report on Form 10-K. These operating results are not necessarily indicative of the results for any future period.

	2016
(in thousands except per share data)	Q1		Q2		Q3		Q4
Revenue	$	234,133	$	245,650	$	245,575	$	266,707
Gross profit		118,397		125,047		125,194		140,052
Income from operations		6,969		11,709		9,410		28,465
Net income		2,103		5,235		17,662		20,546
Net income per basic common share	$	0.04	$	0.11	$	0.38	$	0.44
Net income per diluted common share	$	0.04	$	0.11	$	0.37	$	0.43
	2015
(in thousands except per share data)	Q1		Q2		Q3		Q4
Revenue	$	194,554	$	202,721	$	228,694	$	256,544
Gross profit		105,440		108,403		116,285		129,256
Income from operations		11,076		13,368		12,780		19,419
Net income		5,237		7,717		10,257		10,329
Net income per basic common share	$	0.11	$	0.16	$	0.22	$	0.22
Net income per diluted common share	$	0.11	$	0.16	$	0.21	$	0.21

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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 lease accounting, functional currency determination, and contingencies on an ongoing basis. Estimates are based on historical and current experience, the impact of the current economic environment, and various other assumptions believed to be reasonable under the circumstances at the time of the estimate, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

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 short-term investments. Available-for-sale securities are stated at fair value with unrealized gains and losses reported as a separate component of OCI, adjusted for deferred income taxes. The credit portion of any other-than-temporary impairment is included in net income. Realized gains and losses on sales of financial instruments are recognized upon sale of the investments using the specific identification method.

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 securities, contingent acquisition-related liabilities, self-insurance liability, derivative instruments, and convertible senior notes are disclosed in Note 6—Investments and Fair Value Measurements of the Notes to Consolidated Financial Statements.

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. As such, revenue is generally recognized when persuasive evidence of an arrangement exists, the product has been delivered or services have been rendered, the fee is fixed or determinable, and collection of the resulting receivable is reasonably assured.

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 events. We may not request collateral from our customers, although down payments or letters of credit are generally required from Industrial Inkjet and Productivity Software customers to ensure payment. If we determine that collection of a fee is not reasonably assured, we defer the fee and recognize revenue when collection becomes reasonably assured, which is generally upon receipt of cash.

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, Software—Revenue Recognition, and if applicable, SAB 104, and ASC 605-25, to all transactions involving the sale of software products and hardware transactions where the software is not incidental.

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 terms and conditions. As a result, significant contract interpretation is sometimes required to determine the appropriate accounting, including whether the deliverables specified in a multiple element arrangement should be treated as separate units of accounting for revenue recognition purposes, and, if so, how the price should be allocated among the elements and when to recognize revenue for each element. We recognize revenue for delivered elements only when the delivered elements have stand-alone value, uncertainties regarding customer acceptance are resolved, and there are no customer-negotiated refund or return rights for the delivered elements. If the arrangement includes a customer-negotiated refund or right of return relative to the delivered item and the delivery and performance of the undelivered item is considered probable and substantially in our control, the delivered element constitutes a separate unit of accounting. We limit revenue recognition for delivered elements to the amount that is not contingent on the future delivery of products or services, future performance obligations, or subject to customer-specified return or refund privileges. Changes in the allocation of the sales price between elements may impact the timing of revenue recognition, but will not change the total revenue recognized on the contract.

Multiple-Deliverable Arrangements

We recognize revenue in multiple element arrangements involving tangible products containing software and non-software components that function together to deliver the product’s essential functionality by applying the relative sales price method of allocation in accordance with ASC 605-25. The sales price for each element is determined using VSOE when available (including post-contract customer support, professional services, hosting, and training). When VSOE is not available, then TPE is used. If VSOE or TPE are not available, then BESP is used when applying the relative sales price method for each unit of accounting. When the arrangement includes software and non-software elements, revenue is first allocated to the non-software and software elements as a group based on their relative sales price. Thereafter, the relative sales price allocated to the software elements as a group is further allocated to each unit of accounting in accordance with ASC 985-605. We then defer revenue with respect to the relative sales price that was allocated to any undelivered element.

We have calculated BESP for software licenses and non-software deliverables. We considered several different methods of establishing BESP including cost plus a reasonable margin, stand-alone sales price of the same or similar products, and if available, targeted rate of return, list price less discount, and company published list prices to identify the most appropriate representation of the estimated sales price of our products. Due to the wide range of pricing offered to our customers, we determined that sales price of the same or similar products, list price less discount, and company published list prices were not appropriate methods to determine BESP for our products. Cost plus a reasonable margin and targeted rate of return were eliminated due to the difficulty in determining the cost associated with the intangible elements of each product’s cost structure. As a result, management believes that the best estimate of the sales price of an element is the median sales price of deliverables sold in stand-alone transactions and/or separately priced deliverables contained in bundled arrangements. Elements sold as stand-alone transactions and in bundled arrangements during the four quarters immediately preceding the end of each reporting period were included in the calculation of BESP.

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, Certain Revenue Arrangements that Include Software Elements, determined that tangible products containing software and non-software components that function together to deliver the product’s essential functionality are not required to follow the software revenue recognition guidance in ASC 985-605 as long as the hardware components of the tangible product substantively contribute to its functionality. In addition, hardware components of tangible products containing software components shall always be excluded from the guidance in ASC 985-605. Non-software elements are accounted for in accordance with SAB 104.

Multiple element arrangements containing only software elements remain subject to the provisions of ASC 985-605 and must follow the residual method. When several elements of a multiple element arrangement, including software licenses, post-contract customer support, hosting, and professional services, are sold to a customer through a single contract, the revenue from such multiple element arrangements are allocated to each element using the residual method in accordance with ASC 985-605. Revenue is allocated to the support elements and professional service elements of an agreement using VSOE and to the software license elements of the agreement using the residual method. We have established VSOE for professional services and hosting based on the rates charged to our customers in stand-alone orders. We have also established VSOE for post-contract customer support based on substantive renewal rates. Accordingly, software license fees are recognized under the residual method for arrangements in which the software was licensed with maintenance and/or professional services, and where the maintenance and professional services were not essential to the functionality of the delivered software.

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, Revenue Recognition—Construction-Type and Production-Type Contracts. These services require that we perform significant, extensive, and complex design, development, modification, or implementation activities of our customers’ systems. Performance will often extend over long periods, and our right to receive future payment depends on our future performance in accordance with these agreements.

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, Transfers and Servicing, trade receivables are derecognized from our Consolidated Balance Sheet when sold to third parties upon determining that such receivables are presumptively beyond the reach of creditors in a bankruptcy proceeding. The recourse obligation is measured using market data from similar transactions and the servicing liability is determined based on the fair value that a third party would charge to service these receivables. These liabilities were determined to not be material at December 31, 2016 and 2015.

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 cost flow assumption, or market. We periodically review our inventories for potential excess or obsolete items and write down specific items to net realizable value as appropriate. Work-in-process inventories consist of our product at various levels of assembly and include materials, labor, and manufacturing overhead. Finished goods inventory represents completed products awaiting shipment.

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 lease (forty years), and purchased buildings (forty years). When assets are disposed, the asset and accumulated depreciation are removed from our records and the related gain or loss is recognized in our results of operations.

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, Intangibles—Goodwill and Other—Internal-Use Software, software development costs, including costs incurred to purchase third party software, are capitalized during the application development stage when certain factors are present including, among others, that technology exists to achieve the performance requirements, management has committed to funding the project, and conceptual formulation, design, and testing of possible software alternatives (preliminary project phase) have all been completed. Costs incurred during the preliminary project phase, post-implementation /operational phase, process re-engineering, training, and maintenance must be expensed as incurred. The accumulation of software costs to be capitalized ceases when the software is substantially developed and is ready for its intended use. Capitalized internal use software is amortized over an estimated useful life of three to five years using the straight-line method.

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, a two-step impairment test of goodwill is required, unless the simplified method is elected. In the first step, the fair value of each reporting unit is compared to its carrying value. If the fair value exceeds carrying value, goodwill is not impaired and further testing is not required. If the carrying value exceeds fair value, then the second step of the impairment test is required to determine the implied fair value of the reporting unit’s goodwill. The implied fair value of goodwill is calculated by deducting the fair value of all tangible and intangible net assets of the reporting unit, excluding goodwill, from the fair value of the reporting unit as determined in the first step. If the carrying value of the reporting unit’s goodwill exceeds its implied fair value, then an impairment loss must be recorded equal to the difference. We have not been required to perform this second step of the process because the fair value of our reporting units have exceeded their carrying value as of December 31, 2016, 2015, and 2014.

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 of the useful life of the technology with a $1.6 million impact on amortization expense. No changes have been made to the useful lives of amortizable identifiable intangible assets in 2015 or 2014. Intangible amortization expense was $39.6, $26.5, and $20.7 million for the years ended December 31, 2016, 2015, or 2014, respectively.

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 limited warranty, which covers both parts and labor. Our Fiery DFE limited warranty is 12 to 15 months. Estimated future hardware and software warranty costs are recorded as a cost of product revenue when the related revenue is recognized based on historical and projected warranty claim rates, historical and projected cost-per-claim, and knowledge of specific product failures that are outside our typical experience. Factors that affect our warranty liability include the number of installed units subject to warranty protection, product failure rates, estimated material costs, estimated distribution costs, and estimated labor costs.

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, Simplifying the Accounting for Measurement Period Adjustments; and

• 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, Stock Compensation—Improvements to Employee Share Based Payment Accounting, in 2016, we elected to account for forfeitures when they occur instead of estimating the expected forfeiture rate.

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 assets, liabilities, and capital accounts, which are remeasured at historical exchange rates. Revenue and expenses are remeasured at monthly exchange rates, which approximate average exchange rates in effect during each period. Gains or losses from foreign currency remeasurement are included in interest income and other income (expense), net. Net gains or losses resulting from foreign currency transactions, including hedging gains and losses, are reported in interest income and other income (expense), net, and were losses of $3.8, $4.2, and $6.8 million for the years ended December 31, 2016, 2015, and 2014, respectively.

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, Foreign Currency Matters, we consider the U.S. dollar to be the functional currency for each of our international subsidiaries except for our Brazilian subsidiary, Metrics, for which we consider the Brazilian real to be the subsidiary’s functional currency; our German subsidiaries, EFI GmbH and Alphagraph, for which we consider the Euro to be the subsidiaries’ functional currency; our Italian subsidiary, Reggiani, for which we consider the Euro to be the functional currency; our Spanish subsidiary, Cretaprint, for which we consider the Euro to be the subsidiary’s functional currency; our U.K. subsidiaries, Electronics For Imaging United Kingdom Limited, Shuttleworth, and Rialco, for which we consider the British pound sterling to be the subsidiaries’ functional currency; our Israeli subsidiary, Matan, for which we consider the shekel to be the functional currency; our Japanese subsidiary, Electronics For Imaging Japan KK, for which we consider the Japanese yen to be the subsidiary’s functional currency; our New Zealand subsidiary contains the Prism Group Holdings Limited (“Prism”) operations in New Zealand for which we consider the New Zealand dollar to be the functional currency; our Australian subsidiary contains the Prism, OPS, and Metrix operations in Australia for which we consider the Australian dollar to be the functional currency; and our subsidiary in the People’s Republic of China, which contains the operations of our Cretaprint sales and support center and our Industrial Inkjet demonstration center for which we consider the renminbi to be the functional currency. Optitex generates revenue and incurs operating expenses primarily in local currencies. Upon consideration of the salient economic indicators, we consider the local currency in each of Optitex’s primary locations (shekel, rupee, Euro, and U.S. dollar) to be the functional currencies for Optitex.

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 shares of restricted stock having a dilutive effect, non-vested restricted stock for which the performance criteria have been met, shares to be purchased under our ESPP having a dilutive effect, the assumed issuance at the beginning of 2016 of shares potentially issued from escrow related to the acquisition of CTI, the assumed issuance at the beginning of 2016 of shares issued from escrow during 2016 related to the acquisition of Reggiani, the assumed conversion of our Notes having a dilutive effect using the treasury stock method, as well as the dilutive effect of our warrants when the stock price exceeds the conversion price of the Notes. Any potential shares that are anti-dilutive as defined in ASC 260, Earnings Per Share, are excluded from the effect of dilutive securities.

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 derivative instruments in earnings in the period of change. Gains and losses on foreign currency forward contracts used to hedge balance sheet exposures are recognized in interest income and other income (expense), net, in the same period as the remeasurement gain or loss of the related foreign currency denominated assets and liabilities.

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 of ASC 810, Consolidation, we perform a formal assessment at each reporting period regarding whether any consolidated entity is considered the primary beneficiary of a VIE based on the power to direct activities that most significantly impact the economic performance of the entity and the obligation to absorb losses or rights to receive benefits that could be significant to us. We do not have any arrangements that meet the definition of a VIE.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Debt Issuance Costs. In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, which is effective in the first quarter of 2016. ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt, which is consistent with the presentation of debt discounts and premiums. Retrospective application is required, which resulted in the reclassification of $5.8 million of debt issuance costs from other current assets and other assets to a direct reduction of our 7.5% Convertible Senior Notes, net, due 2019 (“Notes”) in our Consolidated Balance Sheet as of December 31, 2015.

Inventory Valuation. In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory, which is effective in the first quarter of 2017. ASU 2015-11 requires that inventory be valued at the lower of cost or net realizable value, which is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. We currently value inventory at the lower of cost or net realizable value less a reasonable profit margin as allowed by the current inventory valuation guidance. The adoption of ASU 2015-11 is expected to increase our inventory valuation in 2017.

Measurement Period Adjustments. In September 2015, the FASB issued ASU 2015-16, Simplifying the Accounting for Measurement Period Adjustments. The acquirer of a business is required to retrospectively adjust provisional amounts recognized at the acquisition date with a corresponding adjustment to goodwill. Those adjustments are required when new information is obtained about facts and circumstances that existed as of the acquisition date and, if known, would have affected the measurement of the amounts initially recognized or would have resulted in the recognition of additional assets or liabilities. Under current guidance, the acquirer also must revise comparative prior period information, including depreciation, amortization, or other income affects as a result of changes made to provisional amounts. To simplify the accounting for measurement period adjustments, ASU 2015-16 eliminates the requirement to retrospectively account for those adjustments. The impact on our financial statements will be determined in the future if measurement period adjustments are identified.

Lease Arrangements. Under current guidance, the classification of a lease by a lessee as either an operating lease or a capital lease determines whether an asset and liability is recognized on the balance sheet. ASU 2016-02, issued in February 2016 and effective in the first quarter of 2019, requires that a lessee recognize an asset and liability on its balance sheet related to all leases with terms in excess of one year. For all leases, a lessee will be required to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the statement of financial position. The right-to-use asset represents the right to use the underlying asset during the lease term.

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 asset in the statement of operations. Principal repayments are classified within financing activities and interest payments are classified as operating activities in the statement of cash flows.

• 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 lease accounting guidance will be rescinded by the new guidance, although simplified guidance will remain regarding lessee control during the construction period. Consequently, the accounting for build-to-suit leases will be the same as finance leases unless the lessee control provisions are applicable.

We have not quantified the impact, but we expect our consolidated financial position and results of operations to be materially effected.

Principal vs Agent. In March 2016, the FASB issued ASU 2016-08, Principal vs. Agent Considerations (Reporting Revenue Gross vs Net), streamlining and clarifying the criteria for identifying whether an entity is satisfying a performance obligation as the principal or agent in the transaction. The entity that is responsible for fulfilling the contractual obligations related to the good or service is acting as the principal and recognizes the gross amount of consideration. The entity that is responsible only for arranging delivery to the customer is acting as the agent and recognizes revenue in the amount of the fee or commission related to arranging for the delivery of the good or service.

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. In March 2016, the FASB issued ASU 2016-09, which is effective in the first quarter of 2017 with early adoption permitted. We elected to early adopt this standard in the second quarter of 2016, which required retroactive application of this standard as of the first quarter in 2016 resulting in the following:

• 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 capital in the first quarter of 2016 were reversed upon adoption. We recorded $2.2 million of deferred tax assets related to excess tax benefits for federal research and development income tax credits not previously benefitted.

• 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. In June 2016, the FABS issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, amending current guidance regarding other-than-temporary impairment of available-for-sale debt securities. The new guidance requires an estimate of the expected credit loss when fair value is below the amortized cost of the asset without regard for the length of time that the fair value has been below the amortized cost or the historical or implied volatility of the asset. Credit losses on available-for-sale debt securities will be limited to the difference between the security’s amortized cost basis and its fair value. The use of an allowance to record estimated credit losses (and subsequent recoveries) will also be required under the new guidance.

ASU 2016-13 will be effective in the first quarter of 2020. We are evaluating its impact on the carrying value of our available-for-sale securities and results of operations.

Settlement of Convertible Debt. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments, requiring that cash settlements of principal amounts of debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the debt must classify the portion of the principal payment attributable to the accreted interest related to the debt discount as cash outflows from operating activities. This is consistent with the classification of the coupon interest payments.

ASU 2016-15 will be effective in the first quarter of 2018. Accordingly, $63.6 million debt discount attributable to the difference between the 0.75% coupon interest rate on our Notes and the 4.98% (5.46% inclusive of debt issuance costs) effective interest rate will be classified as an operating cash outflow in the Consolidated Statement of Cash Flows upon cash settlement in 2019.

Restricted Cash. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows: Restricted Cash, requiring that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows.

