##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington D.C. 20549


Form 10-K


|           |  |                                                                                             
|---------- |  | --------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                             
|þ          |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934    
|          
|           |  | For the fiscal year ended December 31, 2004                                                 
|          
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 0-18805


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.)
|                                                                         
|303 Velocity Way, Foster City, CA(Address of principal executive offices) |  | 94404(Zip Code)                         

(650) 357- 3500


(Registrants telephone number, including area code)


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


None.


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


Common Stock, $.01 Par Value


(Title of Class)


þ o


o


þ o










DOCUMENTS INCORPORATED BY REFERENCE






|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|** | Based upon the last trade price of the Common Stock reported on
    the Nasdaq National Market on June 30, 2004. Excludes
    approximately 24,052,644 shares of common stock held by
    Directors, Officers and holders known to the Registrant to hold
    5% or more of the Registrants outstanding Common Stock on
    December 31, 2004. Exclusion of shares held by any person
    should not be construed to indicate that such person possesses
    the power, direct or indirect, to direct or cause the direction
    of the management or policies of the Registrant, or that such
    person is controlled by or under common control with the
    Registrant.









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TABLE OF CONTENTS



|                                                        |                                                                                                                       |  |  |  |  |  |  | 
|------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I                                                 
|                                                        | Item 1: Business.                                                                                                    
|                                                        | Item 2: Properties                                                                                                   
|                                                        | Item 3: Legal Proceedings.                                                                                           
|                                                        | Item 4: Submission of Matters to a Vote of Security Holders.                                                         
|PART II                                                
|                                                        | Item 5: Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
|                                                        | Item 6: Selected Financial Data.                                                                                     
|                                                        | Item 7: Managements Discussion and Analysis of Financial Condition and Results of Operations.                       
|                                                        | Item 7A: Quantitative and Qualitative Disclosures About Market Risk                                                  
|                                                        | Item 8: Financial Statements and Supplementary Data                                                                  
|REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|Consolidated Balance Sheets                            
|Consolidated Statements of Income                      
|Consolidated Statements of Stockholders Equity        
|Consolidated Statements of Cash Flows                  
|Notes to Consolidated Financial Statements             
|                                                        | Item 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                         
|                                                        | Item 9A. Controls and Procedures                                                                                     
|PART III                                               
|                                                        | Item 10: Directors and Executive Officers of the Registrant                                                          
|                                                        | Item 11: Executive Compensation                                                                                      
|                                                        | Item 12: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.             
|                                                        | Item 13: Certain Relationships and Related Transactions                                                              
|                                                        | Item 14: Principal Accountant Fees and Services                                                                      
|PART IV                                                
|                                                        | Item 15: Exhibits, Financial Statement Schedules and Reports on Form 10-K.                                           
|SIGNATURES                                             
|Exhibit Index                                          
|EXHIBIT 21                                             
|EXHIBIT 23.1                                           
|EXHIBIT 31.1                                           
|EXHIBIT 31.2                                           
|EXHIBIT 32.1                                           



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PART I




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 and
Part II, Item 7, Managements Discussion
and Analysis of Financial Condition and Results of
Operations and 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 and Section 21E of the
Securities Exchange Act of 1934, as amended and is subject to
certain risks and uncertainties that could cause actual results
to differ materially. When used herein, the words
anticipate, believe,
estimate, expect, intend,
will 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  Competition, in
Item 7 Managements Discussion and Results of
Operations  Factors That Could Adversely Affect
Performance and elsewhere in this Annual Report on
Form 10-K and in the Companys other filings with the
Securities and Exchange Commission, including the Companys
most recent Quarterly Report on Form 10-Q. The Company
assumes no obligation to update these forward-looking statements
to reflect actual results or changes in factors or assumptions
affecting such forward-looking statements.







|        |          
|------- | ---------
|Item 1: | Business.

Filings






General




1



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The EFI Solution














2



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Growth and Expansion Strategies






| |                                     
| | ------------------------------------
| | Proliferate and Expand Product Lines









| |                                                                    
| | -------------------------------------------------------------------
| | Develop and Expand Relationships with Key Industry
    Participants





| |                                                                         
| | ------------------------------------------------------------------------
| | Establish Enterprise Coherence and Leverage Industry
    Standardization



3



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| |                                                                                                     
| | ----------------------------------------------------------------------------------------------------
| | Leverage Technology and Industry Expertise to Expand the
    Scope of Products, Channels and Markets



Products and Technology






| |                                
| | -------------------------------
| | Server and Controller Solutions





| |              
| | -------------
| | Print Servers





4



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| |                              
| | -----------------------------
| | Embedded Controller Solutions





| |                                                                       
| | ----------------------------------------------------------------------
| | Proprietary Features on our Print Servers and Embedded
    Controllers





| |   |                                                                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | EFI Impose  enables electronic document imposition;                                                                                                                                                                                                                                         
|
| |  | Continuous Print  allows processed pages to be stored
    in memory before printing, eliminating the need for the copier
    or printer to cycle down between unique pages;                                                                                                                 
|
| |  | Fiery NetWise 3.0  our third generation networking
    architecture which provides enhanced programmability that helps
    users build customized printing solutions and provides extensive
    Internet-based functionality;                                                               
|
| |  | Fiery ColorWise 3.0  our third generation color
    management system which provides greater image quality and
    calibration;                                                                                                                                                             
|
| |  | Workflow management architecture  allows for the
    management and manipulation of digital print jobs, including EFI
    CommandWorkstation 4.0, Fiery WebTools, EFI Balance and EFI
    OneFlow  a complete, PDF-based, pre-print workflow
    system for small and mid-size print shops;
|
| |  | Variable Data Printing solutions  providing
    compatibility with a full range of VDP languages as well as the
    PPML standard FreeForm and FreeForm 2;                                                                                                                                  
|
| |  | Fiery Driver  a unified printing interface that
    simplifies the printing process;                                                                                                                                                                                                        
|
| |  | Fiery Link  providing information on print job status
    and connected Fierys allowing users to monitor the status of any
    print job, its position in the queue, general information on the
    Fiery and paper and toner levels from any workstation; and                              
|
| |  | ECT compression  a compression technology, offering
    definite compression ratios and virtually lossless image quality.                                                                                                                                                                   



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| |                                   
| | ----------------------------------
| | Professional Printing Applications





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | EFI Workflow: This software includes modules for
    intelligent job routing, document layout, scanning and cost
    management. EFI OneFlow software offers graphic arts
    professionals advanced digital press capabilities in an
    easy-to-use, cost effective software solution for most major
    computer-to-plate, computer-to-film, direct imaging, or digital
    printing environments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | Digital StoreFront: In 2004 EFI shipped version 2.0 of
    Digital StoreFront, an integrated solution that simplifies print
    job submission and procurement throughout the order and
    production process. Using an entirely new software architecture,
    Digital StoreFront 2.0 provides greater scalability, speed, and
    reliability. IKON, through its global services
    organization  IKON Enterprise Services 
    agreed to deploy EFI Digital StoreFront to help production
    customers maximize productivity, increase customer collaboration
    and reduce manual steps in document workflow, resulting in
    faster turnaround times and lower production costs. Ricoh
    Corporation began offering Digital StoreFront and MicroPress
    web-to-print and workflow management solutions to users of
    Ricohs Aficio multifunctional printers in 2004.
|
| |  | EFI Proofing Solutions with Best Technology: This
    software allows professional printers to accurately and
    affordably proof color documents before sending them to an
    offset printing press. Late in 2004, we launched Colorproof XF,
    a higly scalable and versatile client/server based proofing
    solution for commercial printers of all sizes. This new platform
    provides both an intuitive user interface as well as the most
    sophisticated proofing tools for graphic arts professionals.                                                                                                                                                                                                                                                                                                                                                               



| |                                                             
| | ------------------------------------------------------------
| | Print Management Information Software Solutions
    (PMIS)









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| |                     
| | --------------------
| | Enterprise Solutions





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | EFI SendMe: Our scan-to solution offers access to a
    streamlined digital workflow by quickly and easily transforming
    paper documents into electronic files for instantaneous delivery
    or simplified storage. We launched our latest version for this
    popular product in 2004, which is now sold in both the United
    States and Europe.                                                                                          
|
| |  | Automated Dispatch Systems: Our ADS technology, which we
    acquired in 2004, automates and optimizes industry-standard
    processes surrounding service dispatch, field service, help
    desks, parts replenishment, credit collection and meter billing.
    Use of ADS results in increased first-call effectiveness for
    technicians, improved dispatcher-to-tech ratios and increased
    daily tech calls closed among other features.

Significant Relationships




We face competition from other
suppliers as well as our own OEM customers and if we are not
able to compete successfully then our business may be
harmed.




7



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Distribution and Marketing


We rely on
sales to a relatively small number of OEM customers and the loss
of any of these customers could substantially decrease our
revenues.






Research and Development




If we are unable to develop new
products, or execute product introductions on a timely basis,
our future revenue and operating results may be harmed.


8



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Manufacturing






|                  |  |                                             
|----------------- |  | --------------------------------------------
|Supplier          |  | Components                                  
|                  |  |                                             
|Intel             |  | Central processing units, or CPUs; chip sets
|Toshiba           |  | ASICs                                       
|LSI               |  | ASICs                                       
|Texas Instruments |  | Digital signal processors, or DSPs          
|Sanmina-SCI       |  | Contract manufacturing                      
|Transmeta         |  | CPUs                                        





Human Resources




9



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Competition










Intellectual Property Rights




10



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


Risk Factors




Financial Information About Foreign and Domestic Operations
and Export Sales


We face risks from our
international operations and from currency
fluctuations.







|        |           
|------- | ----------
|Item 2: | Properties










|        |                   
|------- | ------------------
|Item 3: | Legal Proceedings.



11



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12



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|        |                                                         
|------- | --------------------------------------------------------
|Item 4: | Submission of Matters to a Vote of Security
    Holders.






PART II







|        |                                                                                                                      
|------- | ---------------------------------------------------------------------------------------------------------------------
|Item 5: | Market for Registrants Common Equity, Related
    Stockholder Matters and Issuer Purchases of Equity
    Securities.



|     |  |      |       |  |      |   |       |    |  |   |       |  |  |    |       |  |    |   |       |    |  |   |       |  |  |   |       |  |  |   |       | 
|---- |  | ---- | ----- |  | ---- | - | ----- | -- |  | - | ----- |  |  | -- | ----- |  | -- | - | ----- | -- |  | - | ----- |  |  | - | ----- |  |  | - | ----- | 
|     |  | 2004 |       |  | 2003 |  
|     |  |      |       |  |      |  
|     |  | Q1   |       |  | Q2   |   |       | Q3 |  |   | Q4    |  |  | Q1 |       |  | Q2 |   |       | Q3 |  |   | Q4    | 
|     |  |      |       |  |      |   |       |    |  |   |       |  |  |    |       |  |    |   |       |    |  |   |       | 
|High |  | $    | 28.81 |  |      | $ | 28.57 |    |  | $ | 28.26 |  |  | $  | 18.92 |  |    | $ | 18.19 |    |  | $ | 22.20 |  |  | $ | 25.30 |  |  | $ | 28.10 | 
|Low  |  |      | 23.70 |  |      |   | 23.06 |    |  |   | 15.00 |  |  |    | 15.91 |  |    |   | 15.31 |    |  |   | 17.11 |  |  |   | 17.11 |  |  |   | 23.28 | 





Equity Compensation Plan Information




Purchases of Equity Securities


Issuer Purchases of Equity Securities


|                    |       |                                          |   |   |                   |                     |   |                    |                        |  |                    |   |  |   |        |  | 
|------------------- | ----- | ---------------------------------------- | - | - | ----------------- | ------------------- | - | ------------------ | ---------------------- |  | ------------------ | - |  | - | ------ |  | 
|                    |       |                                          |   |   |                   | (c) Total Number of |   |                    | (d) Approximate Dollar | 
|                    |       |                                          |   |   |                   | Shares Purchased as |   |                    | Value of Shares that   | 
|                    |       |                                          |   |   |                   | Part of Publicly    |   |                    | May Yet Be Purchased   | 
|                    |       | (a) Total Number of                      |   |   | (b) Average Price |                     |   | Announced Plans or |                        |  | Under the Plans or |  
|Period              |       | Shares Purchased                         |   |   | Paid per Share    |                     |   | Programs           |                        |  | Programs           |  
|                    |       |                                          |   |   |                   |                     |   |                    |                        |  |                    |  
|                    |       | (In thousands, except per share amounts) |  
|October 1-31, 2004  |       |                                          |  |   |                   |                     |  |                    |                        |  |                   |   |  | $ | 98,937 | 
|November 1-30, 2004 |       |                                          |  |   |                   |                     |  |                    |                        |  |                   |   |  | $ | 98,937 | 
|December 1-31, 2004 |       |                                          |  |   |                   |                     |  |                    |                        |  |                   |   |  | $ | 98,937 | 
|                    |       |                                          |   |   |                   |                     |   |                    |                        |  |                    |  
|                    | Total |                                          |   |  |                   |                     |   |                   |                        |  |                    |  |  |   |        |  | 
|                    |       |                                          |   |   |                   |                     |   |                    |                        |  |                    |  






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | On August 26, 2004 we announced that our Board of Directors
    had approved $100.0 million for the repurchase of our
    outstanding common stock during the next twelve months. We began
    repurchasing shares under this program in August 2004 and as of
    December 31, 2004 we had repurchased 53,061 shares.
    Our buy back program is limited by SEC regulations and by
    trading windows set by Company policy.

13



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|        |                         
|------- | ------------------------
|Item 6: | Selected Financial Data.