ASU 2016-18 will be effective in the first quarter of 2018. We are evaluating its impact on our statement of cash flows.

Revenue Recognition. ASU 2014-09, Revenue from Contracts with Customers, issued in May 2014, enhances the comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets. The principles-based guidance provides a framework for addressing revenue recognition issues comprehensively. The standard requires that revenue should be recognized in an amount that reflects the consideration that the entity expects to be entitled in exchange for goods or services, which are referred to as performance obligations.

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 will be effective in the first quarter of 2018. Two adoption methods are allowed under ASU 2014-09. Under the full retrospective method, the revised guidance is applied to all contracts in all reporting periods presented in the financial statements, subject to certain allowable exceptions. Retained earnings is adjusted for the cumulative effect of the change as of January 1, 2016. Under the modified retrospective method, the revised guidance is applied to all contracts existing as of January 1, 2018, with an adjustment to beginning retained earnings for the cumulative effect of the change and providing additional disclosures comparing results to previous guidance. We continue to evaluate the available adoption methods.

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. dollar-denominated revenue in Europe, the U.K., Latin America, China, Israel, Australia, New Zealand, Canada, and to non-U.S. dollar-denominated operating expenses in Europe, India, Japan, the U.K., China, Israel, Brazil, and Australia. We hedge our operating expense cash flow exposure in Indian rupees. We hedge balance sheet remeasurement exposure associated with 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-denominated net monetary assets.

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 by the counterparty associated with these instruments because, by policy, we deal with counterparties having a minimum investment grade or better credit rating. Credit risk is managed through the continuous monitoring of exposures to such counterparties.

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 derivative instruments in earnings in the period of change. Gains (losses) on foreign currency forward contracts used to hedge balance sheet exposures are recognized in interest income and other income (expense), net, in the same period as the remeasurement gain (loss) of the related foreign currency denominated assets and liabilities. Forward contracts not designated as hedging instruments consist of hedges of Brazilian real, British pound sterling, Israeli shekel, Australian dollar, Japanese yen, Chinese renminbi, and Euro-denominated intercompany balances with notional amounts of $90.7 and $63.7 million at December 31, 2016 and 2015, respectively, hedges of Brazilian real, British pound sterling, Australian dollar, Israeli shekel, and Euro-denominated trade receivables with notional amounts of $39.8 and $49.1 million at December 31, 2016 and 2015, respectively, and hedges of British pounds sterling, Indian rupee, and Euro-denominated other net monetary assets with notional amounts of $28.2 and $2.6 million at December 31, 2016 and 2015, respectively.

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. Accordingly, performance-based RSUs, which vested on various dates during the years ended December 31, 2016, 2015, and 2014 based on achievement of specified performance criteria related to revenue, cash flows from operating activities, and non-GAAP operating income targets; market-based RSUs, which vested during the year ended December 31, 2015 based on achievement of specified stock prices for defined periods; and performance-based stock options, which vested during the year ended December 31, 2016 are included in the determination of net income per diluted common share as of the beginning of each respective year.

ASU 2015-03 Debt Issuance Costs [Member]

Recent Accounting Pronouncements

Debt Issuance Costs. In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, which is effective in the first quarter of 2016. ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt, which is consistent with the presentation of debt discounts and premiums. Retrospective application is required, which resulted in the reclassification of $5.8 million of debt issuance costs from other current assets and other assets to a direct reduction of our 7.5% Convertible Senior Notes, net, due 2019 (“Notes”) in our Consolidated Balance Sheet as of December 31, 2015.

ASU 2016-02 Lease Arrangements [Member]

Recent Accounting Pronouncements

Lease Arrangements. Under current guidance, the classification of a lease by a lessee as either an operating lease or a capital lease determines whether an asset and liability is recognized on the balance sheet. ASU 2016-02, issued in February 2016 and effective in the first quarter of 2019, requires that a lessee recognize an asset and liability on its balance sheet related to all leases with terms in excess of one year. For all leases, a lessee will be required to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in the statement of financial position. The right-to-use asset represents the right to use the underlying asset during the lease term.

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 asset in the statement of operations. Principal repayments are classified within financing activities and interest payments are classified as operating activities in the statement of cash flows.

• 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 lease accounting guidance will be rescinded by the new guidance, although simplified guidance will remain regarding lessee control during the construction period. Consequently, the accounting for build-to-suit leases will be the same as finance leases unless the lessee control provisions are applicable.

ASU 2016-08 Principal Vs Agent [Member]

Recent Accounting Pronouncements

Principal vs Agent. In March 2016, the FASB issued ASU 2016-08, Principal vs. Agent Considerations (Reporting Revenue Gross vs Net), streamlining and clarifying the criteria for identifying whether an entity is satisfying a performance obligation as the principal or agent in the transaction. The entity that is responsible for fulfilling the contractual obligations related to the good or service is acting as the principal and recognizes the gross amount of consideration. The entity that is responsible only for arranging delivery to the customer is acting as the agent and recognizes revenue in the amount of the fee or commission related to arranging for the delivery of the good or service.

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. In June 2016, the FABS issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, amending current guidance regarding other-than-temporary impairment of available-for-sale debt securities. The new guidance requires an estimate of the expected credit loss when fair value is below the amortized cost of the asset without regard for the length of time that the fair value has been below the amortized cost or the historical or implied volatility of the asset. Credit losses on available-for-sale debt securities will be limited to the difference between the security’s amortized cost basis and its fair value. The use of an allowance to record estimated credit losses (and subsequent recoveries) will also be required under the new guidance.

ASU 2016-13 will be effective in the first quarter of 2020. We are evaluating its impact on the carrying value of our available-for-sale securities and results of operations.

ASU 2016-18 Restricted Cash [Member]

Recent Accounting Pronouncements

Restricted Cash. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows: Restricted Cash, requiring that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows.

ASU 2016-18 will be effective in the first quarter of 2018. We are evaluating its impact on our statement of cash flows.

ASU 2015-11 Inventory Valuation [Member]

Recent Accounting Pronouncements

Inventory Valuation. In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory, which is effective in the first quarter of 2017. ASU 2015-11 requires that inventory be valued at the lower of cost or net realizable value, which is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. We currently value inventory at the lower of cost or net realizable value less a reasonable profit margin as allowed by the current inventory valuation guidance. The adoption of ASU 2015-11 is expected to increase our inventory valuation in 2017.

ASU 2015-16 Measurement Period Adjustments [Member]

Recent Accounting Pronouncements

Measurement Period Adjustments. In September 2015, the FASB issued ASU 2015-16, Simplifying the Accounting for Measurement Period Adjustments. The acquirer of a business is required to retrospectively adjust provisional amounts recognized at the acquisition date with a corresponding adjustment to goodwill. Those adjustments are required when new information is obtained about facts and circumstances that existed as of the acquisition date and, if known, would have affected the measurement of the amounts initially recognized or would have resulted in the recognition of additional assets or liabilities. Under current guidance, the acquirer also must revise comparative prior period information, including depreciation, amortization, or other income affects as a result of changes made to provisional amounts. To simplify the accounting for measurement period adjustments, ASU 2015-16 eliminates the requirement to retrospectively account for those adjustments. The impact on our financial statements will be determined in the future if measurement period adjustments are identified.

ASU 2016-15 Statement of Cash Flows [Member]

Recent Accounting Pronouncements

Settlement of Convertible Debt. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments, requiring that cash settlements of principal amounts of debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the debt must classify the portion of the principal payment attributable to the accreted interest related to the debt discount as cash outflows from operating activities. This is consistent with the classification of the coupon interest payments.

ASU 2016-15 will be effective in the first quarter of 2018. Accordingly, $63.6 million debt discount attributable to the difference between the 0.75% coupon interest rate on our Notes and the 4.98% (5.46% inclusive of debt issuance costs) effective interest rate will be classified as an operating cash outflow in the Consolidated Statement of Cash Flows upon cash settlement in 2019.

ASU 2016-09 Stock-based Compensation [Member]

Recent Accounting Pronouncements

Stock-based Compensation. In March 2016, the FASB issued ASU 2016-09, which is effective in the first quarter of 2017 with early adoption permitted. We elected to early adopt this standard in the second quarter of 2016, which required retroactive application of this standard as of the first quarter in 2016 resulting in the following:

• 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 capital in the first quarter of 2016 were reversed upon adoption. We recorded $2.2 million of deferred tax assets related to excess tax benefits for federal research and development income tax credits not previously benefitted.

• 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. ASU 2014-09, Revenue from Contracts with Customers, issued in May 2014, enhances the comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets. The principles-based guidance provides a framework for addressing revenue recognition issues comprehensively. The standard requires that revenue should be recognized in an amount that reflects the consideration that the entity expects to be entitled in exchange for goods or services, which are referred to as performance obligations.

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 will be effective in the first quarter of 2018. Two adoption methods are allowed under ASU 2014-09. Under the full retrospective method, the revised guidance is applied to all contracts in all reporting periods presented in the financial statements, subject to certain allowable exceptions. Retained earnings is adjusted for the cumulative effect of the change as of January 1, 2016. Under the modified retrospective method, the revised guidance is applied to all contracts existing as of January 1, 2018, with an adjustment to beginning retained earnings for the cumulative effect of the change and providing additional disclosures comparing results to previous guidance. We continue to evaluate the available adoption methods.

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.

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The Company and Its Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2016

Accounting Policies [Abstract]

Summary of Supplemental Cash Flow Information

Supplemental Disclosure of Cash Flow Information

	For the years ended December 31,
(in thousands)	2016			2015			2014
Net cash paid for income taxes	$	6,812		$	8,512		$	6,157
Cash paid for interest expense	$	2,975		$	2,945		$	128
Acquisitions of businesses and technology:
Cash paid for businesses and technology purchased, excluding contingent consideration	$	21,560		$	82,446		$	23,888
Cash acquired in business acquisitions		(1,628	)		(7,680	)		(1,908	)
Net cash paid for business acquisitions	$	19,932		$	74,766		$	21,980
Common stock issued in connection with business acquisitions	$	73		$	36,567		$	—
Non-cash investing and financing activities:
Non-cash settlement of vacation liabilities by issuing RSUs		3,059		$	1,353		$	—
Property and equipment received, but not paid		1,257			1,684			2,275
	$	4,316		$	3,037		$	2,275

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Earnings Per Share (Tables)

12 Months Ended

Dec. 31, 2016

Earnings Per Share [Abstract]

Basic and Diluted Earnings Per Share

Basic and diluted earnings per share for the years ended December 31, 2016, 2015, and 2014 are reconciled as follows (in thousands, except for per share amounts):

	2016		2015		2014
Basic net income per share:
Net income available to common shareholders	$	45,546	$	33,540	$	33,714
Weighted average common shares outstanding		46,900		47,217		46,866
Basic net income per share	$	0.97	$	0.71	$	0.72
Dilutive net income per share:
Net income available to common shareholders	$	45,546	$	33,540	$	33,714
Weighted average common shares outstanding		46,900		47,217		46,866
Dilutive stock options, restricted stock, and ESPP purchase rights		897		933		1,540
Weighted average common shares outstanding for purposes of computing diluted net income per share		47,797		48,150		48,406
Dilutive net income per share	$	0.95	$	0.70	$	0.70

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Business Acquisitions (Tables)

12 Months Ended

Dec. 31, 2016

Business Combinations [Abstract]

Schedule of Discount Rate, Percentage of Project Tasks Completed and Tasks to be Completed

	Matan			Reggiani			CTI			Shuttleworth			DIMS
Discount rate for IPR&D		16	%		21	%		18	%		20	%		20	%
IPR&D percent complete at acquisition date		33	%		70	%		75	%		17	%		76	%
IPR&D percent complete at December 31, 2016		88	%		100	%		95	%		100	%		93	%
Acquisition-date valuation (in thousands)	$	3,190		$	10,879		$	150		$	555		$	389

Allocation of Purchase Price to Assets Acquired and Liabilities Assumed

The allocation of the purchase price to the assets acquired and liabilities assumed (in thousands) with respect to each of these acquisitions at their respective acquisition dates is summarized as follows:

	2016 Acquisitions									2015 Acquisitions															2014 Acquisitions
	Industrial Inkjet				Productivity Software					Industrial Inkjet										Productivity Software					Productivity Software
	Rialco				Optitex					Matan					Reggiani					CTI and Shuttleworth					SmartLinc, Rhapso, DirectSmile, DIMS
	Weighted average useful life		Purchase Price Allocation		Weighted average useful life		Purchase Price Allocation			Weighted average useful life		Purchase Price Allocation			Weighted average useful life		Purchase Price Allocation			Weighted average useful life		Purchase Price Allocation			Weighted average useful  life		Purchase Price Allocation
Customer relationships		6 years	$	2,512		3-4 years	$	8,890			6 years	$	6,630			4 years	$	12,187			3-4 years	$	5,001			5 years	$	8,569
Existing technology		5 years		846		5 years		7,760			5 years		8,790			4 years		33,118			5 years		5,634			4 years		4,890
Trade names		5 years		763		4 years		2,020			5 years		2,570			5 years		11,964			4 years		1,357			4 years		1,231
IPR&D		—		—		—		—			—		3,190			—		10,879			—		705			—		389
Backlog		< one year		56		< one year		370			< one year		70			< one year		704			< one year		132			—		—
Goodwill				1,426				28,147					26,609					61,341					17,790					21,078
				5,603				47,187					47,859					130,193					30,619					36,157
Net tangible assets (liabilities)				5,177				(11,924	)				(4,945	)				(32,571	)				(3,611	)				(3,758	)
Total purchase price			$	10,780			$	35,263				$	42,914				$	97,622				$	27,008				$	32,399

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Balance Sheet Components (Tables)

12 Months Ended

Dec. 31, 2016

Text Block [Abstract]

Schedule of Inventories

Inventories, net of allowances, as of December 31, 2016 and 2015 are as follows (in thousands):

	2016		2015
Raw materials	$	45,798	$	53,783
Work in process		7,362		6,646
Finished goods		45,915		45,949
	$	99,075	$	106,378

Schedule of Property and Equipment

Property and equipment, net, as of December 31, 2016 and 2015 are as follows (in thousands):

	2016			2015
Land, buildings, and improvements (including build-to-suit lease)	$	67,841		$	72,373
Equipment and purchased software		86,495			69,748
Furniture and leasehold improvements		18,713			17,449
		173,049			159,570
Less accumulated depreciation and amortization		(69,745	)		(61,791	)
	$	103,304		$	97,779

Schedule of Accrued and Other Liabilities

Accrued and other liabilities as of December 31, 2016 and 2015 are as follows (in thousands):

	2016		2015
Accrued compensation and benefits	$	30,609	$	31,104
Warranty provision—current		10,054		9,635
Accrued royalty payments		4,994		5,305
Contingent consideration—current		19,244		4,545
Short-term financing obligations		98		4,469
Deferred rent		2,938		3,367
Restructuring and other		1,824		3,019
Sales tax liabilities		1,997		655
Other accrued liabilities		13,747		12,326
	$	85,505	$	74,425

Schedule of Accumulated Other Comprehensive Income (Loss)

OCI classified within stockholders’ equity in our Consolidated Balance Sheets as of December 31, 2016 and 2015 are as follows (in thousands):

	2016			2015
Net unrealized investment losses	$	(473	)	$	(376	)
Currency translation losses		(24,230	)		(17,049	)
Net unrealized gains on cash flow hedges		9			1
	$	(24,694	)	$	(17,424	)

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Goodwill and Long-Lived Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Purchased Identified Intangible Assets Resulting from Acquisitions

Our purchased identified intangible assets resulting from acquisitions that closed during the years ended December 31, 2016 and 2015 are as follows (in thousands, except for weighted average useful life):

			December 31, 2016									December 31, 2015
	Weighted average useful life (years)		Gross carrying amount		Accumulated amortization			Weighted remaining average useful life (years)		Net carrying amount		Gross carrying amount		Accumulated amortization			Net carrying amount
Goodwill		—	$	359,841	$	—			—	$	359,841	$	338,793	$	—		$	338,793
Customer relationships and other		5.1	$	88,557	$	(49,527	)		2.8	$	39,030	$	75,145	$	(36,625	)	$	38,520
Existing technology		4.0		173,543		(122,654	)		2.7		50,889		161,441		(114,018	)		47,423
Trademarks and trade names		11.1		67,701		(38,300	)		6.3		29,401		65,395		(30,949	)		34,446
IPR&D		—		3,677		—			—		3,677		15,163		—			15,163
Amortizable intangible assets		5.7	$	333,478	$	(210,481	)		3.8	$	122,997	$	317,144	$	(181,592	)	$	135,552

Schedule of Future Amortization Expense

As of December 31, 2016, future estimated amortization expense for each of the next five years and thereafter related to the amortization of identified intangible assets is as follows (in thousands):

For the years ended December 31,	Future amortization expense
2017	$	39,613
2018		35,264
2019		26,780
2020		10,256
2021		3,991
Thereafter		7,093
	$	122,997

Schedule of Goodwill Rollforward

The goodwill rollforward for the years ended December 31, 2016 and 2015 as required by ASC 805 is as follows (in thousands):