|                                                                        |                                                                                                        |                                            |           |         |      |   |           |        |   |   |         |        |   |      |         |        |   |   |         |        |  
|----------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------ | ------------------------------------------ | --------- | ------- | ---- | - | --------- | ------ | - | - | ------- | ------ | - | ---- | ------- | ------ | - | - | ------- | ------ | -
|                                                                        |                                                                                                        | As of and For the Years Ended December 31, |          
|                                                                        |                                                                                                        |                                            |          
|                                                                        |                                                                                                        | 2004                                       |           |         | 2003 |   |           | 2002   |   |   | 2001    |        |   | 2000 |        
|                                                                        |                                                                                                        |                                            |           |         |      |   |           |        |   |   |         |        |   |      |        
|                                                                        |                                                                                                        | (In thousands, except per share amounts)   |          
|Operations                                                              |                                                                                                        |                                            |           |         |      |   |           |        |   |   |         |        |   |      |         |        |   |   |         |       
|Revenue                                                                 |                                                                                                        | $                                          | 394,604   |         |      | $ | 379,587   |        |   | $ | 350,185 |        |   | $    | 517,608 |        |   | $ | 588,449 |       
|Cost of revenue                                                         |                                                                                                        |                                            | 138,382   |         |      |   | 148,054   |        |   |   | 167,685 |        |   |      | 282,113 |        |   |   | 311,152 |       
|                                                                        |                                                                                                        |                                            |           |         |      |   |           |        |   |   |         |        |   |      |        
|Gross profit                                                            |                                                                                                        |                                            | 256,222   |         |      |   | 231,533   |        |   |   | 182,500 |        |   |      | 235,495 |        |   |   | 277,297 |       
|Operating expenses                                                      |                                                                                                        |                                            |           |         |      |   |           |        |   |   |         |        |   |      |         |        |   |   |         |       
|                                                                        | Research and development                                                                               |                                            |           | 111,134 |      |   |           | 96,697 |   |   |         | 89,973 |   |      |         | 98,116 |   |   |         | 94,097 |  
|                                                                        | Sales and marketing                                                                                    |                                            |           | 74,711  |      |   |           | 61,597 |   |   |         | 50,624 |   |      |         | 56,767 |   |   |         | 64,526 |  
|                                                                        | General and administrative                                                                             |                                            |           | 27,264  |      |   |           | 21,690 |   |   |         | 21,778 |   |      |         | 25,456 |   |   |         | 24,784 |  
|                                                                        | Real estate related charges                                                                            |                                            |           | 14,394  |      |   |           |       |   |   |         |       |   |      |         |       |   |   |         |       |  
|                                                                        | Amortization of goodwill and identifiable intangibles and other
    acquisition-related charges(1),(2) |                                            |           | 14,690  |      |   |           | 19,670 |   |   |         | 4,391  |   |      |         | 12,255 |   |   |         | 23,621 |  
|                                                                        |                                                                                                        |                                            |           |         |      |   |           |        |   |   |         |        |   |      |        
|Total operating expenses                                                |                                                                                                        |                                            | 242,193   |         |      |   | 199,654   |        |   |   | 166,766 |        |   |      | 192,594 |        |   |   | 207,028 |       
|Income from operations                                                  |                                                                                                        |                                            | 14,029    |         |      |   | 31,879    |        |   |   | 15,734  |        |   |      | 42,901  |        |   |   | 70,269  |       
|                                                                        | Interest and other income                                                                              |                                            |           | 12,779  |      |   |           | 11,489 |   |   |         | 11,540 |   |      |         | 17,661 |   |   |         | 21,930 |  
|                                                                        | Interest expense                                                                                       |                                            |           | (5,632  | )    |   |           | (2,886 | ) |   |         | (54    | ) |      |         | (190   | ) |   |         | (380   | )
|                                                                        | Litigation settlement income (charges), net                                                            |                                            |           | 58      |      |   |           | 2,408  |   |   |         | (4,409 | ) |      |         |       |   |   |         |       |  
|                                                                        | Gain on sale of product line                                                                           |                                            |           | 2,994   |      |   |           |       |   |   |         |       |   |      |         |       |   |   |         |       |  
|                                                                        | Loss on equity investment                                                                              |                                            |           |        |      |   |           | (1,562 | ) |   |         |       |   |      |         |       |   |   |         |       |  
|                                                                        |                                                                                                        |                                            |           |         |      |   |           |        |   |   |         |        |   |      |        
|Total interest and other income, net                                    |                                                                                                        |                                            | 10,199    |         |      |   | 9,449     |        |   |   | 7,077   |        |   |      | 17,471  |        |   |   | 21,550  |       
|                                                                        |                                                                                                        |                                            |           |         |      |   |           |        |   |   |         |        |   |      |        
|Income before income taxes                                              |                                                                                                        |                                            | 24,228    |         |      |   | 41,328    |        |   |   | 22,811  |        |   |      | 60,372  |        |   |   | 91,819  |       
|Benefit from (provision for) income taxes                               |                                                                                                        |                                            | 13,791    |         |      |   | (14,820   | )      |   |   | (6,843  | )      |   |      | (21,432 | )      |   |   | (37,461 | )     
|                                                                        |                                                                                                        |                                            |           |         |      |   |           |        |   |   |         |        |   |      |        
|Net income                                                              |                                                                                                        | $                                          | 38,019    |         |      | $ | 26,508    |        |   | $ | 15,968  |        |   | $    | 38,940  |        |   | $ | 54,358  |       
|                                                                        |                                                                                                        |                                            |           |         |      |   |           |        |   |   |         |        |   |      |        
|Earnings per share                                                      |                                                                                                        |                                            |           |         |      |   |           |        |   |   |         |        |   |      |         |        |   |   |         |       
|Net income per basic common share(3)                                    |                                                                                                        | $                                          | 0.71      |         |      | $ | 0.49      |        |   | $ | 0.29    |        |   | $    | 0.73    |        |   | $ | 0.99    |       
|                                                                        |                                                                                                        |                                            |           |         |      |   |           |        |   |   |         |        |   |      |        
|Net income per diluted common share(3),(5)                              |                                                                                                        | $                                          | 0.64      |         |      | $ | 0.47      |        |   | $ | 0.29    |        |   | $    | 0.71    |        |   | $ | 0.97    |       
|                                                                        |                                                                                                        |                                            |           |         |      |   |           |        |   |   |         |        |   |      |        
|Shares used in computing net income per basic common share(3)           |                                                                                                        |                                            | 53,898    |         |      |   | 53,789    |        |   |   | 54,256  |        |   |      | 53,468  |        |   |   | 54,649  |       
|Shares used in computing net income per diluted common
    share(3),(5) |                                                                                                        |                                            | 63,996    |         |      |   | 60,138    |        |   |   | 54,852  |        |   |      | 54,605  |        |   |   | 55,983  |       
|Financial Position                                                      |                                                                                                        |                                            |           |         |      |   |           |        |   |   |         |        |   |      |         |        |   |   |         |       
|Cash, cash equivalents and short-term investments                       |                                                                                                        | $                                          | 659,559   |         |      | $ | 624,112   |        |   | $ | 498,370 |        |   | $    | 451,207 |        |   | $ | 353,603 |       
|Working capital                                                         |                                                                                                        |                                            | 618,056   |         |      |   | 665,193   |        |   |   | 470,054 |        |   |      | 438,020 |        |   |   | 389,917 |       
|Long-term obligations, less current portion(4)                          |                                                                                                        |                                            | 240,000   |         |      |   | 240,236   |        |   |   | 278     |        |   |      | 331     |        |   |   | 3,140   |       
|Total assets                                                            |                                                                                                        |                                            | 1,017,877 |         |      |   | 1,013,661 |        |   |   | 727,106 |        |   |      | 702,987 |        |   |   | 654,390 |       
|Stockholders equity                                                    |                                                                                                        | $                                          | 667,560   |         |      | $ | 654,813   |        |   | $ | 634,067 |        |   | $    | 606,567 |        |   | $ | 545,316 |       
|Ratios and Benchmarks (unaudited)                                       |                                                                                                        |                                            |           |         |      |   |           |        |   |   |         |        |   |      |         |        |   |   |         |       
|Current ratio                                                           |                                                                                                        |                                            | 6.6       |         |      |   | 6.6       |        |   |   | 6.1     |        |   |      | 5.6     |        |   |   | 4.7     |       
|Inventory turns                                                         |                                                                                                        |                                            | 22.2      |         |      |   | 23.1      |        |   |   | 24.3    |        |   |      | 15.5    |        |   |   | 16.0    |       
|Full-time employees                                                     |                                                                                                        |                                            | 1,424     |         |      |   | 1,382     |        |   |   | 927     |        |   |      | 917     |        |   |   | 895     |       
|Days Sales Outstanding (DSO)                                            |                                                                                                        |                                            | 45.6      |         |      |   | 44.5      |        |   |   | 41.9    |        |   |      | 46.0    |        |   |   | 49.3    |       

14



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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | We expensed in-process research and development costs of
    $1.0 million, $13.2 million and $20.3 million in
    the years ended December 31, 2004, 2003 and 2000,
    respectively. See Note 3 of Notes to Consolidated Financial
    Statements.                                                                                                                                                                                                                                                                                                            
|   
|(2) | Effective January 1, 2002, we adopted Statement of
    Financial Accounting Standards No. 142, Goodwill and
    Other Intangible Assets(SFAS 142).
    SFAS 142 requires among other things, the discontinuance of
    goodwill amortization and provisions for the reclassification of
    certain existing recognized intangibles to goodwill. Upon the
    adoption of SFAS 142, we ceased amortizing goodwill and
    reclassified net intangibles and deferred tax liabilities
    relating to acquired workforce totaling $0.9 million to
    goodwill.
|   
|(3) | See Note 1 of Notes to Consolidated Financial Statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(4) | In June 2003 we issued $240.0 million of 1.50% Senior
    Convertible Debt. See Note 7 of Notes to Consolidated
    Financial Statements.                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(5) | In accordance with EITF 04-08, we have included
    9,084 shares of common stock contingently issuable under
    our 1.50% Senior Convertible Debentures in our fully
    diluted shares for 2003 and 2004. The previously reported
    earnings per fully diluted share for the year ended 2003 was
    $0.48 and the fully diluted shares for 2003 were 54,839.                                                                                                                                                                                              






|        |                                                                                           
|------- | ------------------------------------------------------------------------------------------
|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 10K.




Overview










15



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##### Table of Contents





Critical Accounting Policies








| |   |                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------
| |  | revenue recognition;                                                                                 
|
| |  | estimating allowance for doubtful accounts, inventory allowances
    and other allowances;           
|
| |  | accounting for income taxes;                                                                         
|
| |  | valuation of long-lived and intangible assets and goodwill;                                          
|
| |  | business combinations and                                                                            
|
| |  | determining functional currencies for the purposes of
    consolidating our international operations.

Revenue recognition.


Software Revenue Recognition Modification of
SOP 97-2, Software Recognition, With Respect to Certain
Transactions,








16



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##### Table of Contents





Allowance for doubtful accounts, inventory allowances and
other allowances and accruals.






Accounting for income taxes.








Valuation of long-lived and intangible assets and
goodwill.


17



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##### Table of Contents







| |   |                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------
| |  | significant changes in the manner of our use of the acquired
    assets or the strategy for our overall business;
|
| |  | significant negative industry or economic trends;                                                                
|
| |  | significant decline in our stock price for a sustained
    period; and                                           
|
| |  | our market capitalization relative to net book value.                                                            



Business combinations.








Determining functional currencies for the purpose of
consolidating our international operations.




18



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##### Table of Contents







Results of Operations




|                                          |                                                                                    |              |     |          |      |  |     |      |   |  |      |    |   |      |      |     |   |  |     |     | 
|----------------------------------------- | ---------------------------------------------------------------------------------- | ------------ | --- | -------- | ---- |  | --- | ---- | - |  | ---- | -- | - | ---- | ---- | --- | - |  | --- | --- | 
|                                          |                                                                                    |              |     | % Change |     
|                                          |                                                                                    | Years Ended  |     |          |      | 
|                                          |                                                                                    | December 31, |     |          | 2004 |  |     | 2003 |  
|                                          |                                                                                    |              |     |          | over |  |     | over |  
|                                          |                                                                                    | 2004         |     |          | 2003 |  |     | 2002 |   |  | 2003 |    |   | 2002 |     
|                                          |                                                                                    |              |     |          |      |  |     |      |   |  |      |    |   |      |     
|                                          |                                                                                    | %            |     |          | %    |  |     | %    |   |  | %    |    |   | %    |     
|                                          |                                                                                    |              |     |          |      |  |     |      |   |  |      |    |   |      |     
|Revenue                                   |                                                                                    |              | 100 |          |      |  | 100 |      |   |  | 100  |    |   |      | 4    |     |   |  | 8   |    
|Cost of revenue                           |                                                                                    |              | 35  |          |      |  | 39  |      |   |  | 48   |    |   |      | (7   | )   |   |  | (12 | )  
|                                          |                                                                                    |              |     |          |      |  |     |      |   |  |      |    |   |      |     
|Gross profit                              |                                                                                    |              | 65  |          |      |  | 61  |      |   |  | 52   |    |   |      | 11   |     |   |  | 27  |    
|                                          | Research and development                                                           |              |     | 28       |      |  |     | 25   |   |  |      | 26 |   |      |      | 15  |   |  |     | 7   | 
|                                          | Sales and marketing                                                                |              |     | 19       |      |  |     | 16   |   |  |      | 14 |   |      |      | 21  |   |  |     | 22  | 
|                                          | General and administrative                                                         |              |     | 7        |      |  |     | 6    |   |  |      | 6  |   |      |      | 26  |   |  |     |    | 
|                                          | Real estate related charges                                                        |              |     | 3        |      |  |     |     |   |  |      |   |   |      |      | nm  |   |  |     | nm  | 
|                                          | Amortization of identifiable intangibles and other
    acquisition-related charges |              |     | 4        |      |  |     | 5    |   |  |      | 1  |   |      |      | (25 | ) |  |     | 348 | 
|                                          |                                                                                    |              |     |          |      |  |     |      |   |  |      |    |   |      |     
|Total operating expenses                  |                                                                                    |              | 61  |          |      |  | 52  |      |   |  | 47   |    |   |      | 21   |     |   |  | 20  |    
|                                          |                                                                                    |              |     |          |      |  |     |      |   |  |      |    |   |      |     
|Income from operations                    |                                                                                    |              | 4   |          |      |  | 9   |      |   |  | 5    |    |   |      | (56  | )   |   |  | 103 |    
|                                          | Interest and other income                                                          |              |     | 3        |      |  |     | 3    |   |  |      | 3  |   |      |      | 11  |   |  |     |    | 
|                                          | Interest expense                                                                   |              |     | (1       | )    |  |     | (1   | ) |  |      |   |   |      |      | 95  |   |  |     | nm  | 
|                                          | Gain on sale of product line                                                       |              |     | 1        |      |  |     |     |   |  |      |   |   |      |      | nm  |   |  |     | nm  | 
|                                          | Litigation settlement income (charges), net                                        |              |     |         |      |  |     | 1    |   |  |      | (1 | ) |      |      | (98 | ) |  |     | 155 | 
|                                          | Loss on equity investment                                                          |              |     |         |      |  |     | (1   | ) |  |      |   |   |      |      | 100 |   |  |     | nm  | 
|                                          |                                                                                    |              |     |          |      |  |     |      |   |  |      |    |   |      |     
|Total interest and other income, net      |                                                                                    |              | 3   |          |      |  | 2   |      |   |  | 2    |    |   |      | 8    |     |   |  | 34  |    
|                                          |                                                                                    |              |     |          |      |  |     |      |   |  |      |    |   |      |     
|Income before income taxes                |                                                                                    |              | 7   |          |      |  | 11  |      |   |  | 7    |    |   |      | (41  | )   |   |  | 81  |    
|Benefit from (provision for) income taxes |                                                                                    |              | 3   |          |      |  | (4  | )    |   |  | (2   | )  |   |      | (193 | )   |   |  | 117 |    
|                                          |                                                                                    |              |     |          |      |  |     |      |   |  |      |    |   |      |     
|Net income                                |                                                                                    |              | 10  |          |      |  | 7   |      |   |  | 5    |    |   |      | 43   |     |   |  | 66  |    
|                                          |                                                                                    |              |     |          |      |  |     |      |   |  |      |    |   |      |     






19



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##### Table of Contents





| |        
| | -------
| | Revenue





|                                   |  |                          |         |          |      |  |     |      |  |   |         |  |  |      |     |  |   |   |         |   |  |  |     |  |  |  |     |   |  |  |     |  
|---------------------------------- |  | ------------------------ | ------- | -------- | ---- |  | --- | ---- |  | - | ------- |  |  | ---- | --- |  | - | - | ------- | - |  |  | --- |  |  |  | --- | - |  |  | --- | -
|                                   |  |                          |         | % Change |     
|                                   |  | Years Ended December 31, |         |          |      | 
|                                   |  |                          |         |          | 2004 |  |     | 2003 | 
|                                   |  |                          |         |          |      |  |     | Over |  |   | Over    | 
|                                   |  | 2004                     |         |          | 2003 |  |     | 2002 |  |   | 2003    |  |  | 2002 |    
|                                   |  |                          |         |          |      |  |     |      |  |   |         |  |  |      |    
|Revenue                            |  | $                        |         |          | %    |  |     | $    |  |   | %       |  |  | $    |     |  | % |   |         | % |  |  | %   | 
|                                   |  |                          |         |          |      |  |     |      |  |   |         |  |  |      |     |  |   |   |         |   |  |  |     | 
|Servers                            |  | $                        | 170,943 |          |      |  | 43  |      |  | $ | 178,948 |  |  |      | 47  |  |   | $ | 185,806 |   |  |  | 53  |  |  |  | (5  | ) |  |  | (4  | )
|Embedded Products                  |  |                          | 121,890 |          |      |  | 31  |      |  |   | 139,936 |  |  |      | 37  |  |   |   | 122,408 |   |  |  | 35  |  |  |  | (13 | ) |  |  | 14  |  
|Professional Printing Applications |  |                          | 68,484  |          |      |  | 17  |      |  |   | 21,782  |  |  |      | 6   |  |   |   | 3,970   |   |  |  | 1   |  |  |  | 214 |   |  |  | 449 |  
|Miscellaneous                      |  |                          | 33,287  |          |      |  | 9   |      |  |   | 38,921  |  |  |      | 10  |  |   |   | 38,001  |   |  |  | 11  |  |  |  | (15 | ) |  |  | 2   |  
|                                   |  |                          |         |          |      |  |     |      |  |   |         |  |  |      |     |  |   |   |         |   |  |  |     | 
|Total Revenue                      |  | $                        | 394,604 |          |      |  | 100 |      |  | $ | 379,587 |  |  |      | 100 |  |   | $ | 350,185 |   |  |  | 100 |  |  |  | 4   |   |  |  | 8   |  
|                                   |  |                          |         |          |      |  |     |      |  |   |         |  |  |      |     |  |   |   |         |   |  |  |     | 