	Industrial Inkjet			Productivity Software			Fiery			Total
Ending Balance, December 31, 2014	$	59,124		$	121,486		$	64,833		$	245,443
Additions (Reggiani, Matan, CTI, and Shuttleworth acquisitions)	$	91,776		$	17,790		$	—		$	109,566
Opening balance sheet adjustment		(3,826	)		(13	)		—			(3,839	)
Foreign currency adjustments		(4,891	)		(6,135	)		(1,351	)		(12,377	)
Ending Balance, December 31, 2015	$	142,183		$	133,128		$	63,482		$	338,793
Additions (Rialco and Optitex acquisitions)	$	1,426		$	28,147		$	—		$	29,573
Opening balance sheet adjustment		(171	)		(663	)		—			(834	)
Foreign currency adjustments		(2,370	)		(5,137	)		(184	)		(7,691	)
Ending Balance, December 31, 2016	$	141,068		$	155,475		$	63,298		$	359,841
Accumulated Impairment as of December 31, 2016, recognized in 2008	$	103,991		$	—		$	—		$	103,991

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Investments and Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2016

Text Block [Abstract]

Available-for-Sale Short-Term Investments

Our available-for-sale short-term investments as of December 31, 2016 and 2015 are as follows (in thousands):

	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
December 31, 2016
U.S. Government and sponsored entities	$	70,893	$	49	$	(348	)	$	70,594
Corporate debt securities		198,166		102		(621	)		197,647
Municipal government		1,278		—		(1	)		1,277
Asset-backed securities		24,233		79		(17	)		24,295
Mortgage-backed securities—residential		1,615		3		(3	)		1,615
Total short-term investments	$	296,185	$	233	$	(990	)	$	295,428
December 31, 2015
U.S. Government and sponsored entities	$	98,411	$	12	$	(137	)	$	98,286
Corporate debt securities		198,498		20		(510	)		198,008
Asset-backed securities		35,276		195		(174	)		35,297
Mortgage-backed securities—residential		1,689		2		(6	)		1,685
Total short-term investments	$	333,874	$	229	$	(827	)	$	333,276

Summary of Fair Value and Duration of Investments, Including Cash Equivalents, that have been Classified in Gross Unrealized Loss Position

The fair value and duration that investments, including cash equivalents, have been in a gross unrealized loss position as of December 31, 2016 and 2015 are as follows (in thousands):

	Less than 12 Months					More than 12 Months					TOTAL
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
December 31, 2016
U.S. Government and sponsored entities	$	39,810	$	(348	)	$	—	$	—		$	39,810	$	(348	)
Corporate debt securities		133,382		(581	)		13,158		(40	)		146,540		(621	)
Municipal government		1,268		(1	)		—		—			1,268		(1	)
Asset-backed securities		4,540		(7	)		4,611		(10	)		9,151		(17	)
Mortgage-backed securities—residential		428		(1	)		153		(2	)		581		(3	)
Total	$	179,428	$	(938	)	$	17,922	$	(52	)	$	197,350	$	(990	)
December 31, 2015
U.S. Government and sponsored entities	$	82,366	$	(137	)	$	—	$	—		$	82,366	$	(137	)
Corporate debt securities		136,274		(448	)		16,940		(62	)		153,214		(510	)
Asset-backed securities		27,928		(103	)		7,131		(71	)		35,059		(174	)
Mortgage-backed securities—residential		764		(2	)		269		(4	)		1,033		(6	)
Total	$	247,332	$	(690	)	$	24,340	$	(137	)	$	271,672	$	(827	)

Amortized Cost and Estimated Fair Value of Investments

Amortized cost and estimated fair value of investments at December 31, 2016 are summarized by maturity date as follows (in thousands):

	Amortized cost		Fair value
Mature in less than one year	$	107,033	$	106,918
Mature in one to three years		189,152		188,510
Total short-term investments	$	296,185	$	295,428

Investments in Accordance with Fair Value Hierarchy

Our investments and liabilities measured at fair value have been presented in accordance with the fair value hierarchy specified in ASC 820 as of December 31, 2016 and 2015 in order of liquidity as follows (in thousands):

	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
December 31, 2016
Assets:
Money market funds	$	23,575	$	23,575	$	—	$	—
U.S. Government and sponsored entities		70,594		51,870		18,724		—
Corporate debt securities		197,647		—		197,647		—
Municipal government		1,277		—		1,277		—
Asset-backed securities		24,295		—		24,228		67
Mortgage-backed securities—residential		1,615		—		1,615		—
	$	319,003	$	75,445	$	243,491	$	67
Liabilities:
Contingent consideration, current and noncurrent	$	56,463	$	—	$	—	$	56,463
Self-insurance		1,542		—		—		1,542
	$	58,005	$	—	$	—	$	58,005
December 31, 2015
Assets:
Money market funds	$	13,221	$	13,221	$	—	$	—
U.S. Government and sponsored entities		98,286		34,712		63,574		—
Corporate debt securities		198,778		—		198,778		—
Asset-backed securities		35,297		—		35,113		184
Mortgage-backed securities—residential		1,684		—		1,684		—
	$	347,266	$	47,933	$	299,149	$	184
Liabilities:
Contingent consideration, current and noncurrent	$	54,796	$	—	$	—	$	54,796
Self-insurance		1,268		—		—		1,268
	$	56,064	$	—	$	—	$	56,064

Summary of Changes in Contingent Liability for Contingent Consideration

Changes in the contingent liability for contingent consideration during the years ended December 31, 2016 and 2015 are summarized as follows:

Fair value of contingent consideration at December 31, 2014	$	12,277
Fair value of Reggiani contingent consideration at July 1, 2015		43,170
Fair value of CTI contingent consideration at October 6, 2015		2,551
Fair value of Shuttleworth contingent consideration at November 4, 2015		5,077
Changes in valuation		(2,135	)
Payments		(4,093	)
Foreign currency adjustment		(2,051	)
Fair value of contingent consideration at December 31, 2015	$	54,796
Fair value of Rialco contingent consideration at March 1, 2016		2,109
Fair value of Optitex contingent consideration at June 16, 2016		22,300
Changes in valuation		6,813
Payments		(28,111	)
Foreign currency adjustment		(1,444	)
Fair value of contingent consideration at December 31, 2016	$	56,463

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Convertible Senior Notes, Note Hedges, and Warrants (Tables)

12 Months Ended

Dec. 31, 2016

Debt Disclosure [Abstract]

Schedule of Convertible Notes

The Notes consist of the following at December 31, 2016 and 2015 (in thousands):

	2016			2015
Liability component	$	345,000		$	345,000
Debt discount, net of amortization		(36,115	)		(48,515	)
Debt issuance costs, net of amortization		(4,401	)		(5,751	)
Net carrying amount	$	304,484		$	290,734
Equity component	$	63,643		$	63,643
Less: debt issuance costs allocated to equity		(1,582	)		(1,582	)
Net carrying amount	$	62,061		$	62,061

Summary of Interest Expense Recognized Related to Notes

Interest expense recognized related to the Notes during the years ended December 31, 2016, 2015, and 2014 was as follows (in thousands):

	2016		2015		2014
0.75% coupon	$	2,588	$	2,595	$	798
Amortization of debt issuance costs		1,350		1,396		419
Amortization of debt discount		12,400		11,667		3,461
	$	16,338	$	15,658	$	4,678

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Commitments and Contingencies (Tables)

12 Months Ended

Dec. 31, 2016

Commitments and Contingencies Disclosure [Abstract]

Future Minimum Lease Payments under Non-Cancellable Operating Leases and Future Minimum Sublease Receipts

Future minimum lease payments under noncancellable operating leases, including our build-to-suit lease, and future minimum sublease receipts, for each of the next five years and thereafter as of December 31, 2016 are as follows (in thousands):

	Future Minimum		Future Minimum
Fiscal Year	Lease Payments		Sublease Receipts
2017	$	9,097	$	370
2018		8,240		313
2019		7,848		166
2020		6,570		—
2021		5,355		—
Thereafter		33,894		—
Total	$	71,004	$	849

Changes in Product Warranty Reserve

The changes in product warranty reserve for the years ended December 31, 2016 and 2015 were as follows (in thousands):

	2016			2015
Balance at January 1,	$	9,635		$	9,682
Liability assumed through business acquisitions		—			1,006
Provisions, net of releases		12,715			11,839
Settlements		(12,031	)		(12,892	)
Balance at December 31,	$	10,319		$	9,635

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2016

Income Tax Disclosure [Abstract]

Components of Income before Income Taxes

The components of income before income taxes for the years ended December 31, 2016, 2015, and 2014 are as follows (in thousands):

	2016		2015		2014
U.S.	$	8,254	$	9,311	$	15,090
Foreign		31,128		28,211		26,997
Total	$	39,382	$	37,522	$	42,087

Provision for (Benefit from) Income Taxes

The provision for (benefit from) income taxes for the years ended December 31, 2016, 2015, and 2014 is summarized as follows (in thousands):

	2016			2015			2014
Current:
U.S. Federal	$	(7,593	)	$	3,755		$	5,050
State		662			1,813			1,237
Foreign		11,722			5,798			7,922
Total current		4,791			11,366			14,209
Deferred:
U.S. Federal		(4,276	)		(3,119	)		(94	)
State		(567	)		(583	)		846
Foreign		(6,112	)		(3,682	)		(6,588	)
Total deferred		(10,955	)		(7,384	)		(5,836	)
Provision for (benefit from) income taxes	$	(6,164	)	$	3,982		$	8,373

Reconciliation Between Income Tax Provision (Benefit) Computed at Federal Statutory Rate and Actual Tax Provision (Benefit)

The reconciliation of the income tax provision (benefit) computed at the federal statutory rate to the actual tax provision (benefit) for the years ended December 31, 2016, 2015, and 2014 is as follows (in thousands):

	2016					2015					2014
Tax provision at federal statutory rate	$	13,783		35.0	%	$	13,133		35.0	%	$	14,731		35.0	%
State income taxes, net of federal benefit		62		0.2			800		2.1			360		0.9
Research and development credits		(2,627	)	(6.7	)		(4,217	)	(11.2	)		(2,629	)	(6.2	)
Effect of foreign operations		(3,439	)	(8.7	)		(3,483	)	(9.3	)		(2,293	)	(5.4	)
Increase in value of intangible assets		—		—			—		—			(3,130	)	(7.4	)
Reduction in accrual for estimated potential tax assessments		(15,404	)	(39.1	)		(4,808	)	(12.7	)		(2,088	)	(5.0	)
Non-deductible stock-based compensation pursuant to ASC 718-740		1,288		3.3			3,244		8.6			2,793		6.6
Domestic manufacturing deduction		(831	)	(2.1	)		(878	)	(2.3	)		(598	)	(1.4	)
Other		1,004		2.4			191		0.4			1,227		2.8
Provision for (benefit from) income taxes	$	(6,164	)	(15.7	)%	$	3,982		10.6	%	$	8,373		19.9	%

Tax Effects of Temporary Differences that Give Rise to Deferred Tax Assets (Liabilities)

The tax effects of temporary differences that give rise to deferred tax assets (liabilities) as of December 31, 2016 and 2015 are as follows (in thousands):

	2016			2015
Reserves and accruals not currently deductible for tax purposes	$	14,079		$	13,804
Net operating loss carryforwards		10,055			10,409
Tax credit carryforwards		63,985			44,176
Deferred revenue		1,642			3,778
Stock-based compensation		8,487			8,309
Other		6,222			5,099
Gross deferred tax assets		104,470			85,575
Depreciation and amortization		(17,845	)		(24,042	)
State Taxes		(2,092	)		(1,841	)
Gross deferred tax liabilities		(19,937	)		(25,883	)
Deferred tax valuation allowance		(42,406	)		(37,652	)
Net deferred tax assets	$	42,127		$	22,040

Reconciliation of Change in Gross Unrecognized Tax Benefits

A reconciliation of the change in the gross unrecognized tax benefits from January 1, 2014 to December 31, 2016 is as follows (in millions):

	Federal, State, and Foreign Tax			Accrued Interest  and Penalties			Gross Unrecognized Income Tax Benefits
Balance at January 1, 2014	$	32.4		$	0.6		$	33.0
Additions for tax positions of prior years		0.9			0.4			1.3
Additions for tax positions related to 2014		3.6			—			3.6
Reductions due to lapse of applicable statute of limitations		(2.7	)		(0.2	)		(2.9	)
Balance at December 31, 2014	$	34.2		$	0.8		$	35.0
Additions for tax positions of prior years		14.1			0.2			14.3
Additions for tax positions related to 2015		4.7			—			4.7
Reductions due to lapse of applicable statute of limitations		(6.9	)		(0.5	)		(7.4	)
Balance at December 31, 2015	$	46.1		$	0.5		$	46.6
Additions for tax positions of prior years		1.8			0.2			2.0
Additions for tax positions related to 2016		3.9			—			3.9
Reductions due to lapse of applicable statute of limitations		(16.4	)		(0.2	)		(16.6	)
Balance at December 31, 2016	$	35.4		$	0.5		$	35.9

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Employee Benefit Plans (Tables)

12 Months Ended

Dec. 31, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Stock-Based Compensation Expense

Stock-based compensation expense related to stock options, RSUs, ESPP purchase rights, and stock options under ASC 718 for the years ended December 31, 2016, 2015, and 2014 is summarized as follows (in thousands):

	2016			2015			2014
RSUs		28,952			29,671			32,429
ESPP purchase rights		2,795			4,003			3,368
Employee stock options		79			397			264
Total stock-based compensation		31,826			34,071			36,061
Income tax benefit		(10,342	)		(9,436	)		(10,045	)
Stock-based compensation expense, net of tax	$	21,484		$	24,635		$	26,016

Schedule of ESPP Purchase Rights and Underlying Weighted Average Assumptions

Stock options were not granted during the years ended December 31, 2016, 2015, and 2014. The estimated weighted average fair value per share of ESPP purchase rights issued and the assumptions used to estimate fair value for the years ended December 31, 2016, 2015, and 2014 are as follows:

	2016			2015			2014
Weighted average fair value per share	$	10.69		$	10.28		$	11.12
Expected volatility		22% - 32	%		19% - 28	%		25% - 28	%
Risk-free interest rate		0.4% - 0.8	%		0.1% - 0.7	%		0.1% - 0.5	%
Expected term (in years)		0.5 - 2.0			0.5 - 2.0			0.5 - 2.0

Schedule of Stock Options Outstanding and Exercisable

Stock options outstanding and exercisable, including performance-based and market-based options, as of December 31, 2016, 2015, and 2014 and activity for each of the years then ended are summarized as follows (in thousands, except weighted average exercise price and remaining contractual term):

	Shares			Weighted average exercise price		Weighted average remaining contractual term (years)		Aggregate intrinsic value
Options outstanding at January 1, 2014		1,060		$	14.66
Options forfeited and expired		(4	)		25.63
Options exercised		(490	)		15.72
Options outstanding at December 31, 2014		566		$	13.67
Options exercised		(124	)		15.35
Options outstanding at December 31, 2015		442		$	13.20
Options forfeited and expired		(12	)		10.77
Options exercised		(115	)		11.64
Options outstanding at December 31, 2016		315		$	13.86		1.46	$	9,480
Options vested and expected to vest at December 31, 2016		315		$	13.86		1.46	$	9,480
Options exercisable at December 31, 2016		315		$	13.86		1.46	$	9,480

Schedule of Non-Vested RSUs

Non-vested RSUs, including performance-based and market-based RSUs, as of December 31, 2016, 2015, and 2014, and activity for each of the years then ended, are summarized as follows (shares in thousands):

	Shares			Weighted average  grant date fair value
Non-vested at January 1, 2014		2,089		$	23.44
Restricted stock granted		1,272			41.71
Restricted stock vested		(1,174	)		21.94
Restricted stock forfeited		(184	)		23.62
Non-vested at December 31, 2014		2,003		$	35.91
Restricted stock granted		1,104			41.61
Restricted stock vested		(925	)		32.39
Restricted stock forfeited		(368	)		39.08
Non-vested at December 31, 2015		1,814		$	40.53
Restricted stock granted		1,359			43.35
Restricted stock vested		(787	)		38.34
Restricted stock forfeited		(303	)		39.54
Non-vested at December 31, 2016		2,083		$	43.34

Schedule of Performance-Based and Market-Based RSUs and Stock Options

Performance-based and market-based RSUs included in the tables above as of December 31, 2016, 2015, and 2014, and activity for each of the years then ended, are summarized below (in thousands):

	Performance-based						Market-based
	RSUs			Stock Options			RSUs
Non-vested at January 1, 2014		680			16			—
Granted		709			—			34
Vested		(403	)		—			—
Forfeited		(134	)		—			—
Non-vested at December 31, 2014		852			16			34
Granted		569			—			18
Vested		(284	)		—			(3	)
Forfeited		(217	)		—			(26	)
Non-vested at December 31, 2015		920			16			23
Granted		821			—			—
Vested		(226	)		(4	)		—
Forfeited		(250	)		(12	)		—
Non-vested at December 31, 2016		1,265			—			23

Schedule of Weighted Average Grant Date Fair Value Per Share of Performance-Based and Market-Based RSUs and Assumptions Used to Estimate Fair Value

The estimated grant date fair value per share of performance-based and market-based RSUs granted and the assumptions used to estimate grant date fair value for the years ended December 31, 2016, 2015, and 2014 are as follows:

	Performance-based				Market-based
	RSUs				RSUs
	Short-term		Long-term
Year ended December 31, 2016 Grants
Grant date fair value per share	$	39.79	$	45.76
Service period (years)		1.0		2.0 - 3.0
Year ended December 31, 2015 Grants
Grant date fair value per share	$	38.77	$	42.82	$	33.84
Service period (years)		1.0		2.0 - 3.0
Derived service period (years)						1.60
Implied volatility						30.0	%
Risk-free interest rate						1.7	%
Year ended December 31, 2014 Grants
Grant date fair value per share	$	42.04	$	40.30	$	32.10
Service period (years)		1.0		4.0
Derived service period (years)						1.53
Implied volatility						35.0	%
Risk-free interest rate						2.3	%

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Restructuring and Other (Tables)

12 Months Ended

Dec. 31, 2016

Restructuring and Related Activities [Abstract]

Restructuring and Other Reserve Activities

Restructuring and other reserve activities for the years ended December 31, 2016 and 2015 are summarized as follows (in thousands):

	2016			2015
Reserve balance at January 1	$	3,019		$	2,102
Restructuring charges		2,808			3,109
Other charges		3,921			2,622
Non-cash restructuring and other		(403	)		—
Cash payments		(7,521	)		(4,814	)
Reserve balance at December 31	$	1,824		$	3,019

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Segment Information, Geographic Regions, and Major Customers (Tables)

12 Months Ended

Dec. 31, 2016

Segment Reporting [Abstract]

Summary of Operating Segment Profit (Gross Profit), Excluding Stock-Based Compensation Expense by Segment

Operating segment profit (i.e., gross profit), excluding stock-based compensation expense, for the years ended December 31, 2016, 2015, and 2014 is summarized as follows (in thousands):

	2016			2015			2014
Industrial Inkjet
Revenue	$	562,583		$	447,705		$	379,170
Gross profit		199,448			152,918			143,981
Gross profit percentages		35.5	%		34.2	%		38.0	%
Productivity Software
Revenue	$	151,737		$	135,350		$	130,743
Gross profit		114,179			99,278			94,733
Gross profit percentages		75.2	%		73.3	%		72.5	%
Fiery
Revenue	$	277,745		$	299,458		$	280,514
Gross profit		198,322			210,140			193,585
Gross profit percentages		71.4	%		70.2	%		69.0	%

Reconciliation of Operating Segment Gross Profit to Consolidated Statements of Operations

Operating segment profit (i.e., gross profit) for the years ended December 31, 2016, 2015, and 2014 is reconciled to the Consolidated Statements of Operations as follows (in thousands):

	2016			2015			2014
Segment gross profit	$	511,949		$	462,336		$	432,299
Stock-based compensation expense		(2,784	)		(2,837	)		(2,562	)
Other items excluded from segment profit		(475	)		(115	)		—
Gross profit	$	508,690		$	459,384		$	429,737

Tangible and Intangible Assets, Net of Liabilities, Summarized by Operating Segment

Tangible and intangible assets, net of liabilities, are summarized by operating segment as of December 31, 2016 and 2015 as follows (in thousands):

	Industrial Inkjet		Productivity Software			Fiery		Corporate and Unallocated Net Assets		Total
December 31, 2016
Goodwill	$	141,068	$	155,475		$	63,298	$	—	$	359,841
Identified intangible assets, net		84,465		38,440			92		—		122,997
Tangible assets, net of liabilities		156,202		(27,689	)		33,325		183,156		344,994
Net tangible and intangible assets	$	381,735	$	166,226		$	96,715	$	183,156	$	827,832
December 31, 2015
Goodwill	$	142,183	$	133,128		$	63,482	$	—	$	338,793
Identified intangible assets, net		101,623		33,432			497		—		135,552
Tangible assets, net of liabilities		102,351		(10,023	)		23,954		233,567		349,849
Net tangible and intangible assets	$	346,157	$	156,537		$	87,933	$	233,567	$	824,194

Revenue by Ship-to Destination

Our revenue by ship-to destination for the years ended December 31, 2016, 2015, and 2014 was as follows (in thousands):

	2016		2015		2014
Americas	$	500,411	$	473,599	$	438,421
EMEA		360,305		291,103		244,545
APAC		131,349		117,811		107,461
Total Revenue	$	992,065	$	882,513	$	790,427

XML

Quarterly Consolidated Financial Information (Tables)

12 Months Ended

Dec. 31, 2016

Quarterly Financial Information Disclosure [Abstract]

Schedule of Quarterly Consolidated Financial Information

The following table presents our operating results for each of the quarters in the years ended December 31, 2016 and 2015. The information for each of these quarters is unaudited, but has been prepared on the same basis as our audited consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K. In the opinion of management, all necessary adjustments (consisting only of normal recurring adjustments) have been included that are required to state fairly our unaudited quarterly results when read in conjunction with our audited consolidated financial statements and the notes thereto appearing in this Annual Report on Form 10-K. These operating results are not necessarily indicative of the results for any future period.

	2016
(in thousands except per share data)	Q1		Q2		Q3		Q4
Revenue	$	234,133	$	245,650	$	245,575	$	266,707
Gross profit		118,397		125,047		125,194		140,052
Income from operations		6,969		11,709		9,410		28,465
Net income		2,103		5,235		17,662		20,546
Net income per basic common share	$	0.04	$	0.11	$	0.38	$	0.44
Net income per diluted common share	$	0.04	$	0.11	$	0.37	$	0.43
	2015
(in thousands except per share data)	Q1		Q2		Q3		Q4
Revenue	$	194,554	$	202,721	$	228,694	$	256,544
Gross profit		105,440		108,403		116,285		129,256
Income from operations		11,076		13,368		12,780		19,419
Net income		5,237		7,717		10,257		10,329
Net income per basic common share	$	0.11	$	0.16	$	0.22	$	0.22
Net income per diluted common share	$	0.11	$	0.16	$	0.21	$	0.21

XML

The Company and Its Significant Accounting Policies - Additional Information (Detail) - USD ($)				3 Months Ended	12 Months Ended
		Dec. 31, 2016	Jan. 01, 2016	Mar. 31, 2016	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Sep. 30, 2014
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Maturity of highly liquid investments					Three months or less
Maturity of marketable investments					Greater than three months
Other-than-temporary impairments, including credit-related impairments					$ 0	$ 0	$ 0
Restricted investments and cash equivalents		$ 6,252,000			$ 6,252,000
Present value of minimum lease payments					90.00%
Percentage of economic life of equipment					75.00%
Deferred cost of revenue		3,400,000			$ 3,400,000	8,700,000
Financing receivables		31,000,000			$ 31,000,000	14,800,000
Products revenues					10.00%
Depreciation expense					$ 14,100,000	12,200,000	9,900,000
Amortization period of intangible assets					5 years 8 months 12 days
Intangible amortization expense					$ 39,560,000	26,510,000	20,673,000
Long-lived asset impairment charges					0	0	0
Warranty reserves		$ 10,054,000			10,054,000	9,635,000
Research and development costs	[1]				151,192,000	141,364,000	134,732,000
Advertising and promotional expenses					$ 4,600,000	4,300,000	4,300,000
Assets and liabilities of acquired business, including goodwill		100.00%			100.00%
Gains or losses resulting from foreign currency transactions					$ (3,800,000)	(4,200,000)	$ (6,800,000)
Cumulated translation adjustment, net of tax, unrealized gain (loss)		$ (24,230,000)			(24,230,000)	(17,049,000)
Amount of increase in additional paid in capital resulting from an excess tax benefit associated with share based compensation plan reversed upon adoption of new accounting standard				$ 100,000
Deferred tax assets related to excess tax benefits for federal research and development income tax credits		$ 2,200,000			$ 2,200,000
Excess tax benefit, reclassified from operating to financing activities reversed upon adoption of new accounting standard				200,000		3,300,000
Excess tax benefit, decrease in cash flows provided by financing activities				(200,000)		$ (3,300,000)
Retroactive net income adjustment				$ 200,000
Cumulative effect adjustment to retained earnings, net of tax			$ 2,100,000
Interest rate of debt, stated percentage		0.75%			0.75%	0.75%	0.75%
0.75% Convertible Senior Notes Due 2019 [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Debt discount		$ 63,600,000			$ 63,600,000
Interest rate of debt, stated percentage		0.75%			0.75%			0.75%
Effective interest rate percentage		4.98%			4.98%
Desktop and Laptop Computers [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Estimated useful lives					2 years
Manufacturing Equipment [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Estimated useful lives					7 years
Testing and Other Equipment [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Estimated useful lives					3 years
Research and Development Equipment [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Estimated useful lives					3 years
Furniture [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Estimated useful lives					5 years
Land Improvements [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Estimated useful lives					7 years
Building under Build-to-Suit Lease [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Estimated useful lives					40 years
Building [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Estimated useful lives					40 years
Equipment Leased to Customers on Operating Leases [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Estimated useful lives					3 years
European [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Percentage of total revenue					28.00%
Higher Risk Southern European Countries [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Percentage of European receivables					26.00%
Percentage of consolidated net receivables					7.00%
Spain and Italy [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Trade receivables sold without recourse					$ 3,500,000	$ 3,700,000
United States [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Trade receivables sold with recourse					19,800,000	$ 23,200,000
Debt Issuance Costs [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Debt issuance costs		$ 5,800,000			$ 5,800,000
Debt Issuance Costs [Member] | 0.75% Convertible Senior Notes Due 2019 [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Effective interest rate percentage		5.46%			5.46%
Trademarks and Trade Names [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Amortization period of intangible assets					11 years 1 month 6 days
Intangible Assets, Amortization Period [Member] | Developed Technology [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Impact of change in useful life of intangible asset					$ 1,600,000
Industrial Inkjet [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Accompanied limited warranty period					12 months
Fiery [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Products revenues					28.00%
Bank of Tokyo - Mitsubishi UFJ Leasing & Finance LLC [Member] | Off Balance Sheet Financing - Synthetic Lease Arrangements [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Restricted investments and cash equivalents		$ 6,300,000			$ 6,300,000
Percentage of funds pledge that are deposited in government securities		115.00%			115.00%
Percentage of funds pledge that are deposited in cash equivalents		100.00%			100.00%
Bank of Tokyo - Mitsubishi UFJ Leasing & Finance LLC [Member] | Off Balance Sheet Financing - Synthetic Lease Arrangements [Member] | Cash Equivalents [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Funds invested under lease		$ 1,200,000			$ 1,200,000
Bank of Tokyo - Mitsubishi UFJ Leasing & Finance LLC [Member] | Off Balance Sheet Financing - Synthetic Lease Arrangements [Member] | US Government Securities [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Funds invested under lease		5,100,000			$ 5,100,000
Maximum [Member] | Software under Perpetual Licenses [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Estimated useful lives						5 years
Maximum [Member] | Tooling [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Estimated useful lives					3 years
Maximum [Member] | Leasehold Improvements [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Estimated useful lives						5 years
Maximum [Member] | Building Improvements [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Estimated useful lives						10 years
Maximum [Member] | Internal Use Software [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Estimated useful lives					5 years
Maximum [Member] | Developed Technology [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Amortization period of intangible assets					6 years
Maximum [Member] | Customer Relationships [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Amortization period of intangible assets					9 years
Maximum [Member] | Covenants Not to Compete [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Amortization period of intangible assets					5 years
Maximum [Member] | Trademarks and Trade Names [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Amortization period of intangible assets					16 years
Maximum [Member] | Fiery [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Limited warranty period					15 months
Maximum [Member] | Fiery [Member] | Industrial Inkjet [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Limited warranty period					15 months
Minimum [Member] | Computer Server Equipment [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Estimated useful lives					3 years
Minimum [Member] | Software under Perpetual Licenses [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Estimated useful lives						3 years
Minimum [Member] | Building Improvements [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Estimated useful lives						5 years
Minimum [Member] | Internal Use Software [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Estimated useful lives					3 years
Minimum [Member] | Developed Technology [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Amortization period of intangible assets					2 years
Minimum [Member] | Customer Relationships [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Amortization period of intangible assets					3 years
Minimum [Member] | Covenants Not to Compete [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Amortization period of intangible assets					4 years
Minimum [Member] | Trademarks and Trade Names [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Amortization period of intangible assets					3 years
Minimum [Member] | Fiery [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Limited warranty period					12 months
Minimum [Member] | Fiery [Member] | Industrial Inkjet [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Limited warranty period					12 months
Sales-Type Lease [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Financing receivables		17,800,000			$ 17,800,000	$ 10,200,000
Trade Receivables with Original Maturities in Excess of One Year [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Financing receivables		13,200,000			13,200,000	4,600,000
Trade Receivables with Original Maturities in Excess of One Year [Member] | Trade Receivables with Original Maturities in Excess of One Year [Member]
Organization Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Financing receivables		$ 7,100,000			$ 7,100,000	$ 3,200,000

[1] Includes stock-based compensation expense as follows: 2016 2015 2014 Cost of revenue $ 2,784 $ 2,837 $ 2,562 Research and development 8,968 9,406 8,818 Sales and marketing 7,690 7,602 7,070 General and administrative 12,384 14,226 17,611

XML

The Company and Its Significant Accounting Policies - Summary of Supplemental Cash Flow Information (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Supplemental Cash Flow Elements [Abstract]
Net cash paid for income taxes	$ 6,812	$ 8,512	$ 6,157
Cash paid for interest expense	2,975	2,945	128
Acquisitions of businesses and technology:
Cash paid for businesses and technology purchased, excluding contingent consideration	21,560	82,446	23,888
Cash acquired in business acquisitions	(1,628)	(7,680)	(1,908)
Net cash paid for business acquisitions	19,932	74,766	21,980
Common stock issued in connection with business acquisitions	73	36,567
Non-cash investing and financing activities:
Non-cash settlement of vacation liabilities by issuing RSUs	3,059	1,353
Property and equipment received, but not paid	1,257	1,684	2,275
Total Non-cash investing and financing activities	$ 4,316	$ 3,037	$ 2,275

XML

Earnings Per Share - Basic and Diluted Earnings Per Share (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Basic net income per share:
Net income available to common shareholders	$ 20,546	$ 17,662	$ 5,235	$ 2,103	$ 10,329	$ 10,257	$ 7,717	$ 5,237	$ 45,546	$ 33,540	$ 33,714
Weighted average common shares outstanding									46,900	47,217	46,866
Basic net income per share	$ 0.44	$ 0.38	$ 0.11	$ 0.04	$ 0.22	$ 0.22	$ 0.16	$ 0.11	$ 0.97	$ 0.71	$ 0.72
Dilutive net income per share:
Net income available to common shareholders	$ 20,546	$ 17,662	$ 5,235	$ 2,103	$ 10,329	$ 10,257	$ 7,717	$ 5,237	$ 45,546	$ 33,540	$ 33,714
Weighted average common shares outstanding									46,900	47,217	46,866
Dilutive stock options, restricted stock, and ESPP purchase rights									897	933	1,540
Weighted average common shares outstanding for purposes of computing diluted net income per share									47,797	48,150	48,406
Dilutive net income per share	$ 0.43	$ 0.37	$ 0.11	$ 0.04	$ 0.21	$ 0.21	$ 0.16	$ 0.11	$ 0.95	$ 0.70	$ 0.70

XML

Earnings Per Share - Additional Information (Detail) - shares shares in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
ESPP Purchase Rights [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share, amount
RSUs [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share, amount		0	0

XML

Business Acquisitions - Additional Information (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Acquired Finite-Lived Intangible Assets [Line Items]
Post-acquisition revenue	$ 19.8
Adjusted initial preliminary purchase price allocations	$ 0.8	$ 3.8	$ 0.2
Asset Valuation Methodology [Member] | Minimum [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Fair value discount rate	16.00%
Asset Valuation Methodology [Member] | Maximum [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Fair value discount rate	30.00%
Reggiani And Matan [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Post-acquisition revenue		88.4
Business acquisition related costs	$ 2.2	$ 5.5	$ 1.5

XML

Business Acquisitions - 2016 Acquisitions Additional Information (Detail) - USD ($) $ in Thousands			12 Months Ended
	Jun. 16, 2016	Mar. 01, 2016	Dec. 31, 2016	Dec. 31, 2014	Dec. 31, 2015
Acquired Finite-Lived Intangible Assets [Line Items]
Fair value of earnout			$ 56,463	$ 12,277	$ 54,796
Contingent liabilities, current			19,244		$ 4,545
Contingent liabilities, noncurrent			37,200
Productivity Software [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Businesses purchased, net of cash acquired				$ 20,400
Rialco Limited [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Businesses purchased, net of cash acquired		$ 8,400
Fair value of earnout		$ 2,109	2,300
Contingent liabilities, current			1,200
Contingent liabilities, noncurrent			$ 1,100
Rialco Limited [Member] | Earnout [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Fair value discount rate			0.80%
Optitex Ltd [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Fair value of earnout	$ 22,300
Contingent liabilities, current			$ 8,400
Contingent liabilities, noncurrent			16,000
Optitex Ltd [Member] | Productivity Software [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Businesses purchased, net of cash acquired	$ 11,600
Fair value of earnout			$ 24,400
Optitex Ltd [Member] | Earnout [Member] | Productivity Software [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Fair value discount rate			2.30%