|                                      |  |              |     |  |      |  |     |      |  |  |     | 
|------------------------------------- |  | ------------ | --- |  | ---- |  | --- | ---- |  |  | --- | 
|                                      |  | Years Ended  |    
|                                      |  | December 31, |    
|                                      |  |              |    
|                                      |  | 2004         |     |  | 2003 |  |     | 2002 | 
|                                      |  |              |     |  |      |  |     |      | 
|Volume                                |  | %            |     |  | %    |  |     | %    | 
|                                      |  |              |     |  |      |  |     |      | 
|Servers                               |  |              | 24  |  |      |  | 20  |      |  |  | 23  | 
|Embedded Products                     |  |              | 75  |  |      |  | 75  |      |  |  | 70  | 
|Professional Printing Applications(1) |  |              |    |  |      |  |    |      |  |  |    | 
|Miscellaneous                         |  |              | 1   |  |      |  | 5   |      |  |  | 7   | 
|                                      |  |              |     |  |      |  |     |      | 
|Total Volume                          |  |              | 100 |  |      |  | 100 |      |  |  | 100 | 
|                                      |  |              |     |  |      |  |     |      | 






|    |                                                                                          
|--- | -----------------------------------------------------------------------------------------
|(1) | There are no volumes associated with the Professional Printing
    Applications revenues.





20



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|              |       |                          |         |          |      |  |    |      |  |   |         |         |  |      |    |     |   |   |         |         |  |  |    |     |  |  |    |   |  |  |    |   | 
|------------- | ----- | ------------------------ | ------- | -------- | ---- |  | -- | ---- |  | - | ------- | ------- |  | ---- | -- | --- | - | - | ------- | ------- |  |  | -- | --- |  |  | -- | - |  |  | -- | - | 
|              |       |                          |         | % Change |     
|              |       | Years Ended December 31, |         |          |      | 
|              |       |                          |         |          | 2004 |  |    | 2003 | 
|              |       |                          |         |          |      |  |    | over |  |   | over    |        
|              |       | 2004                     |         |          | 2003 |  |    | 2002 |  |   | 2003    |         |  | 2002 |   
|              |       |                          |         |          |      |  |    |      |  |   |         |         |  |      |   
|              |       | $                        |         |          | %    |  |    | $    |  |   | %       |         |  | $    |    |     | % |   |         | %       |  |  | %  |    
|              |       |                          |         |          |      |  |    |      |  |   |         |         |  |      |    |     |   |   |         |         |  |  |    |    
|              |       | (In thousands)           |        
|North America |       | $                        | 217,069 |          |      |  | 55 |      |  | $ | 192,326 |         |  |      | 51 |     |   | $ | 184,891 |         |  |  | 53 |     |  |  | 13 |   |  |  | 4  |  
|Europe        |       |                          | 105,168 |          |      |  | 27 |      |  |   | 113,914 |         |  |      | 30 |     |   |   | 108,978 |         |  |  | 31 |     |  |  | (8 | ) |  |  | 5  |  
|Japan         |       |                          | 56,799  |          |      |  | 14 |      |  |   | 57,231  |         |  |      | 15 |     |   |   | 38,541  |         |  |  | 11 |     |  |  | (1 | ) |  |  | 49 |  
|Rest of World |       |                          | 15,568  |          |      |  | 4  |      |  |   | 16,116  |         |  |      | 4  |     |   |   | 17,775  |         |  |  | 5  |     |  |  | (3 | ) |  |  | (9 | )
|              |       |                          |         |          |      |  |    |      |  |   |         |         |  |      |    |     |   |   |         |         |  |  |    |    
|              | Total |                          | $       | 394,604  |      |  |    | 100  |  |   | $       | 379,587 |  |      |    | 100 |   |   | $       | 350,185 |  |  |    | 100 |  |  |    | 4 |  |  |    | 8 | 
|              |       |                          |         |          |      |  |    |      |  |   |         |         |  |      |    |     |   |   |         |         |  |  |    |    



21



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| |              
| | -------------
| | Gross Margins







22



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##### Table of Contents





| |                   
| | ------------------
| | Operating Expenses







| |                         
| | ------------------------
| | Research and Development



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Expenses for research and development consist primarily of
    personnel-related and facility expenses and, to a lesser extent,
    consulting, depreciation and costs of prototype materials.
    Research and development expenses were $111.1 million or
    28% of revenue in 2004 compared to $96.7 million or 25% of
    revenue in 2003 and $90.0 million or 26% of revenue in
    2002. Our 2003 acquisitions on an annualized basis account for
    the majority of the $14.4 million increase in research and
    development expenses in 2004 when compared to 2003, while our
    2004 acquisition accounted for a small additional amount. As the
    acquired companies were not maintained as stand-alone
    businesses, the amounts in 2004 attributed to acquisitions
    cannot be accurately determined. Of the $6.7 million or 7%
    increase in absolute dollars from 2002 to 2003, the majority is
    attributable to the increased head count from our 2003
    acquisition of three companies. The remaining increase came from
    increased payroll costs. We believe that the development of new
    products and the enhancement of existing products are essential
    to our continued success and intend to continue to devote
    substantial resources to research and product development
    efforts. We expect that our research and development expenses
    may increase in absolute dollars and also as a percentage of
    revenue, even though we have reduced our research and
    development staff in early 2005 as part of our announced
    reduction in workforce. As part of our cost containment
    practices, we review all projects on a periodic basis for
    estimated return on investment. Those projects that do not meet
    certain criteria are changed or halted.



| |                    
| | -------------------
| | Sales and Marketing



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Sales and marketing expenses include personnel-related expenses,
    costs for trade shows, marketing programs and promotional
    materials, sales commissions, travel and entertainment expenses,
    depreciation and costs associated with sales offices in the
    United States, Europe, Japan and other locations around the
    world. Sales and marketing expenses for 2004 were
    $74.7 million or 19% of revenue compared to
    $61.6 million or 16% of revenue in 2003 and
    $50.6 million or 14% of revenue in 2002. We estimate the
    increase from 2003 to 2004 related to 2003 acqusitions on an
    annualized basis was over half of the total increase with the
    increase related to our 2004 acquisition contributing a small
    additional amount. The remaining increase in sales and marketing
    expenses in 2004 primarily came from our participation in
    drupa, a leading print industry exposition which occurs
    every four years, our sponsorship of Connect, the annual
    conference for users of our Print MIS software, and our
    participation in other trade shows. Included in the increases
    are the effects of the weakening US dollar, which has led to
    higher US dollar costs for our international sales offices.
    While costs in the local currency have generally remained
    constant, during 2004 the translated US dollar costs have
    increased. Our acquisitions in 2003 led to increased head count
    in the sales and marketing group and accounted for over half of
    the increase in sales

23



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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | and marketing expenses in 2003. The remaining increase in sales
    and marketing expenses in 2003 came from salary increases and
    increased participation in trade shows, offset by decreased
    facility costs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| | We expect that our sales and marketing expenses may increase in
    absolute dollars and possibly also as a percentage of revenue as
    we continue to actively promote our products, launch new
    products and services, and continue to build our sales and
    marketing organization, particularly in Europe and Asia Pacific,
    and as we grow our software solutions and other new product
    lines which require greater sales and marketing support from us.
    We also expect that if the US dollar remains volatile against
    the euro or other currencies, sales and marketing expenses
    reported in US dollars could fluctuate. Approximately 43% of our
    sales and marketing expenses are from our foreign offices.



| |                           
| | --------------------------
| | General and Administrative



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | General and administrative expenses consist primarily of
    personnel-related expenses and, to a lesser extent, depreciation
    and facility costs, professional fees and other costs associated
    with public companies. General and administrative expenses were
    $27.3 million or 7% of revenue in 2004, compared to
    $21.7 million or 6% of revenue in 2003 and
    $21.8 million or 6% of revenue in 2002. The increase in
    general and administrative expenses between 2003 and 2004
    principally consists of from the impact of our 2003 acquistions
    on an annualized basis, increased costs of $1.4 million
    associated with complying with new regulations related to SOX,
    and increased legal costs related to various litigation matters.
    The relatively flat general and administrative expenses between
    2002 and 2003 are the result of decreased facility costs offset
    with an increase in payroll costs and the addition of general
    and administrative expenses related to our 2003 acquisitions. We
    expect that our general and administrative expenses will
    increase in absolute dollars and as a percentage of revenue due
    to additional costs that will be incurred for compliance with
    SOX, and in order to support our efforts to grow our business in
    future periods. We also expect that if the US dollar remains
    volatile against the euro or other currencies, general and
    administrative expenses reported in US dollars could fluctuate.
    Approximately 9% of our general and administrative expenses are
    from our foreign offices.