XML

Business Acquisitions - 2015 Acquisitions - Additional Information (Detail) - USD ($) $ in Thousands, shares in Millions		12 Months Ended
	Jul. 01, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Acquired Finite-Lived Intangible Assets [Line Items]
Fair value of earnout		$ 56,463	$ 54,796	$ 12,277
Earnout payments		28,111	4,093	$ 10,594
Contingent consideration, current		19,244	4,545
Contingent consideration, noncurrent		37,200
Matan Digital Printers [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Businesses purchased, net of cash acquired	$ 38,900
CTI And Shuttleworth [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Businesses purchased, net of cash acquired		9,700
Equity consideration to purchase business		$ 9,300
Shares issuance on purchase of business		0.2
Fair value of earnout		$ 6,800
Contingent consideration, current		2,400
Contingent consideration, noncurrent		$ 4,400
CTI And Shuttleworth [Member] | Minimum [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Fair value discount rate		0.60%
CTI And Shuttleworth [Member] | Maximum [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Fair value discount rate		1.30%
CTI [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Acquisition date		Oct. 06, 2015
Fair value of earnout			2,551
Shuttleworth [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Acquisition date		Nov. 04, 2015
Fair value of earnout			$ 5,077
Reggiani [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Acquisition date		Jul. 01, 2015
Businesses purchased, net of cash acquired	26,600
Equity consideration to purchase business	$ 26,900
Shares issuance on purchase of business	0.6
Fair value of earnout	$ 43,170	$ 22,800
Earnout payments		$ 23,800
Fair value discount rate		4.98%
Contingent consideration, current		$ 7,100
Contingent consideration, noncurrent		$ 15,700

XML

Business Acquisitions - 2014 Acquisitions Additional Information (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Acquired Finite-Lived Intangible Assets [Line Items]
Earnout payments	$ 28,111	$ 4,093	$ 10,594
SmartLinc, Inc. [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Earnout payments	$ 400	300
Acquisition date	Jan. 16, 2014
Rhapso [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Acquisition date	Apr. 14, 2014
DirectSmile GmbH [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Acquisition date	Jul. 18, 2014
DIMS [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Acquisition date	Sep. 15, 2014
Productivity Software [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Businesses purchased, net of cash acquired			$ 20,400
Earnout payments	$ 4,000	$ 300

XML

Business Acquisitions - Schedule of Discount Rate, Percentage of Project Tasks Completed and Tasks to be Completed (Detail) $ in Thousands	12 Months Ended
	Dec. 31, 2016 USD ($)
Reggiani [Member]
In Process Research And Development [Line Items]
Discount rate for IPR&D	4.98%
IPR&D [Member] | DIMS [Member]
In Process Research And Development [Line Items]
Discount rate for IPR&D	20.00%
IPR&D percent complete at acquisition date	76.00%
IPR&D percent complete at December 31, 2016	93.00%
Acquisition-date valuation	$ 389
IPR&D [Member] | Matan Digital Printers [Member]
In Process Research And Development [Line Items]
Discount rate for IPR&D	16.00%
IPR&D percent complete at acquisition date	33.00%
IPR&D percent complete at December 31, 2016	88.00%
Acquisition-date valuation	$ 3,190
IPR&D [Member] | Reggiani [Member]
In Process Research And Development [Line Items]
Discount rate for IPR&D	21.00%
IPR&D percent complete at acquisition date	70.00%
IPR&D percent complete at December 31, 2016	100.00%
Acquisition-date valuation	$ 10,879
IPR&D [Member] | CTI [Member]
In Process Research And Development [Line Items]
Discount rate for IPR&D	18.00%
IPR&D percent complete at acquisition date	75.00%
IPR&D percent complete at December 31, 2016	95.00%
Acquisition-date valuation	$ 150
IPR&D [Member] | Shuttleworth [Member]
In Process Research And Development [Line Items]
Discount rate for IPR&D	20.00%
IPR&D percent complete at acquisition date	17.00%
IPR&D percent complete at December 31, 2016	100.00%
Acquisition-date valuation	$ 555

XML

Business Acquisitions - Allocation of Purchase Price to Assets Acquired and Liabilities Assumed (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Acquired Finite-Lived Intangible Assets [Line Items]
Purchase Price Allocation, Goodwill	$ 359,841	$ 338,793	$ 245,443
Minimum [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted average useful life	2 years
Maximum [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted average useful life	16 years
Productivity Software [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Purchase Price Allocation, Goodwill	$ 155,475	133,128	121,486
Productivity Software [Member] | Optitex Ltd [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Purchase Price Allocation, Goodwill	28,147
Purchase Price Allocation	47,187
Net tangible liabilities	(11,924)
Total purchase price	35,263
Productivity Software [Member] | CTI And Shuttleworth [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Purchase Price Allocation, Goodwill		17,790
Purchase Price Allocation		30,619
Net tangible liabilities		(3,611)
Total purchase price		27,008
Productivity Software [Member] | SmartLinc, Rhapso, DirectSmile, DIMS [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Purchase Price Allocation, Goodwill			21,078
Purchase Price Allocation			36,157
Net tangible liabilities			(3,758)
Total purchase price			32,399
Industrial Inkjet [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Purchase Price Allocation, Goodwill	141,068	142,183	$ 59,124
Industrial Inkjet [Member] | Rialco Limited [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Purchase Price Allocation, Goodwill	1,426
Purchase Price Allocation	5,603
Net tangible liabilities	5,177
Total purchase price	10,780
Industrial Inkjet [Member] | Matan Digital Printers [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Purchase Price Allocation, Goodwill		26,609
Purchase Price Allocation		47,859
Net tangible liabilities		(4,945)
Total purchase price		42,914
Industrial Inkjet [Member] | Reggiani [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Purchase Price Allocation, Goodwill		61,341
Purchase Price Allocation		130,193
Net tangible liabilities		(32,571)
Total purchase price		97,622
Customer Relationships [Member] | Productivity Software [Member] | Optitex Ltd [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Purchase Price Allocation, intangible assets	$ 8,890
Customer Relationships [Member] | Productivity Software [Member] | Optitex Ltd [Member] | Minimum [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted average useful life	3 years
Customer Relationships [Member] | Productivity Software [Member] | Optitex Ltd [Member] | Maximum [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted average useful life	4 years
Customer Relationships [Member] | Productivity Software [Member] | CTI And Shuttleworth [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Purchase Price Allocation, intangible assets		$ 5,001
Customer Relationships [Member] | Productivity Software [Member] | CTI And Shuttleworth [Member] | Minimum [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted average useful life		3 years
Customer Relationships [Member] | Productivity Software [Member] | CTI And Shuttleworth [Member] | Maximum [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted average useful life		4 years
Customer Relationships [Member] | Productivity Software [Member] | SmartLinc, Rhapso, DirectSmile, DIMS [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted average useful life			5 years
Purchase Price Allocation, intangible assets			$ 8,569
Customer Relationships [Member] | Industrial Inkjet [Member] | Rialco Limited [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted average useful life	6 years
Purchase Price Allocation, intangible assets	$ 2,512
Customer Relationships [Member] | Industrial Inkjet [Member] | Matan Digital Printers [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted average useful life		6 years
Purchase Price Allocation, intangible assets		$ 6,630
Customer Relationships [Member] | Industrial Inkjet [Member] | Reggiani [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted average useful life		4 years
Purchase Price Allocation, intangible assets		$ 12,187
Existing Technology [Member] | Productivity Software [Member] | Optitex Ltd [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Purchase Price Allocation, intangible assets	$ 7,760
Existing Technology [Member] | Productivity Software [Member] | Optitex Ltd [Member] | Maximum [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted average useful life	5 years
Existing Technology [Member] | Productivity Software [Member] | CTI And Shuttleworth [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Purchase Price Allocation, intangible assets		$ 5,634
Existing Technology [Member] | Productivity Software [Member] | CTI And Shuttleworth [Member] | Maximum [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted average useful life		5 years
Existing Technology [Member] | Productivity Software [Member] | SmartLinc, Rhapso, DirectSmile, DIMS [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted average useful life			4 years
Purchase Price Allocation, intangible assets			$ 4,890
Existing Technology [Member] | Industrial Inkjet [Member] | Rialco Limited [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted average useful life	5 years
Purchase Price Allocation, intangible assets	$ 846
Existing Technology [Member] | Industrial Inkjet [Member] | Matan Digital Printers [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted average useful life		5 years
Purchase Price Allocation, intangible assets		$ 8,790
Existing Technology [Member] | Industrial Inkjet [Member] | Reggiani [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted average useful life		4 years
Purchase Price Allocation, intangible assets		$ 33,118
Trade Names [Member] | Productivity Software [Member] | Optitex Ltd [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Purchase Price Allocation, intangible assets	$ 2,020
Trade Names [Member] | Productivity Software [Member] | Optitex Ltd [Member] | Maximum [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted average useful life	4 years
Trade Names [Member] | Productivity Software [Member] | CTI And Shuttleworth [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Purchase Price Allocation, intangible assets		$ 1,357
Trade Names [Member] | Productivity Software [Member] | CTI And Shuttleworth [Member] | Maximum [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted average useful life		4 years
Trade Names [Member] | Productivity Software [Member] | SmartLinc, Rhapso, DirectSmile, DIMS [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted average useful life			4 years
Purchase Price Allocation, intangible assets			$ 1,231
Trade Names [Member] | Industrial Inkjet [Member] | Rialco Limited [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted average useful life	5 years
Purchase Price Allocation, intangible assets	$ 763
Trade Names [Member] | Industrial Inkjet [Member] | Matan Digital Printers [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted average useful life		5 years
Purchase Price Allocation, intangible assets		$ 2,570
Trade Names [Member] | Industrial Inkjet [Member] | Reggiani [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted average useful life		5 years
Purchase Price Allocation, intangible assets		$ 11,964
IPR&D [Member] | Matan Digital Printers [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Purchase Price Allocation, intangible assets	3,190
IPR&D [Member] | Reggiani [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Purchase Price Allocation, intangible assets	10,879
IPR&D [Member] | Productivity Software [Member] | CTI And Shuttleworth [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Purchase Price Allocation, intangible assets		705
IPR&D [Member] | Productivity Software [Member] | SmartLinc, Rhapso, DirectSmile, DIMS [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Purchase Price Allocation, intangible assets			$ 389
IPR&D [Member] | Industrial Inkjet [Member] | Matan Digital Printers [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Purchase Price Allocation, intangible assets		3,190
IPR&D [Member] | Industrial Inkjet [Member] | Reggiani [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Purchase Price Allocation, intangible assets		10,879
Backlog [Member] | Productivity Software [Member] | Optitex Ltd [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Purchase Price Allocation, intangible assets	$ 370
Backlog [Member] | Productivity Software [Member] | Optitex Ltd [Member] | Maximum [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted average useful life	1 year
Backlog [Member] | Productivity Software [Member] | CTI And Shuttleworth [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Purchase Price Allocation, intangible assets		$ 132
Backlog [Member] | Productivity Software [Member] | CTI And Shuttleworth [Member] | Maximum [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted average useful life		1 year
Backlog [Member] | Industrial Inkjet [Member] | Rialco Limited [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Purchase Price Allocation, intangible assets	$ 56
Backlog [Member] | Industrial Inkjet [Member] | Rialco Limited [Member] | Maximum [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted average useful life	1 year
Backlog [Member] | Industrial Inkjet [Member] | Matan Digital Printers [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Purchase Price Allocation, intangible assets		$ 70
Backlog [Member] | Industrial Inkjet [Member] | Matan Digital Printers [Member] | Maximum [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted average useful life		1 year
Backlog [Member] | Industrial Inkjet [Member] | Reggiani [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Purchase Price Allocation, intangible assets		$ 704
Backlog [Member] | Industrial Inkjet [Member] | Reggiani [Member] | Maximum [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted average useful life		1 year

XML

Balance Sheet Components - Schedule of Inventories (Detail) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Inventory Disclosure [Abstract]
Raw materials	$ 45,798	$ 53,783
Work in process	7,362	6,646
Finished goods	45,915	45,949
Inventory, net	$ 99,075	$ 106,378

XML

Balance Sheet Components - Schedule of Property and Equipment (Detail) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Property, Plant and Equipment [Abstract]
Land, buildings, and improvements (including build-to-suit lease)	$ 67,841	$ 72,373
Equipment and purchased software	86,495	69,748
Furniture and leasehold improvements	18,713	17,449
Property, plant and equipment, gross	173,049	159,570
Less accumulated depreciation and amortization	(69,745)	(61,791)
Property, plant and equipment, net	$ 103,304	$ 97,779

XML

Balance Sheet Components - Additional Information (Detail)	12 Months Ended
	Dec. 31, 2016 USD ($) ft²	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)
Balance Sheet Components [Line Items]
Area of leased property | ft²	59,000
Property and equipment capitalized cost	$ 10,300,000	$ 10,600,000
Reclassified amounts out of OCI, net of tax	$ 0	$ (66,000)	$ (24,000)
California [Member]
Balance Sheet Components [Line Items]
Lease term	15 years

XML

Balance Sheet Components - Schedule of Accrued and Other Liabilities (Detail) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Other Liabilities Disclosure [Abstract]
Accrued compensation and benefits	$ 30,609	$ 31,104
Warranty provision-current	10,054	9,635
Accrued royalty payments	4,994	5,305
Contingent consideration-current	19,244	4,545
Short-term financing obligations	98	4,469
Deferred rent	2,938	3,367
Restructuring and other	1,824	3,019	$ 2,102
Sales tax liabilities	1,997	655
Other accrued liabilities	13,747	12,326
Accrued and other liabilities	$ 85,505	$ 74,425

XML

Balance Sheet Components - Schedule of Accumulated Other Comprehensive Income (Loss) (Detail) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Accumulated Other Comprehensive Income [Abstract]
Net unrealized investment losses	$ (473)	$ (376)
Currency translation losses	(24,230)	(17,049)
Net unrealized gains on cash flow hedges	9	1
Accumulated other comprehensive loss	$ (24,694)	$ (17,424)

XML

Goodwill and Long-Lived Intangible Assets - Schedule of Purchased Identified Intangible Assets Resulting from Acquisitions (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Purchased Identified Intangible Assets resulting from Acquisitions [Line Items]
Weighted average useful life (years)	5 years 8 months 12 days
Gross carrying amount - Intangible assets	$ 333,478	$ 317,144
Accumulated amortization	$ (210,481)	(181,592)
Weighted remaining average useful life (years)	3 years 9 months 18 days
Net carrying amount - Intangible assets	$ 122,997	135,552
Net carrying amount - Goodwill	$ 359,841	338,793	$ 245,443
Customer Relationships and Other [Member]
Purchased Identified Intangible Assets resulting from Acquisitions [Line Items]
Weighted average useful life (years)	5 years 1 month 6 days
Gross carrying amount - Intangible assets	$ 88,557	75,145
Accumulated amortization	$ (49,527)	(36,625)
Weighted remaining average useful life (years)	2 years 9 months 18 days
Net carrying amount - Intangible assets	$ 39,030	38,520
Existing Technology [Member]
Purchased Identified Intangible Assets resulting from Acquisitions [Line Items]
Weighted average useful life (years)	4 years
Gross carrying amount - Intangible assets	$ 173,543	161,441
Accumulated amortization	$ (122,654)	(114,018)
Weighted remaining average useful life (years)	2 years 8 months 12 days
Net carrying amount - Intangible assets	$ 50,889	47,423
Trademarks and Trade Names [Member]
Purchased Identified Intangible Assets resulting from Acquisitions [Line Items]
Weighted average useful life (years)	11 years 1 month 6 days
Gross carrying amount - Intangible assets	$ 67,701	65,395
Accumulated amortization	$ (38,300)	(30,949)
Weighted remaining average useful life (years)	6 years 3 months 18 days
Net carrying amount - Intangible assets	$ 29,401	34,446
IPR&D [Member]
Purchased Identified Intangible Assets resulting from Acquisitions [Line Items]
Gross carrying amount - Intangible assets	3,677	15,163
Net carrying amount - Intangible assets	$ 3,677	$ 15,163

XML

Goodwill and Long-Lived Intangible Assets - Additional Information (Detail) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Purchased Identified Intangible Assets resulting from Acquisitions [Line Items]
Intangible amortization expense	$ 39,560,000	$ 26,510,000	$ 20,673,000
Compound annual growth rate	8.00%
Long-term growth rate of calculated terminal values	4.00%
Estimated control premium rate	13.20%
Forecast horizon	6 years
Long-lived asset impairment charges	$ 0	$ 0	$ 0
Goodwill Assessment [Member]
Purchased Identified Intangible Assets resulting from Acquisitions [Line Items]
Fair value related to goodwill assessment	10.00%
Industrial Inkjet [Member]
Purchased Identified Intangible Assets resulting from Acquisitions [Line Items]
Fair value of goodwill	$ 575,000,000
Goodwill fair value in excess of carrying value percentage	1.51%
Revenue growth rate	26.00%
Productivity Software [Member]
Purchased Identified Intangible Assets resulting from Acquisitions [Line Items]
Fair value of goodwill	$ 444,000,000
Goodwill fair value in excess of carrying value percentage	2.67%
Revenue growth rate	12.00%
Fiery [Member]
Purchased Identified Intangible Assets resulting from Acquisitions [Line Items]
Fair value of goodwill	$ 515,000,000
Goodwill fair value in excess of carrying value percentage	5.33%
Revenue decline rate	7.00%
Long-term growth rate of calculated terminal values	2.50%
Intangible Assets, Amortization Period [Member] | Developed Technology [Member]
Purchased Identified Intangible Assets resulting from Acquisitions [Line Items]
Impact of change in useful life of intangible asset	$ 1,600,000
Minimum [Member]
Purchased Identified Intangible Assets resulting from Acquisitions [Line Items]
Estimated useful lives	2 years
Revenue growth rate	6.00%
Minimum [Member] | Fiery [Member]
Purchased Identified Intangible Assets resulting from Acquisitions [Line Items]
Revenue growth rate	2.00%
Maximum [Member]
Purchased Identified Intangible Assets resulting from Acquisitions [Line Items]
Estimated useful lives	16 years
Revenue growth rate	10.00%
Maximum [Member] | Fiery [Member]
Purchased Identified Intangible Assets resulting from Acquisitions [Line Items]
Revenue growth rate	3.00%