| |                            
| | ---------------------------
| | Real Estate Related Charges



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We expensed $14.4 million related to our real estate in
    2004. A valuation of the building located at 301 Velocity Way
    was completed in 2004 as part of our amended financing
    arrangement signed in September 2004 for that building. Under
    the original lease of $43.1 million, we guaranteed the
    lessor an 82% residual value in the building upon the
    termination of the original lease. The valuation provided a
    value of approximately $31.7 million for the building, and
    we paid the lessor $11.4 million and recorded a one-time
    loss associated with the original lease in September 2004. In
    addition, during the quarter ended September 30, 2004, we
    wrote off $0.9 million of capitalized lease costs
    associated with the original lease. We also wrote off
    $2.1 million of capitalized costs associated with other
    development activity determined to have no remaining validity
    related to land purchased in 1997 within our Foster City campus.



| |                                                                                   
| | ----------------------------------------------------------------------------------
| | Amortization of Identifiable Intangibles and Other
    Acquisition-Related Charges



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Amortization of identifiable intangibles was $13.7 million
    or approximately 4% of revenue in 2004, while the
    acquisition-related charge for the write-off of in-process
    research and development was $1.0 million. Amortization of
    identifiable intangibles, was $6.5 million or 2% of revenue
    in 2003, while the acquisition-related charge for the write-off
    of in-process research and development was $13.2 million or
    3% of revenue for 2003. The acquisition of two companies in the
    fourth quarter of 2003 and one company in the first quarter of
    2004 account for the increase in amortization expense. The
    in-process research and development costs related to Printcafe
    and T/ R Systems, acquired in 2003, contributed
    $12.0 million of the $13.2 million in 2003.
    Amortization of identifiable intangibles was $4.4 million
    or 1% of revenue in 2002. Since the adoption of SFAS 142 in
    January 2002 we have not identified any impairment of goodwill
    upon completion of the annual impairment tests performed upon
    the July 1 balances in 2003 and 2004.

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| |                          
| | -------------------------
| | Interest and other income



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Interest income was $12.2 million in 2004 and increased by
    16% from $10.5 million in 2003, reflecting rising interest
    rates. The decrease in 2003 of $1.3 million in interest
    income from 2002 is due to a lower return on investments as a
    result of decreasing market interest rates throughout 2003. The
    decline in interest income due to lower interest rates was
    offset in part by an increase in the investment balance from
    additional cash generated from operations and the proceeds from
    our convertible debenture offering in June 2003, less cash used
    to repurchase shares of our common stock. Realized gains on
    short-term investments account for $0.1 million and
    $0.9 million of other income in 2004 and 2003,
    respectively. In 2002, the realized gains on short-term
    investments were $0.7 million while the losses on foreign
    currency translations were $0.5 million. The remaining
    $0.4 million loss in 2002 was related to losses from our
    investment in a venture capital fund.



| |                 
| | ----------------
| | Interest expense



| |                                                                                                                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Interest expense and debt issuance costs related to the
    convertible debentures was $5.0 million and
    $2.9 million for the years ended December 31, 2004 and
    2003, respectively. Interest expense in 2002 was related to the
    bonds associated with the Foster City property and was not
    material.



| |                                            
| | -------------------------------------------
| | Litigation settlement income (charges), net



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In 2004 and 2003 we received litigation settlement income of
    $0.1 million and $2.4 million, respectively, net of
    related legal expenses, from the settlement of litigation
    protecting our intellectual property. Litigation settlement
    expenses in other income in 2002 consist of the settlement of
    the 1997 securities class action lawsuit for $4.4 million,
    including legal fees and other related costs. While there has
    been no change in our view that the lawsuit had no merit, we
    determined that settlement of the lawsuit was in our best
    interest and the best interest of our stockholders.



| |                          
| | -------------------------
| | Loss on equity investment



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In June 2003 we exercised an option granted by Printcafe to
    purchase approximately 2.1 million shares of Printcafe
    stock, representing approximately a 17% ownership in Printcafe,
    which we accounted for as an available-for-sale
    equity security. In October 2003, we acquired the remaining 83%
    interest in Printcafe. We were required under generally accepted
    accounting principles (GAAP) to report the investment in
    Printcafe on an equity basis from the time of the option
    exercise through the date that we acquired 100% of the
    outstanding shares of Printcafe. A $1.6 million non-cash
    charge was recorded as a result of the change to equity method
    of accounting.



| |                             
| | ----------------------------
| | Gain on Sale of Product Line



| |                                                                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We recognized approximately $3.0 million from the sale of
    our Unimobile product line, consisting of a customer base,
    research and development and sales employees, and intangible
    assets.



| |                                          
| | -----------------------------------------
| | Benefit from (Provision for) Income Taxes



25



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Recent Accounting Pronouncements




| |         
| | --------
| | SFAS 153

Exchanges
of Nonmonetary Assets  An Amendment of APB Opinion
No. 29




| |                        
| | -----------------------
| | SFAS 123 (Revised 2004)

Share-Based Payment Accounting for Stock-Based
Compensation Statement of Cash Flows.






| |          
| | ---------
| | EITF 03-1



26



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##### Table of Contents







| |          
| | ---------
| | FSP 109-2

Accounting and Disclosure
Guidance for Foreign Earnings Repatriation with the American
Jobs Creation Act of 2004 Accounting for
Income Taxes,


Liquidity and Capital Resources


|                                                    |                                                         |                |         |         |      |   |          |         |  |   |         |         | 
|--------------------------------------------------- | ------------------------------------------------------- | -------------- | ------- | ------- | ---- | - | -------- | ------- |  | - | ------- | ------- | 
|                                                    |                                                         | 2004           |         |         | 2003 |   |          | 2002    | 
|                                                    |                                                         |                |         |         |      |   |          |         | 
|                                                    |                                                         | (In thousands) |        
|Cash and cash equivalents                           |                                                         | $              | 156,322 |         |      | $ | 113,163  |         |  | $ | 153,905 |        
|Short term investments                              |                                                         |                | 503,237 |         |      |   | 510,949  |         |  |   | 344,465 |        
|                                                    | Total cash, cash equivalents and short term investments |                |         | 659,559 |      |   |          | 624,112 |  |   |         | 498,370 | 
|Net cash provided by operating activities           |                                                         |                | 59,677  |         |      |   | 46,112   |         |  |   | 49,922  |        
|Net cash provided by (used in) investing activities |                                                         |                | 12,194  |         |      |   | (301,664 | )       |  |   | (96,043 | )      
|Net cash (used in) provided by financing activities |                                                         |                | (28,766 | )       |      |   | 214,719  |         |  |   | 9,210   |        

Overview




Operating Activities






27



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Investing Activities






| |         
| | --------
| | Activity

|                                                                                                              |  |               |       |   |      |   |        |      |  |   |       |  
|------------------------------------------------------------------------------------------------------------- |  | ------------- | ----- | - | ---- | - | ------ | ---- |  | - | ----- | -
|                                                                                                              |  | 2004          |       |   | 2003 |   |        | 2002 | 
|                                                                                                              |  |               |       |   |      |   |        |      | 
|                                                                                                              |  | (In millions) |      
|Cash payments for acquisitions                                                                                |  | $             | (11.6 | ) |      | $ | (58.2  | )    |  | $ | (1.9  | )
|Cash payments for property and equipment, net of proceeds from
    sales                                      |  |               | (2.3  | ) |      |   | (4.9   | )    |  |   | (8.2  | )
|Net proceeds (purchases) of investments in marketable
    securities                                          |  |               | 39.4  |   |      |   | (168.9 | )    |  |   | (83.3 | )
|Proceeds from (cash payments for) restricted cash, cash
    equivalents and short-term short term investments |  |               | 33.6  |   |      |   | (69.7  | )    |  |   |      |  
|Purchases of restricted investments for collateral                                                            |  |               | (45.5 | ) |      |   |       |      |  |   | (2.9  | )
|Other items                                                                                                   |  |               | (1.4  | ) |      |   |       |      |  |   | 0.3   |  
|                                                                                                              |  |               |       |   |      |   |        |      | 
|Net cash used in (provided by) investing activities                                                           |  | $             | 12.2  |   |      | $ | (301.7 | )    |  | $ | (96.0 | )
|                                                                                                              |  |               |       |   |      |   |        |      | 



| |             
| | ------------
| | Acquisitions





28



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| |                       
| | ----------------------
| | Property and Equipment







| |            
| | -----------
| | Investments





| |                                                                 
| | ----------------------------------------------------------------
| | Restricted Cash, Cash Equivalents and Short term
    Investments





| |                    
| | -------------------
| | Collateral Accounts



Financing Activities


Market for Registrants Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity Securities