XML

Goodwill and Long-Lived Intangible Assets - Schedule of Future Amortization Expense (Detail) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Goodwill and Intangible Assets Disclosure [Abstract]
2017	$ 39,613
2018	35,264
2019	26,780
2020	10,256
2021	3,991
Thereafter	7,093
Net carrying amount - Intangible assets	$ 122,997	$ 135,552

XML

Goodwill and Long-Lived Intangible Assets - Schedule of Goodwill Rollforward (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Purchased Identified Intangible Assets resulting from Acquisitions [Line Items]
Beginning Balance	$ 338,793	$ 245,443
Additions	29,573	109,566
Opening balance sheet adjustments	(834)	(3,839)
Foreign currency adjustments	(7,691)	(12,377)
Ending Balance	359,841	338,793
Accumulated Impairment, Ending Balance	103,991
Industrial Inkjet [Member]
Purchased Identified Intangible Assets resulting from Acquisitions [Line Items]
Beginning Balance	142,183	59,124
Additions	1,426	91,776
Opening balance sheet adjustments	(171)	(3,826)
Foreign currency adjustments	(2,370)	(4,891)
Ending Balance	141,068	142,183
Accumulated Impairment, Ending Balance	103,991
Productivity Software [Member]
Purchased Identified Intangible Assets resulting from Acquisitions [Line Items]
Beginning Balance	133,128	121,486
Additions	28,147	17,790
Opening balance sheet adjustments	(663)	(13)
Foreign currency adjustments	(5,137)	(6,135)
Ending Balance	155,475	133,128
Fiery [Member]
Purchased Identified Intangible Assets resulting from Acquisitions [Line Items]
Beginning Balance	63,482	64,833
Foreign currency adjustments	(184)	(1,351)
Ending Balance	$ 63,298	$ 63,482

XML

Investments and Fair Value Measurements - Additional Information (Detail)	12 Months Ended
	Dec. 31, 2016 USD ($) Transactions $ / shares	Dec. 31, 2015 USD ($) Transactions $ / shares	Dec. 31, 2014 USD ($)
Investments And Fair Value Measurements [Line Items]
Maturity of highly liquid investments	Three months or less
Maturity of marketable investments	Greater than three months
Net unrealized gains (losses) on sale of securities included in other comprehensive income	$ (800,000)	$ (600,000)
Available-for-sale securities, net realized gains	400,000	100,000	$ 100,000
Available-for-sale securities, realized gains	400,000	200,000
Available-for-sale securities, realized losses		100,000
Net Asset Value per share | $ / shares	$ 1
Cash equivalents and short term investments	$ 319,003,000	$ 347,266,000
Transfers between Level 1 and 2 | Transactions	0	0
Fair value of liability	$ 56,463,000	$ 54,796,000	12,277,000
Contingent liabilities, current	19,244,000	4,545,000
Contingent liabilities, noncurrent	37,200,000
Fair value of contingent consideration increase (decrease)	6,800,000	(2,100,000)
Earnout interest accretion	2,700,000	1,400,000
Payments	28,111,000	4,093,000	$ 10,594,000
Increase in fair value of contingent consideration	1,200,000
Decrease in fair value of contingent consideration	3,600,000
Increase in fair value of contingent consideration resulting from a change in discount rate	500,000
Decrease in fair value of contingent consideration resulting from a change in discount rate	$ 800,000
Probability-adjusted revenue	5.00%
Percentage of increase or decrease in the fair value of contingent consideration	1.00%
Notional amount of derivative assets and liabilities	$ 161,800,000	118,600,000
Productivity Software [Member]
Investments And Fair Value Measurements [Line Items]
Payments	4,000,000	300,000
Designated as Cash Flow Hedges [Member]
Investments And Fair Value Measurements [Line Items]
Notional amount of derivative assets and liabilities	3,200,000	3,200,000
Metrix [Member]
Investments And Fair Value Measurements [Line Items]
Payments	200,000	600,000
SmartLinc, Inc. [Member]
Investments And Fair Value Measurements [Line Items]
Payments	400,000	300,000
Direct Smile [Member]
Investments And Fair Value Measurements [Line Items]
Payments	3,600,000
Reggiani And Matan [Member]
Investments And Fair Value Measurements [Line Items]
Payments	$ 23,800,000
Technique [Member]
Investments And Fair Value Measurements [Line Items]
Payments		2,000,000
GamSys [Member]
Investments And Fair Value Measurements [Line Items]
Payments		$ 1,100,000
Minimum [Member]
Investments And Fair Value Measurements [Line Items]
Probability of achieving revenue	50.00%
Minimum [Member] | Productivity Software [Member] | Monte Carlo Valuation Method [Member]
Investments And Fair Value Measurements [Line Items]
Fair value discount rate	0.60%
Minimum [Member] | Earnout [Member] | Productivity Software [Member] | Probability-Adjusted Method [Member]
Investments And Fair Value Measurements [Line Items]
Fair value discount rate	4.20%
Maximum [Member]
Investments And Fair Value Measurements [Line Items]
Probability of achieving revenue	100.00%
Maximum [Member] | Productivity Software [Member] | Monte Carlo Valuation Method [Member]
Investments And Fair Value Measurements [Line Items]
Fair value discount rate	4.98%
Maximum [Member] | Earnout [Member] | Productivity Software [Member] | Probability-Adjusted Method [Member]
Investments And Fair Value Measurements [Line Items]
Fair value discount rate	6.00%
Maximum Potential Payment [Member]
Investments And Fair Value Measurements [Line Items]
Payments	$ 14,600,000
Money Market Funds [Member]
Investments And Fair Value Measurements [Line Items]
Net Asset Value per share | $ / shares	$ 1.00	$ 1.00
Cash equivalents and short term investments	$ 23,575,000	$ 13,221,000
Corporate Debt Securities [Member]
Investments And Fair Value Measurements [Line Items]
Cash equivalents and short term investments	$ 197,647,000	198,778,000
Corporate Debt Securities [Member] | Cash Equivalents [Member]
Investments And Fair Value Measurements [Line Items]
Cash equivalents and short term investments		$ 700,000

XML

Investments and Fair Value Measurements - Available-for-Sale Short-Term Investments (Detail) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	$ 296,185	$ 333,874
Gross unrealized gains	233	229
Gross unrealized losses	(990)	(827)
Fair value	295,428	333,276
U.S. Government and Sponsored Entities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	70,893	98,411
Gross unrealized gains	49	12
Gross unrealized losses	(348)	(137)
Fair value	70,594	98,286
Corporate Debt Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	198,166	198,498
Gross unrealized gains	102	20
Gross unrealized losses	(621)	(510)
Fair value	197,647	198,008
Municipal Government [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	1,278
Gross unrealized losses	(1)
Fair value	1,277
Asset-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	24,233	35,276
Gross unrealized gains	79	195
Gross unrealized losses	(17)	(174)
Fair value	24,295	35,297
Mortgage-Backed Securities - Residential [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	1,615	1,689
Gross unrealized gains	3	2
Gross unrealized losses	(3)	(6)
Fair value	$ 1,615	$ 1,685

XML

Investments and Fair Value Measurements - Summary of Fair Value and Duration of Investments, Including Cash Equivalents, that have been Classified in Gross Unrealized Loss Position (Detail) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	$ 179,428	$ 247,332
Less than 12 Months, Unrealized Losses	(938)	(690)
More than 12 Months, Fair Value	17,922	24,340
More than 12 Months, Unrealized Losses	(52)	(137)
Total, Fair Value	197,350	271,672
Total, Unrealized Losses	(990)	(827)
U.S. Government and Sponsored Entities [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	39,810	82,366
Less than 12 Months, Unrealized Losses	(348)	(137)
Total, Fair Value	39,810	82,366
Total, Unrealized Losses	(348)	(137)
Corporate Debt Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	133,382	136,274
Less than 12 Months, Unrealized Losses	(581)	(448)
More than 12 Months, Fair Value	13,158	16,940
More than 12 Months, Unrealized Losses	(40)	(62)
Total, Fair Value	146,540	153,214
Total, Unrealized Losses	(621)	(510)
Municipal Government [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	1,268
Less than 12 Months, Unrealized Losses	(1)
Total, Fair Value	1,268
Total, Unrealized Losses	(1)
Asset-Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	4,540	27,928
Less than 12 Months, Unrealized Losses	(7)	(103)
More than 12 Months, Fair Value	4,611	7,131
More than 12 Months, Unrealized Losses	(10)	(71)
Total, Fair Value	9,151	35,059
Total, Unrealized Losses	(17)	(174)
Mortgage-Backed Securities - Residential [Member]
Schedule of Available-for-sale Securities [Line Items]
Less than 12 Months, Fair Value	428	764
Less than 12 Months, Unrealized Losses	(1)	(2)
More than 12 Months, Fair Value	153	269
More than 12 Months, Unrealized Losses	(2)	(4)
Total, Fair Value	581	1,033
Total, Unrealized Losses	$ (3)	$ (6)

XML

Investments and Fair Value Measurements - Amortized Cost and Estimated Fair Value of Investments (Detail) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Amortized Cost and Fair Value Debt Securities [Abstract]
Mature in less than one year, Amortized cost	$ 107,033
Mature in one to three years, Amortized cost	189,152
Amortized cost	296,185	$ 333,874
Mature in less than one year, Fair value	106,918
Mature in one to three years, Fair value	188,510
Total short-term investments, Fair value	$ 295,428	$ 333,276

XML

Investments and Fair Value Measurements - Investments in Accordance with Fair Value Hierarchy (Detail) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Investments And Fair Value Measurements [Line Items]
Total Investments	$ 319,003	$ 347,266
Contingent consideration, current and noncurrent	56,463	54,796	$ 12,277
Self-insurance	1,542	1,268
Liabilities	58,005	56,064
Money Market Funds [Member]
Investments And Fair Value Measurements [Line Items]
Total Investments	23,575	13,221
U.S. Government and Sponsored Entities [Member]
Investments And Fair Value Measurements [Line Items]
Total Investments	70,594	98,286
Corporate Debt Securities [Member]
Investments And Fair Value Measurements [Line Items]
Total Investments	197,647	198,778
Municipal Government [Member]
Investments And Fair Value Measurements [Line Items]
Total Investments	1,277
Asset-Backed Securities [Member]
Investments And Fair Value Measurements [Line Items]
Total Investments	24,295	35,297
Mortgage-Backed Securities - Residential [Member]
Investments And Fair Value Measurements [Line Items]
Total Investments	1,615	1,684
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Investments And Fair Value Measurements [Line Items]
Total Investments	75,445	47,933
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Money Market Funds [Member]
Investments And Fair Value Measurements [Line Items]
Total Investments	23,575	13,221
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | U.S. Government and Sponsored Entities [Member]
Investments And Fair Value Measurements [Line Items]
Total Investments	51,870	34,712
Significant Other Observable Inputs (Level 2) [Member]
Investments And Fair Value Measurements [Line Items]
Total Investments	243,491	299,149
Significant Other Observable Inputs (Level 2) [Member] | U.S. Government and Sponsored Entities [Member]
Investments And Fair Value Measurements [Line Items]
Total Investments	18,724	63,574
Significant Other Observable Inputs (Level 2) [Member] | Corporate Debt Securities [Member]
Investments And Fair Value Measurements [Line Items]
Total Investments	197,647	198,778
Significant Other Observable Inputs (Level 2) [Member] | Municipal Government [Member]
Investments And Fair Value Measurements [Line Items]
Total Investments	1,277
Significant Other Observable Inputs (Level 2) [Member] | Asset-Backed Securities [Member]
Investments And Fair Value Measurements [Line Items]
Total Investments	24,228	35,113
Significant Other Observable Inputs (Level 2) [Member] | Mortgage-Backed Securities - Residential [Member]
Investments And Fair Value Measurements [Line Items]
Total Investments	1,615	1,684
Unobservable Inputs (Level 3) [Member]
Investments And Fair Value Measurements [Line Items]
Total Investments	67	184
Contingent consideration, current and noncurrent	56,463	54,796
Self-insurance	1,542	1,268
Liabilities	58,005	56,064
Unobservable Inputs (Level 3) [Member] | Asset-Backed Securities [Member]
Investments And Fair Value Measurements [Line Items]
Total Investments	$ 67	$ 184

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Investments and Fair Value Measurements - Summary of Changes in Contingent Liability for Contingent Consideration (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Business Acquisition, Contingent Consideration [Line Items]
Fair value of contingent consideration	$ 54,796	$ 12,277
Changes in valuation	6,813	(2,135)
Payments	(28,111)	(4,093)	$ (10,594)
Foreign currency adjustment	(1,444)	(2,051)
Fair value of contingent consideration	56,463	$ 54,796	$ 12,277
Reggiani [Member]
Business Acquisition, Contingent Consideration [Line Items]
Payments	(23,800)
Fair value of contingent consideration	22,800
Date of acquisition agreement		Jul. 01, 2015
CTI [Member]
Business Acquisition, Contingent Consideration [Line Items]
Fair value of contingent consideration	2,551
Fair value of contingent consideration		$ 2,551
Date of acquisition agreement		Oct. 06, 2015
Shuttleworth [Member]
Business Acquisition, Contingent Consideration [Line Items]
Fair value of contingent consideration	5,077
Fair value of contingent consideration		$ 5,077
Date of acquisition agreement		Nov. 04, 2015
Rialco Limited [Member]
Business Acquisition, Contingent Consideration [Line Items]
Fair value of contingent consideration	$ 2,300
Date of acquisition agreement	Mar. 01, 2016
Optitex Ltd [Member]
Business Acquisition, Contingent Consideration [Line Items]
Date of acquisition agreement	Jun. 16, 2016

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Investments and Fair Value Measurements - Additional Information1 (Detail) - USD ($) $ in Millions	1 Months Ended
	Sep. 30, 2014	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Investments And Fair Value Measurements [Line Items]
Interest rate of debt issued		0.75%	0.75%	0.75%
Convertible Senior Notes Due 2019 [Member]
Investments And Fair Value Measurements [Line Items]
Aggregate principal amount of debt issued	$ 345
Fair value of notes issued		$ 355
Interest rate of debt issued	0.75%
Maturity year of debt	2019

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Convertible Senior Notes, Note Hedges, and Warrants - Additional Information (Detail)	1 Months Ended	12 Months Ended
	Sep. 30, 2014 USD ($)	Dec. 31, 2016 USD ($) $ / shares	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)
Debt Instrument [Line Items]
Interest rate of debt, stated percentage		0.75%	0.75%	0.75%
Net carrying amount		$ 304,484,000	$ 290,734,000
Aggregate amount paid for Note Hedges	$ 63,900,000	0	0	$ 63,928,000
Proceeds from sale of warrants	34,500,000	0	0	$ 34,535,000
Debt Issuance Costs [Member]
Debt Instrument [Line Items]
Debt issuance costs, net of amortization		5,800,000
Liability Component [Member]
Debt Instrument [Line Items]
Net carrying amount		304,484,000	290,734,000
Debt issuance costs, net of amortization		4,401,000	5,751,000
Equity Component [Member]
Debt Instrument [Line Items]
Net carrying amount		62,061,000	62,061,000
Debt issuance costs, net of amortization		1,582,000	1,582,000
Equity Component Gross Value [Member]
Debt Instrument [Line Items]
Net carrying amount		$ 63,643,000	$ 63,643,000
0.75% Convertible Senior Notes Due 2019 [Member]
Debt Instrument [Line Items]
Debt instrument, principal amount	$ 345,000,000
Interest rate of debt, stated percentage	0.75%	0.75%
Debt instrument, maturity year	2019
Net proceeds from issuance of debt	$ 336,300,000
Net proceeds used to purchase Note Hedges		$ 29,400,000
Debt instrument, description		The Notes are senior unsecured obligations of EFI with interest payable semiannually in arrears on March 1 and September 1 of each year, commencing March 1, 2015. The Notes are not callable and will mature on September 1, 2019, unless previously purchased or converted in accordance with their terms prior to such date.
Conversion rate, number of share per $1,000 principal amount		18.9667
Conversion rate, principal amount of Notes		$ 1,000
Initial conversion price | $ / shares		$ 52.72
Debt instrument, Conversion rate description		• during any calendar quarter commencing after the calendar quarter ending on December 31, 2014 (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; • during the five business day period after any five consecutive trading day period (“Notes Measurement Period”) in which the “trading price” (as the term is defined in the Indenture) per $1,000 principal amount of Notes for each trading day of such Notes Measurement Period was less than 98% of the product of the last reported stock price on such trading day and the conversion rate on each such trading day; • upon the occurrence of specified corporate events; or • at any time on or after March 1, 2019 until the close of business on the second scheduled trading day immediately preceding the maturity date.
Conversion threshold minimum stock price as a percentage of conversion price		130.00%
Effective interest rate percentage		4.98%
Deferred tax liability		$ 23,700,000
Common stock strike price per share | $ / shares		$ 68.86
0.75% Convertible Senior Notes Due 2019 [Member] | Debt Issuance Costs [Member]
Debt Instrument [Line Items]
Effective interest rate percentage		5.46%
0.75% Convertible Senior Notes Due 2019 [Member] | Liability Component [Member]
Debt Instrument [Line Items]
Debt issuance costs		$ 7,000,000
0.75% Convertible Senior Notes Due 2019 [Member] | Equity Component [Member]
Debt Instrument [Line Items]
Debt issuance costs		$ 1,600,000

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Convertible Senior Notes, Note Hedges, and Warrants - Schedule of Convertible Notes (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Debt Instrument [Line Items]
Net carrying amount	$ 304,484	$ 290,734
Liability Component Gross Value [Member]
Debt Instrument [Line Items]
Liability component	345,000	345,000
Liability Component [Member]
Debt Instrument [Line Items]
Debt discount, net of amortization	(36,115)	(48,515)
Debt issuance costs, net of amortization	(4,401)	(5,751)
Net carrying amount	304,484	290,734
Equity Component Gross Value [Member]
Debt Instrument [Line Items]
Net carrying amount	63,643	63,643
Equity Component [Member]
Debt Instrument [Line Items]
Debt issuance costs, net of amortization	(1,582)	(1,582)
Net carrying amount	$ 62,061	$ 62,061

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Convertible Senior Notes, Note Hedges, and Warrants - Summary of Interest Expense Recognized Related to Notes (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Debt Disclosure [Abstract]
0.75% coupon	$ 2,588	$ 2,595	$ 798
Amortization of debt issuance costs	1,350	1,396	419
Amortization of debt discount	12,400	11,667	3,461
Interest expense recognized related to notes	$ 16,338	$ 15,658	$ 4,678

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Convertible Senior Notes, Note Hedges, and Warrants - Summary of Interest Expense Recognized Related to Notes (Parenthetical) (Detail)	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Debt Disclosure [Abstract]
Interest rate of debt, stated percentage	0.75%	0.75%	0.75%

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Commitments and Contingencies - Future Minimum Lease Payments under Non-Cancellable Operating Leases and Future Minimum Sublease Receipts (Detail) $ in Thousands	Dec. 31, 2016 USD ($)
Commitments and Contingencies Disclosure [Abstract]
2017, Future Minimum Lease Payments	$ 9,097
2018, Future Minimum Lease Payments	8,240
2019, Future Minimum Lease Payments	7,848
2020, Future Minimum Lease Payments	6,570
2021, Future Minimum Lease Payments	5,355
Thereafter, Future Minimum Lease Payments	33,894
Total, Future Minimum Lease Payments	71,004
2017, Future Minimum Sublease Receipts	370
2018, Future Minimum Sublease Receipts	313
2019, Future Minimum Sublease Receipts	166
2020, Future Minimum Sublease Receipts	0
2021, Future Minimum Sublease Receipts	0
Thereafter, Future Minimum Sublease Receipts	0
Total, Future Minimum Sublease Receipts	$ 849

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Commitments and Contingencies - Real Estate (Detail)			12 Months Ended
	Dec. 31, 2016 USD ($) a ft²	Aug. 26, 2016 USD ($) a ft² Renewal_Options	Dec. 31, 2016 USD ($) a ft²	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)
Real Estate Properties [Line Items]
Rent expenses			$ 8,800,000	$ 8,000,000	$ 6,100,000
Minimum lease payments	$ 71,004,000		71,004,000
Cost of manufacturing and warehouse facility under construction	103,304,000		103,304,000	97,779,000
Net unrealized gains (losses) on sale of securities included in other comprehensive income	(800,000)		(800,000)	(600,000)
Assets held for sale	3,781,000		3,781,000
Land	$ 900,000		$ 900,000
Area of leased property | ft²	59,000		59,000
Imputed financing obligation	$ 14,152,000		$ 14,152,000	13,480,000
Minimum [Member] | Matan Digital Printers [Member]
Real Estate Properties [Line Items]
Estimated material loss from outstanding claim in business acquisition	1		1
Maximum [Member] | Matan Digital Printers [Member]
Real Estate Properties [Line Items]
Estimated material loss from outstanding claim in business acquisition	$ 10,100,000		$ 10,100,000
Lease Agreement [Member]
Real Estate Properties [Line Items]
Lease term			10 years
Area of real estate property | ft²	22,000		22,000
Assets Held-for-sale [Member]
Real Estate Properties [Line Items]
Acres of land | a	5.6		5.6
Area of real estate property | ft²	43,682		43,682
Net book value of facility	$ 2,900,000		$ 2,900,000
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Real Estate Properties [Line Items]
Net unrealized gains (losses) on sale of securities included in other comprehensive income	$ (100,000)		$ (100,000)
Fiery [Member] | Minimum [Member]
Real Estate Properties [Line Items]
Limited warranty period			12 months
Fiery [Member] | Minimum [Member] | Industrial Inkjet [Member]
Real Estate Properties [Line Items]
Limited warranty period			12 months
Fiery [Member] | Maximum [Member]
Real Estate Properties [Line Items]
Limited warranty period			15 months
Fiery [Member] | Maximum [Member] | Industrial Inkjet [Member]
Real Estate Properties [Line Items]
Limited warranty period			15 months
Off Balance Sheet Financing - Land Lease Arrangements [Member] | City of Manchester [Member]
Real Estate Properties [Line Items]
Lease term		48 years 6 months
Number of renewal options for lease agreement | Renewal_Options		2
Acres of land | a		16.9
Minimum lease payments		$ 13,100,000
Renewal term of lease		5 years
Renewal term of lease		3 years 6 months
Off Balance Sheet Financing - Synthetic Lease Arrangements [Member] | Bank of Tokyo - Mitsubishi UFJ Leasing & Finance LLC [Member]
Real Estate Properties [Line Items]
Lease term		6 years
Minimum lease payments		$ 1,800,000
Area of real estate property | ft²		225,000
Residual value guarantee percentage		89.00%
Lease arrangement description			Upon completion of the initial term, we have the option to renew the lease, purchase the facility, or return the facility to BTMU subject to an 89% residual value guarantee under which we would recognize additional rent expense in the form of a variable rent payment.
Construction period			18 months
Percentage of funds pledge that are deposited in government securities	115.00%		115.00%
Percentage of funds pledge that are deposited in cash equivalents	100.00%		100.00%
Off Balance Sheet Financing - Synthetic Lease Arrangements [Member] | Bank of Tokyo - Mitsubishi UFJ Leasing & Finance LLC [Member] | Cash Equivalents [Member]
Real Estate Properties [Line Items]
Funds invested under lease	$ 1,200,000		$ 1,200,000
Off Balance Sheet Financing - Synthetic Lease Arrangements [Member] | Bank of Tokyo - Mitsubishi UFJ Leasing & Finance LLC [Member] | US Government Securities [Member]
Real Estate Properties [Line Items]
Funds invested under lease	5,100,000		$ 5,100,000
Off Balance Sheet Financing - Synthetic Lease Arrangements [Member] | Bank of Tokyo - Mitsubishi UFJ Leasing & Finance LLC [Member] | Industrial Inkjet [Member]
Real Estate Properties [Line Items]
Cost of manufacturing and warehouse facility under construction		$ 40,000,000
Build to Suit Facility [Member]
Real Estate Properties [Line Items]
Lease term			15 years
Lease base rent plus other charges and expenses	18,500,000		$ 18,500,000
Build-out and structural improvements paid by lessor			4,500,000
Build out and tenant improvements paid by lessee			5,300,000
Property and equipment including capitalized interest	$ 10,300,000		$ 10,300,000	$ 10,600,000

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Commitments and Contingencies - Changes in Product Warranty Reserve (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Commitments and Contingencies Disclosure [Abstract]
Beginning Balance	$ 9,635	$ 9,682
Liability assumed through business acquisitions		1,006
Provisions, net of releases	12,715	11,839
Settlements	(12,031)	(12,892)
Ending Balance	$ 10,319	$ 9,635

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Common Stock Repurchase Programs - Additional Information (Detail) - USD ($) shares in Millions		12 Months Ended
	Nov. 09, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Nov. 06, 2013
Stock Repurchase Program [Line Items]
Aggregate purchase price		$ 83,291,000	$ 76,447,000	$ 101,095,000
Share Repurchase Program 2013 [Member]
Stock Repurchase Program [Line Items]
Repurchase of common stock, authorized amount	$ 150,000,000				$ 200,000,000
Aggregate shares repurchased		1.8	1.5
Aggregate purchase price		$ 74,200,000	$ 65,700,000
Authorized remaining amount of common stock cancelled	$ 54,900,000
Common stock repurchase authorization expiration date		Dec. 31, 2018

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Common Stock Repurchase Programs - Additional Information1 (Detail) - Net Share Settlement [Member] - USD ($) shares in Millions, $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Stock Repurchase Program [Line Items]
Aggregate shares repurchased	0.2	0.2
Value of shares surrendered to satisfy tax withholding obligations	$ 9.1	$ 10.7

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Derivatives and Hedging - Additional Information (Detail) - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Notional amount of derivative assets and liabilities	$ 161,800,000	$ 118,600,000
Designated as Cash Flow Hedges [Member]
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Notional amount of derivative assets and liabilities	3,200,000	3,200,000
Brazilian Real, British Pound Sterling, Israeli Shekel, Australian Dollar, Japanese Yen, Chinese Renminbi, and Euro Denominated Intercompany Balances [Member] | Not Designated as Hedging Instruments [Member]
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Notional amount of derivative assets and liabilities	90,700,000	63,700,000
Brazilian Real, British Pound Sterling, Australian Dollar, Israeli Shekel, And Euro-Denominated Trade Receivables [Member] | Not Designated as Hedging Instruments [Member]
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Notional amount of derivative assets and liabilities	39,800,000	49,100,000
British Pounds Sterling, Indian Rupee, and Euro-Denominated other net monetary assets. | Not Designated as Hedging Instruments [Member]
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Notional amount of derivative assets and liabilities	28,200,000	2,600,000
Foreign Exchange Contracts [Member] | Designated as Cash Flow Hedges [Member]
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Notional amount of derivative assets and liabilities	3,200,000	3,200,000
Forward Contracts [Member] | Not Designated as Hedging Instruments [Member]
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Notional amount of derivative assets and liabilities	$ 158,700,000	$ 115,400,000

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Income Taxes - Components of Income before Income Taxes (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Income Tax Disclosure [Abstract]
U.S.	$ 8,254	$ 9,311	$ 15,090
Foreign	31,128	28,211	26,997
Income before income taxes	$ 39,382	$ 37,522	$ 42,087

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Income Taxes - Provision for (Benefit from) Income Taxes (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Income Tax Disclosure [Abstract]
U.S. Federal	$ (7,593)	$ 3,755	$ 5,050
State	662	1,813	1,237
Foreign	11,722	5,798	7,922
Total current	4,791	11,366	14,209
U.S. Federal	(4,276)	(3,119)	(94)
State	(567)	(583)	846
Foreign	(6,112)	(3,682)	(6,588)
Total deferred	(10,955)	(7,384)	(5,836)
Provision for (benefit from) income taxes	$ (6,164)	$ 3,982	$ 8,373

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Income Taxes - Reconciliation Between Income Tax Provision (Benefit) Computed at Federal Statutory Rate and Actual Tax Provision (Benefit) (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Income Tax Disclosure [Abstract]
Tax provision at federal statutory rate	$ 13,783	$ 13,133	$ 14,731
State income taxes, net of federal benefit	62	800	360
Research and development credits	(2,627)	(4,217)	(2,629)
Effect of foreign operations	(3,439)	(3,483)	(2,293)
Increase in value of intangible assets			(3,130)
Reduction in accrual for estimated potential tax assessments	(15,404)	(4,808)	(2,088)
Non-deductible stock-based compensation pursuant to ASC 718-740	1,288	3,244	2,793
Domestic manufacturing deduction	(831)	(878)	(598)
Other	1,004	191	1,227
Provision for (benefit from) income taxes	$ (6,164)	$ 3,982	$ 8,373
Tax provision at federal statutory rate	35.00%	35.00%	35.00%
State income taxes, net of federal benefit	0.20%	2.10%	0.90%
Research and development credits	(6.70%)	(11.20%)	(6.20%)
Effect of foreign operations	(8.70%)	(9.30%)	(5.40%)
Increase in value of intangible assets			(7.40%)
Reduction in accrual for estimated potential tax assessments	(39.10%)	(12.70%)	(5.00%)
Non-deductible stock-based compensation pursuant to ASC 718-740	3.30%	8.60%	6.60%
Domestic manufacturing deduction	(2.10%)	(2.30%)	(1.40%)
Other	2.40%	0.40%	2.80%
Provision for (benefit from) income taxes	(15.70%)	10.60%	19.90%

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Income Taxes - Additional Information (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Income Taxes [Line Items]
Tax benefit from release of previously unrecognized tax benefits	$ 16,600
Tax benefit related to the increased valuation of intangible assets resulting from merger of subsidiaries			$ 3,100
U.S. Statutory income tax rate	35.00%	35.00%	35.00%
Unremitted foreign earnings reinvested	$ 164,600
Amount of tax remitted on foreign earnings	34,600
Unrecognized tax benefits that would affect the effective tax rate if recognized	32,000	$ 43,500	$ 32,100
Amounts netted against related deferred tax assets	1,100	1,000	700
Gross unrecognized tax benefits decrease in next 12 months	3,500
Offset to deferred tax assets for unrecognized tax benefits	20,000
Estimated unrecognized tax benefits	12,030	11,312
Accrued interest and penalties related to unrecognized tax benefits	500	$ 500	$ 900
Deferred tax assets related to excess tax benefits for federal research and development income tax credits	2,200
Foster City [Member]
Income Taxes [Line Items]
Tax benefit from sale of building and land	10,300
RSU Forfeitures [Member]
Income Taxes [Line Items]
Deferred tax assets for tax benefit on cumulative effect adjustment associated with change in accounting	$ 600
Minimum [Member]
Income Taxes [Line Items]
Losses and credit expire	2022
Maximum [Member]
Income Taxes [Line Items]
Losses and credit expire	2027
U.S. federal [Member]
Income Taxes [Line Items]
Loss carryforwards	$ 16,100
Credit carryforwards	42,300
State [Member]
Income Taxes [Line Items]
Loss carryforwards	54,800
Credit carryforwards	$ 37,300

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Income Taxes - Tax Effects of Temporary Differences that Give Rise to Deferred Tax Assets (Liabilities) (Detail) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Income Tax Disclosure [Abstract]
Reserves and accruals not currently deductible for tax purposes	$ 14,079	$ 13,804
Net operating loss carryforwards	10,055	10,409
Tax credit carryforwards	63,985	44,176
Deferred revenue	1,642	3,778
Stock-based compensation	8,487	8,309
Other	6,222	5,099
Gross deferred tax assets	104,470	85,575
Depreciation and amortization	(17,845)	(24,042)
State Taxes	(2,092)	(1,841)
Gross deferred tax liabilities	(19,937)	(25,883)
Deferred tax valuation allowance	(42,406)	(37,652)
Net deferred tax assets	$ 42,127	$ 22,040

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Income Taxes - Reconciliation of Change in Gross Unrecognized Tax Benefits (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Income Tax Contingency [Line Items]
Beginning Balance	$ 11,312
Ending Balance	12,030	$ 11,312
Federal, State, and Foreign Tax [Member]
Income Tax Contingency [Line Items]
Beginning Balance	46,100	34,200	$ 32,400
Additions for tax positions of prior years	1,800	14,100	900
Additions for tax positions	3,900	4,700	3,600
Reductions due to lapse of applicable statute of limitations	(16,400)	(6,900)	(2,700)
Ending Balance	35,400	46,100	34,200
Accrued Interest and Penalties [Member]
Income Tax Contingency [Line Items]
Beginning Balance	500	800	600
Additions for tax positions of prior years	200	200	400
Reductions due to lapse of applicable statute of limitations	(200)	(500)	(200)
Ending Balance	500	500	800
Gross Unrecognized Income Tax Benefits [Member]
Income Tax Contingency [Line Items]
Beginning Balance	46,600	35,000	33,000
Additions for tax positions of prior years	2,000	14,300	1,300
Additions for tax positions	3,900	4,700	3,600
Reductions due to lapse of applicable statute of limitations	(16,600)	(7,400)	(2,900)
Ending Balance	$ 35,900	$ 46,600	$ 35,000

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Income Taxes - Open Tax Years - Additional Information (Detail)	12 Months Ended
	Dec. 31, 2016
Earliest Tax Year [Member] | State Tax Jurisdictions [Member]
Income Tax Examination [Line Items]
Open tax year	2012
Earliest Tax Year [Member] | Internal Revenue Service [Member]
Income Tax Examination [Line Items]
Open tax year	2013
Earliest Tax Year [Member] | Netherlands Tax Authority [Member]
Income Tax Examination [Line Items]
Open tax year	2014
Earliest Tax Year [Member] | Spanish Tax Authority [Member]
Income Tax Examination [Line Items]
Open tax year	2012
Earliest Tax Year [Member] | Italian Tax Authority [Member]
Income Tax Examination [Line Items]
Open tax year	2012
Latest Tax Year [Member] | State Tax Jurisdictions [Member]
Income Tax Examination [Line Items]
Open tax year	2015
Latest Tax Year [Member] | Internal Revenue Service [Member]
Income Tax Examination [Line Items]
Open tax year	2015
Latest Tax Year [Member] | Netherlands Tax Authority [Member]
Income Tax Examination [Line Items]
Open tax year	2015
Latest Tax Year [Member] | Spanish Tax Authority [Member]
Income Tax Examination [Line Items]
Open tax year	2015
Latest Tax Year [Member] | Italian Tax Authority [Member]
Income Tax Examination [Line Items]
Open tax year	2015