29



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##### Table of Contents











| |                  
| | -----------------
| | Other Commitments







| |                  
| | -----------------
| | Legal Proceedings



Contractual Obligations




|                                                            |          |                        |         |           |        |   |       |        |  |       |        |        |           |         |        |        |  |   |         |         | 
|----------------------------------------------------------- | -------- | ---------------------- | ------- | --------- | ------ | - | ----- | ------ |  | ----- | ------ | ------ | --------- | ------- | ------ | ------ |  | - | ------- | ------- | 
|                                                            |          | Payments due by period |        
|                                                            |          |                        |        
|                                                            |          |                        |         | Less than |        |   | 1  3 |        |  | 3  5 |        |        | More than |        
|                                                            |          | Total                  |         |           | 1 Year |   |       | Years  |  |       | Years  |        |           | 5 Years |       
|                                                            |          |                        |         |           |        |   |       |        |  |       |        |        |           |         |       
|                                                            |          | (In thousands)         |        
|Operating lease obligations(1)                              |          | $                      | 58,729  |           |        | $ | 8,184 |        |  | $     | 15,370 |        |           | $       | 12,306 |        |  | $ | 22,869  |        
|Capital purchase obligations(2)                             |          |                        |        |           |        |   |      |        |  |       |       |        |           |         |       |        |  |   |        |        
|Interest payments on 1.50% senior convertible debentures(3) |          |                        | 66,300  |           |        |   | 3,600 |        |  |       | 7,200  |        |           |         | 7,200  |        |  |   | 48,300  |        
|Long-term debt obligations                                  |          |                        | 240,000 |           |        |   |      |        |  |       |       |        |           |         |       |        |  |   | 240,000 |        
|                                                            |          |                        |         |           |        |   |       |        |  |       |        |        |           |         |       
|                                                            | Total(4) |                        | $       | 365,029   |        |   | $     | 11,784 |  |       | $      | 22,570 |           |         | $      | 19,506 |  |   | $       | 311,169 | 
|                                                            |          |                        |         |           |        |   |       |        |  |       |        |        |           |         |       

30



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##### Table of Contents








|    |                                                                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Lease obligations related to the principal corporate facilities
    are estimated and are based on current market interest rates
    (LIBOR). See Off-Balance Sheet Financing below
|   
|(2) | See Off-Balance Sheet Financing below.                                                                                                                                             
|   
|(3) | See Note 7 of the Notes to the Consolidated Financial
    Statements for additional information regarding our
    1.50% Senior Convertible Debentures                              
|   
|(4) | Total does not include contractual obligations recorded on the
    balance sheet as current liabilities, or certain purchase
    obligations as discussed below.                   





Off-Balance Sheet Financing




| |                             
| | ----------------------------
| | Synthetic Lease Arrangements









31



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##### Table of Contents



Consolidation of Variable Interest Entities, as revised


Disclosures On Stock Option Programs




| |                           
| | --------------------------
| | Option Program Description





| |                                            
| | -------------------------------------------
| | Distribution and Dilutive Effect of Options

Employee and Executive Option Grants


|                                                                                  |  |                    |     |  |      |  |     |      |  |  |     | 
|--------------------------------------------------------------------------------- |  | ------------------ | --- |  | ---- |  | --- | ---- |  |  | --- | 
|                                                                                  |  | As of December 31, |    
|                                                                                  |  |                    |    
|                                                                                  |  | 2004               |     |  | 2003 |  |     | 2002 | 
|                                                                                  |  |                    |     |  |      |  |     |      | 
|Grants during the period as % of outstanding shares                               |  |                    | 1%  |  |      |  | 6%  |      |  |  | 6%  | 
|Grants to listed officers* during the period as % of total
    options granted    |  |                    | 0%  |  |      |  | 13% |      |  |  | 9%  | 
|Grants to listed officers* during the period as % of outstanding
    shares       |  |                    | 0%  |  |      |  | 1%  |      |  |  | 1%  | 
|Cumulative options held by listed officers* as % of total
    options outstanding |  |                    | 10% |  |      |  | 11% |      |  |  | 10% | 






|  |                                                                                                                                                                                                                           
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | See Executive Officersfor listed officers; these are
    defined by the SEC for the proxy as the CEO and each of the four
    other most highly compensated executive officers. We have only
    three executive officers.



| |                           
| | --------------------------
| | General Option Information

In-the-Money and Out-of-the-Money Option Information


|                          |  |                         |       |          |               |   |       |        |          |  |       |  |  |          |       |  |       |  |       |  |  |   |       | 
|------------------------- |  | ----------------------- | ----- | -------- | ------------- | - | ----- | ------ | -------- |  | ----- |  |  | -------- | ----- |  | ----- |  | ----- |  |  | - | ----- | 
|                          |  | As of December 31, 2004 |      
|                          |  |                         |      
|                          |  | Exercisable             |       |          | Unexercisable |   |       | Total  |         
|                          |  |                         |       |          |               |   |       |        |         
|                          |  |                         |       | Weighted |               |   |       |        | Weighted |  |       |  |  | Weighted |      
|                          |  |                         |       | Average  |               |   |       |        | Average  |  |       |  |  | Average  |      
|                          |  |                         |       | Exercise |               |   |       |        | Exercise |  |       |  |  | Exercise |      
|                          |  | Shares                  |       |          | Price         |   |       | Shares |          |  | Price |  |  | Shares   |       |  | Price | 
|                          |  |                         |       |          |               |   |       |        |          |  |       |  |  |          |       |  |       | 
|                          |  | (Shares in thousands)   |      
|In-the-money              |  |                         | 2,436 |          |               | $ | 15.08 |        |          |  | 379   |  |  | $        | 16.58 |  |       |  | 2,815 |  |  | $ | 15.28 | 
|Out-of-the-money(1)       |  |                         | 4,776 |          |               | $ | 31.87 |        |          |  | 2,156 |  |  | $        | 21.60 |  |       |  | 6,932 |  |  | $ | 28.68 | 
|                          |  |                         |       |          |               |   |       |        |          |  |       |  |  |          |       |  |       | 
|Total Options Outstanding |  |                         | 7,212 |          |               | $ | 26.20 |        |          |  | 2,535 |  |  | $        | 20.85 |  |       |  | 9,747 |  |  | $ | 24.81 | 
|                          |  |                         |       |          |               |   |       |        |          |  |       |  |  |          |       |  |       | 






|    |                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Out-of-the-money options are those options with an exercise
    price equal to or above the closing price of $17.41 at
    December 31, 2004.

32



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##### Table of Contents



Factors That Could Adversely Affect Performance and Financial
Results




| |                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------
| | We rely on sales to a relatively small number of OEM
    customers and the loss of any of these customers could
    substantially decrease our revenues.





| |                                                                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Because of our recent acquisitions we now sell some of our
    products directly to distributors and to the end-user. If we are
    unable to effectively manage a direct sales force, revenues
    could decline.





| |                                                                                                                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We do not typically have long term purchase contracts with
    our customers and our customers have in the past and could at
    any time in the future, reduce or cease purchasing products from
    us, harming our operating results and business.