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Employee Benefit Plans - Equity Incentive Plans - Additional Information (Detail)	12 Months Ended
	Dec. 31, 2016 Employee Plan shares	Dec. 31, 2015 shares	Dec. 31, 2014 shares	Jun. 04, 2013 shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of prior equity incentive plans with outstanding equity awards | Plan	0
2009 Equity Incentive Award Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock reserved under the plan for future issuance				11,600,000
Shares outstanding	2,400,000	2,300,000	2,500,000
Shares available for grant	1,700,000	2,700,000	3,400,000
2009 Equity Incentive Award Plan [Member] | Employees and Consultants [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of employees eligible to participate in plan | Employee	3,600
2009 Equity Incentive Award Plan [Member] | Non-Employee Director [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of employees eligible to participate in plan | Employee	5
2009 Equity Incentive Award Plan [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	1 year
Expiration period	7 years
Option price as percentage of fair market value	100.00%
2009 Equity Incentive Award Plan [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	4 years
Expiration period	10 years

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Employee Benefit Plans - Amended and Restated 2000 Employee Stock Purchase Plan - Additional Information (Detail) - ESPP Purchase Rights [Member] - USD ($) $ / shares in Units, shares in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Jun. 04, 2013
Employee Stock Purchase Plan [Line Items]
Increase in the number of shares available to be sold under the ESPP				2.0
Shares issued under the ESPP	0.3	0.3	0.6
Stock issued under ESPP, average purchase price	$ 32.88	$ 31.66	$ 13.54
Total unrecognized compensation cost related to stock-based compensation arrangements granted under the ESPP	$ 500,000
Unrecognized compensation cost related to stock-based compensation arrangements granted under the ESPP, recognition period	1 year 9 months 18 days
Shares available for issuance under the ESPP	1.2	1.5	1.8
Minimum [Member]
Employee Stock Purchase Plan [Line Items]
Percentage of employee contribution to plan from base salary	1.00%
Maximum value of shares employees can purchase	$ 25,000
Maximum [Member]
Employee Stock Purchase Plan [Line Items]
Percentage of employee contribution to plan from base salary	10.00%
Option price as percentage of fair market value	85.00%
Maximum offering period	27 months

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Employee Benefit Plans - Employee 401(k) Plan - Additional Information (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Percentage employee contribution matched by the Company	50.00%
Maximum employee contribution matched by the Company	4.00%
401k vesting period	4 years
Employee contribution matched by the company	$ 2.2	$ 2.3	$ 2.1
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Employees contribution out of annual compensation	1.00%		40.00%
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Employees contribution out of annual compensation	40.00%		75.00%

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Employee Benefit Plans - Schedule of Stock-Based Compensation Expense (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock-based compensation expense	$ 31,826	$ 34,071	$ 36,061
Income tax effect	(10,342)	(9,436)	(10,045)
Stock-based compensation expense, net of tax	21,484	24,635	26,016
RSUs [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock-based compensation expense	28,952	29,671	32,429
ESPP Purchase Rights [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock-based compensation expense	2,795	4,003	3,368
Employee Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock-based compensation expense (benefit)	$ 79	$ 397	$ 264

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Employee Benefit Plans - Valuation Assumptions for Stock Options and ESPP Purchase - Additional Information (Detail) - shares	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Options granted	0	0	0

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Employee Benefit Plans - Schedule of ESPP Purchase Rights and Underlying Weighted Average Assumptions (Detail) - ESPP Purchase Rights [Member] - $ / shares	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted average fair value per share	$ 10.69	$ 10.28	$ 11.12
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected volatility	22.00%	19.00%	25.00%
Risk-free interest rate	0.40%	0.10%	0.10%
Expected term (in years)	6 months	6 months	6 months
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected volatility	32.00%	28.00%	28.00%
Risk-free interest rate	0.80%	0.70%	0.50%
Expected term (in years)	2 years	2 years	2 years

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Employee Benefit Plans - Schedule of Stock Options Outstanding and Exercisable (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Shares, Options outstanding, beginning balance	442	566	1,060
Shares outstanding, Options forfeited and expired	(12)		(4)
Shares outstanding, Options exercised	(115)	(124)	(490)
Shares, Options outstanding, ending balance	315	442	566
Weighted average exercise price, Options outstanding, beginning balance	$ 13.20	$ 13.67	$ 14.66
Shares outstanding, Options vested and expected to vest, ending balance	315
Weighted average exercise price, Options forfeited and expired	$ 10.77		25.63
Shares outstanding, Options exercisable, ending balance	315
Weighted average exercise price, Options exercised	$ 11.64	15.35	15.72
Weighted average exercise price, Options outstanding, ending balance	13.86	$ 13.20	$ 13.67
Weighted average exercise price, Options vested and expected to vest, ending balance	13.86
Weighted average exercise price, Options exercisable, ending balance	$ 13.86
Weighted average remaining contractual term (years), Options outstanding	1 year 5 months 16 days
Weighted average remaining contractual term (years), Options vested and expected to vest	1 year 5 months 16 days
Weighted average remaining contractual term (years), Options exercisable	1 year 5 months 16 days
Aggregate intrinsic value, Options outstanding	$ 9,480
Aggregate intrinsic value, Options vested and expected to vest	9,480
Aggregate intrinsic value, Options exercisable	$ 9,480

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Employee Benefit Plans - Stock Option Activity - Additional Information (Detail) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Intrinsic value of options exercised	$ 3,800,000	$ 3,700,000	$ 13,200,000
Unrecognized compensation cost related to stock options	$ 0
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted average exercise price	$ 11.40
Weighted average remaining contractual term	7 months 21 days
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted average exercise price	$ 16.57
Weighted average remaining contractual term	2 years 8 months 5 days

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Employee Benefit Plans - Non-Vested RSUs - Additional Information (Detail) - RSUs [Member] - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted average fair value of restricted stock units granted	$ 43,350	$ 41,610	$ 41,710
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	1 year
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	4 years

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Employee Benefit Plans - Schedule of Non-Vested RSUs (Detail) - RSUs [Member] - $ / shares shares in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Nonvested Restricted Stock Units Activity [Line Items]
Non-vested, beginning balance	1,814	2,003	2,089
Shares, Restricted stock granted	1,359	1,104	1,272
Shares, Restricted stock vested	(787)	(925)	(1,174)
Shares, Restricted stock forfeited	(303)	(368)	(184)
Non-vested, ending balance	2,083	1,814	2,003
Weighted average grant date fair value, Non-vested, beginning balance	$ 40.53	$ 35.91	$ 23.44
Weighted average grant date fair value, Restricted stock granted	43.35	41.61	41.71
Weighted average grant date fair value, Restricted stock vested	38.34	32.39	21.94
Weighted average grant date fair value, Restricted stock forfeited	39.54	39.08	23.62
Weighted average grant date fair value, Non-vested, ending balance	$ 43.34	$ 40.53	$ 35.91

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Employee Benefit Plans - Vested RSUs - Additional Information (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted	0	0	0
RSUs [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair value of RSUs vested during the year	$ 38,340	$ 32,390	$ 21,940
Aggregate intrinsic value of RSUs vested and expected to vest	$ 79,100
Number of RSUs vested and expected to vest	1,800,000
Unrecognized compensation expense other than options	$ 33,900
Weighted average period of recognition of unrecognized compensation cost	1 year 3 months 29 days
Performance-based Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Non-vested performance-based RSUs	21.00%
Options granted	0	0	0
Market-based Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted	0	0	0

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Employee Benefit Plans - Schedule of Performance-Based and Market-Based RSUs and Stock Options (Detail) - shares	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock Options, Granted	0	0	0
Performance-based Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock Options, Non-vested, beginning balance	16,000	16,000	16,000
Stock Options, Granted	0	0	0
Stock Options, Vested	(4,000)
Stock Options, Forfeited	(12,000)
Stock Options, Non-vested, ending balance		16,000	16,000
Performance-based RSUs [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Non-vested, beginning balance	920,000	852,000	680,000
RSUs, Granted	821,000	569,000	709,000
RSUs, Vested	(226,000)	(284,000)	(403,000)
RSUs, Forfeited	(250,000)	(217,000)	(134,000)
Non-vested, ending balance	1,265,000	920,000	852,000
Market-based RSUs [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Non-vested, beginning balance	23,000	34,000
RSUs, Granted		18,000	34,000
RSUs, Vested		(3,000)
RSUs, Forfeited		(26,000)
Non-vested, ending balance	23,000	23,000	34,000

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Employee Benefit Plans - Schedule of Weighted Average Grant Date Fair Value Per Share of Performance-Based and Market-Based RSUs and Assumptions Used to Estimate Fair Value (Detail) - $ / shares	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Performance-based RSUs [Member] | Short Term [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Grant date fair value per share	$ 39.79	$ 38.77	$ 42.04
Service period (years)	1 year	1 year	1 year
Performance-based RSUs [Member] | Long Term [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Grant date fair value per share	$ 45.76	$ 42.82	$ 40.30
Service period (years)			4 years
Service period, lower range (years)	2 years	2 years
Service period, upper range (years)	3 years	3 years
Market-based RSUs [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Grant date fair value per share		$ 33.84	$ 32.10
Derived service period (years)		1 year 7 months 6 days	1 year 6 months 11 days
Implied volatility		30.00%	35.00%
Risk-free interest rate		1.70%	2.30%

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Restructuring and Other - Additional Information (Detail) $ in Thousands	12 Months Ended
	Dec. 31, 2016 USD ($) Employees	Dec. 31, 2015 USD ($) Employees	Dec. 31, 2014 USD ($) Employees
Reorganizations [Abstract]
Restructuring and other costs	$ 6,729	$ 5,731	$ 6,578
Severance charges	$ 4,100	$ 3,000	$ 3,200
Number of head count reductions | Employees	128	99	130
Facilities relocation and downsizing expenses	$ 500	$ 900	$ 2,000
Integration expenses	$ 2,100	$ 1,800	$ 1,400

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Restructuring and Other - Restructuring and Other Reserve Activities (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Restructuring and Related Activities [Abstract]
Reserve balance at January 1	$ 3,019	$ 2,102
Restructuring charges	2,808	3,109
Other charges	3,921	2,622
Non-cash restructuring and other	(403)
Cash payments	(7,521)	(4,814)
Reserve balance at December 31	$ 1,824	$ 3,019

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Segment Information, Geographic Regions, and Major Customers - Additional Information (Detail) $ in Thousands	12 Months Ended
	Dec. 31, 2016 USD ($) Segment	Dec. 31, 2015 USD ($)	Dec. 31, 2014
Segment Reporting Information [Line Items]
Number of operating segments | Segment	3
Property and equipment, net	$ 103,304	$ 97,779
Customers providing more than 10% of revenues	10.00%
Xerox [Member]
Segment Reporting Information [Line Items]
Customers providing more than 10% of revenues		12.00%	11.00%
Accounts receivable of net consolidated receivable		10.00%
United States [Member]
Segment Reporting Information [Line Items]
Property and equipment, net	$ 88,500
Europe, Middle East, and Africa ("EMEA") [Member]
Segment Reporting Information [Line Items]
Property and equipment, net	12,900
Asia Pacific ("APAC") [Member]
Segment Reporting Information [Line Items]
Property and equipment, net	$ 1,900

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Segment Information, Geographic Regions, and Major Customers - Summary of Operating Segment Profit (Gross Profit), Excluding Stock-Based Compensation Expense by Segment (Detail) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Segment Reporting Information [Line Items]
Revenue	$ 266,707	$ 245,575	$ 245,650	$ 234,133	$ 256,544	$ 228,694	$ 202,721	$ 194,554	$ 992,065	$ 882,513	$ 790,427
Industrial Inkjet [Member]
Segment Reporting Information [Line Items]
Revenue									562,583	447,705	379,170
Gross profit									$ 199,448	$ 152,918	$ 143,981
Gross profit percentages									35.50%	34.20%	38.00%
Productivity Software [Member]
Segment Reporting Information [Line Items]
Revenue									$ 151,737	$ 135,350	$ 130,743
Gross profit									$ 114,179	$ 99,278	$ 94,733
Gross profit percentages									75.20%	73.30%	72.50%
Fiery [Member]
Segment Reporting Information [Line Items]
Revenue									$ 277,745	$ 299,458	$ 280,514
Gross profit									$ 198,322	$ 210,140	$ 193,585
Gross profit percentages									71.40%	70.20%	69.00%

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Segment Information, Geographic Regions, and Major Customers - Reconciliation of Operating Segment Gross Profit to Consolidated Statements of Operations (Detail) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Segment Reporting Information [Line Items]
Stock-based compensation expense									$ (31,826)	$ (34,071)	$ (36,061)
Gross profit	$ 140,052	$ 125,194	$ 125,047	$ 118,397	$ 129,256	$ 116,285	$ 108,403	$ 105,440	508,690	459,384	429,737
Cost of Revenue [Member]
Segment Reporting Information [Line Items]
Stock-based compensation expense									(2,784)	(2,837)	(2,562)
Material Reconciling Items [Member]
Segment Reporting Information [Line Items]
Other items excluded from segment profit									(475)	(115)
Gross profit									508,690	459,384	429,737
Material Reconciling Items [Member] | Segment Profit [Member]
Segment Reporting Information [Line Items]
Segment gross profit									511,949	462,336	432,299
Material Reconciling Items [Member] | Cost of Revenue [Member]
Segment Reporting Information [Line Items]
Stock-based compensation expense									$ (2,784)	$ (2,837)	$ (2,562)

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Segment Information, Geographic Regions, and Major Customers - Tangible and Intangible Assets, Net of Liabilities, Summarized by Operating Segment (Detail) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Segment Reporting Information [Line Items]
Goodwill	$ 359,841	$ 338,793	$ 245,443
Identified intangible assets, net	122,997	135,552
Tangible assets, net of liabilities	344,994	349,849
Total stockholders' equity	827,832	824,194	788,689	$ 767,450
Industrial Inkjet [Member]
Segment Reporting Information [Line Items]
Goodwill	141,068	142,183	59,124
Productivity Software [Member]
Segment Reporting Information [Line Items]
Goodwill	155,475	133,128	121,486
Fiery [Member]
Segment Reporting Information [Line Items]
Goodwill	63,298	63,482	$ 64,833
Operating Segment [Member] | Industrial Inkjet [Member]
Segment Reporting Information [Line Items]
Goodwill	141,068	142,183
Identified intangible assets, net	84,465	101,623
Tangible assets, net of liabilities	156,202	102,351
Total stockholders' equity	381,735	346,157
Operating Segment [Member] | Productivity Software [Member]
Segment Reporting Information [Line Items]
Goodwill	155,475	133,128
Identified intangible assets, net	38,440	33,432
Tangible assets, net of liabilities	(27,689)	(10,023)
Total stockholders' equity	166,226	156,537
Operating Segment [Member] | Fiery [Member]
Segment Reporting Information [Line Items]
Goodwill	63,298	63,482
Identified intangible assets, net	92	497
Tangible assets, net of liabilities	33,325	23,954
Total stockholders' equity	96,715	87,933
Corporate and Unallocated Net Assets [Member]
Segment Reporting Information [Line Items]
Tangible assets, net of liabilities	183,156	233,567
Total stockholders' equity	$ 183,156	$ 233,567

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Segment Information, Geographic Regions, and Major Customers - Revenue by Ship-to Destination (Detail) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Segment Reporting Information [Line Items]
Total revenue	$ 266,707	$ 245,575	$ 245,650	$ 234,133	$ 256,544	$ 228,694	$ 202,721	$ 194,554	$ 992,065	$ 882,513	$ 790,427
Americas [Member]
Segment Reporting Information [Line Items]
Total revenue									500,411	473,599	438,421
Europe, Middle East, and Africa ("EMEA") [Member]
Segment Reporting Information [Line Items]
Total revenue									360,305	291,103	244,545
Asia Pacific ("APAC") [Member]
Segment Reporting Information [Line Items]
Total revenue									$ 131,349	$ 117,811	$ 107,461

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Subsequent Events - Additional Information (Detail) - USD ($) $ in Thousands		12 Months Ended
	Jan. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Subsequent Event [Line Items]
Cash consideration		$ 21,560	$ 82,446	$ 23,888
Freeflow Business from Xerox Corporation [Member] | Subsequent Event [Member]
Subsequent Event [Line Items]
Cash consideration	$ 23,900

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Quarterly Consolidated Financial Information - Schedule of Quarterly Consolidated Financial Information (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Quarterly Financial Information Disclosure [Abstract]
Revenue	$ 266,707	$ 245,575	$ 245,650	$ 234,133	$ 256,544	$ 228,694	$ 202,721	$ 194,554	$ 992,065	$ 882,513	$ 790,427
Gross profit	140,052	125,194	125,047	118,397	129,256	116,285	108,403	105,440	508,690	459,384	429,737
Income from operations	28,465	9,410	11,709	6,969	19,419	12,780	13,368	11,076	56,553	56,643	53,439
Net income	$ 20,546	$ 17,662	$ 5,235	$ 2,103	$ 10,329	$ 10,257	$ 7,717	$ 5,237	$ 45,546	$ 33,540	$ 33,714
Net income per basic common share	$ 0.44	$ 0.38	$ 0.11	$ 0.04	$ 0.22	$ 0.22	$ 0.16	$ 0.11	$ 0.97	$ 0.71	$ 0.72
Net income per diluted common share	$ 0.43	$ 0.37	$ 0.11	$ 0.04	$ 0.21	$ 0.21	$ 0.16	$ 0.11	$ 0.95	$ 0.70	$ 0.70