33



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##### Table of Contents





| |                                                                                                                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We rely on our OEM customers to develop and sell products
    incorporating our technologies and if they fail to successfully
    develop and sell these products, or curtail or cease the use of
    our technologies in their products, our business will be
    harmed.







| |                                                                                                     
| | ----------------------------------------------------------------------------------------------------
| | Ongoing economic uncertainty has had and may continue to
    have a negative effect on our business.





| |                                                                                                               
| | --------------------------------------------------------------------------------------------------------------
| | Our operating results may fluctuate based upon many
    factors, which could adversely affect our stock price.





| |   |                                                                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | varying demand for our products, due to seasonality, OEM
    customer product development and marketing efforts, OEM customer
    financial and operational condition and general economic
    conditions;
|
| |  | shifts in customer demand to lower cost products;                                                                                                                                                         
|
| |  | success and timing of new product introductions by us and our
    OEM customers and the performance of our products generally;                                                                            
|
| |  | volatility in foreign exchange rates, changes in interest rates
    and availability of bank or financing credit to consumers of
    digital copiers and printers;                                        
|
| |  | price reductions by us and our competitors, which may be
    exacerbated by competitive pressures caused by economic
    conditions generally;                                                            
|
| |  | delay, cancellation or rescheduling of orders or projects;                                                                                                                                                

34



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| |   |                                                                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | availability of key components, including possible delays in
    deliveries from suppliers, the performance of third-party
    manufacturers and the status of our relationships with our key
    suppliers;
|
| |  | potential excess or shortage of employees and location of
    research and development centers;                                                                                                             
|
| |  | changes in our product mix such as shifts from higher revenue
    products to lower revenue products dependent on higher sales
    volumes;                                                                 
|
| |  | costs associated with complying with any applicable governmental
    regulations, including substantial costs related to compliance
    with SOX;                                                           
|
| |  | acquisitions and integration of new businesses;                                                                                                                                                             
|
| |  | changes in our business model related to the migration of
    embedded products to a design-licensed model;                                                                                                 
|
| |  | costs related to the entry into new markets, such as commercial
    printing and office equipment service automation;                                                                                       
|
| |  | general economic conditions; and                                                                                                                                                                            
|
| |  | other risks described herein.                                                                                                                                                                               



| |                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We face competition from other suppliers as well as our
    own OEM customers and if we are not able to compete successfully
    our business may be harmed.









| |                                                                                                                                                                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Demand for technology, in general, and for products
    containing our technology that enable black-and-white and color
    printing of digital data has decreased over the past three years
    and could decrease in the future, adversely affecting our sales
    revenue.



35



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##### Table of Contents







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





| |                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------
| | Recent and proposed regulations related to equity
    incentives could adversely affect our ability to attract and
    retain key personnel.

Accounting for
Stock-Based Compensation




| |                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we are unable to develop new products, or execute
    product introductions on a timely basis, our future revenue and
    operating results may be harmed.



36



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##### Table of Contents









| |                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------
| | If we enter new markets or distribution channels this
    could result in higher operating expenses that may not be offset
    by increased revenue.





| |                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We license software used in most of our products from
    Adobe Systems Incorporated and the loss of this license would
    prevent us from shipping these products.





| |                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We depend upon a limited group of suppliers for key
    components in our products and the loss of any of these
    suppliers could adversely affect our business.



37



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##### Table of Contents







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





| |                                                                                                                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Seasonal purchasing patterns of our OEM customers have
    historically caused lower fourth and first quarter revenue from
    sales of our servers and embedded products, which may negatively
    impact our results of operations.





| |   |                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our OEM customers have historically sought to minimize year-end
    inventory investment (including the reduction in demand
    following introductory channel fill purchases);
|
| |  | the timing of new product releases and training by our OEM
    customers in the first and fourth quarters; and                                                                   

38



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##### Table of Contents





| |   |                                                                                                                                                                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | certain of our OEM customers have typically achieved their
    yearly sales targets before year end and consequently delayed
    further purchases into the next fiscal year (we do not know when
    our customers reach these sales targets as they generally do not
    disclose them to us).





| |                                                                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We may make acquisitions that are dilutive to existing
    stockholders, result in unanticipated accounting charges or
    otherwise adversely affect our results of operations and result
    in difficulties in assimilating and integrating the operations,
    personnel, technologies, products and information systems of
    acquired companies or businesses.





| |   |                                                                                                                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | if we issue equity securities in connection with an acquisition,
    the issuance will generally be dilutive to our existing
    stockholders, alternatively, acquisitions made entirely or
    partially for cash will reduce our cash reserves;
|
| |  | difficulties in integration of operations, employees,
    technologies, or products and the related diversion of
    management time and effort to accomplish successful integration;                                                            
|
| |  | risks 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;                                                                                                                                                                                                         
|
| |  | potential loss of key employees, particularly management, of the
    acquired company;                                                                                                                                                           
|
| |  | possible expense overruns;                                                                                                                                                                                                                       
|
| |  | an adverse reaction by customers, suppliers or partners of the
    acquired company or us;                                                                                                                                                       
|
| |  | the risk of changes in ratings by stock analysts;                                                                                                                                                                                                
|
| |  | potential litigation surrounding transactions;                                                                                                                                                                                                   
|
| |  | the inability to protect or secure technology rights; and                                                                                                                                                                                        
|
| |  | an increase in operating costs.                                                                                                                                                                                                                  





| |                                                                                    
| | -----------------------------------------------------------------------------------
| | We face risks from our international operations and from
    currency fluctuations.





39



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##### Table of Contents







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







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





| |                                                                                    
| | -----------------------------------------------------------------------------------
| | Our products may contain defects which are not discovered
    until after shipping.





| |                                                                                                      
| | -----------------------------------------------------------------------------------------------------
| | Actual or perceived security vulnerabilities in our
    products could adversely affect our revenues.



40



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##### Table of Contents







| |                                                                      
| | ---------------------------------------------------------------------
| | System failures or system unavailability could harm our
    business.





| |                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------
| | The location and concentration of our facilities subjects
    us to the risk of earthquakes, floods or other natural disasters
    and public health risks.







| |                                                                                    
| | -----------------------------------------------------------------------------------
| | The value of our investment portfolio will decrease if
    interest rates increase.





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





| |   |                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------
| |  | actual or anticipated variations in our quarterly or annual
    operating results;                  
|
| |  | announcements of our historical or anticipated operating results;                                   
|
| |  | announcements of technological innovations or new products or
    services by us or our competitors;

41



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##### Table of Contents





| |   |                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------
| |  | 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;                                   
|
| |  | changes in general economic conditions;                                                                          
|
| |  | terrorist attacks and the effects of military engagements;                                                       
|
| |  | natural disasters                                                                                                
|
| |  | changes in the rating of our debentures or other
    securities; and                                             
|
| |  | changes in the economic performance and/or market valuations of
    other software and high-technology companies.





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





| |                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Under new regulations required by SOX, an adverse opinion
    on internal controls over financial reporting could be issued by
    our independent registered public accounting firm, and this
    could have a negative impact on our stock price.







| |                                                                     
| | --------------------------------------------------------------------
| | Our debt service obligations may adversely affect our cash
    flow.



42



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##### Table of Contents







| |   |                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | On or after June 1, 2008, we may redeem the debentures for
    cash at any time as a whole, or from time to time in part, at a
    price equal to 100% of the principal amount of the debenture to
    be redeemed plus any accrued and unpaid interest, including
    contingent interest, if any;                                                                                                        
|
| |  | On June 1, 2008 a holder may require us to repurchase all
    or a portion of that holders debentures at a repurchase
    price equal to 100% of the principal amount of those debentures
    plus accrued and unpaid interest, including contingent interest,
    if any, to, but not including, the date of repurchase in
    cash; and                                                                 
|
| |  | A holder may require us to repurchase all or a portion of that
    holders debentures if a fundamental change, as defined in
    the indenture, occurs prior to June 1, 2008 at 100% of
    their principal amount, plus any accrued and unpaid interest,
    including contingent interest, if any to, but not including, the
    repurchase date. We may choose to pay the repurchase price in
    cash.







| |   |                                                                                                                                                                                                                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | increase our vulnerability to general adverse economic and
    industry conditions, as we are required to make interest
    payments and maintain compliance with financial covenants
    contained in the debentures regardless of such external
    conditions;                                                          
|
| |  | limit our ability to obtain additional financing due to
    covenants contained in the debentures and the existing leverage
    evidenced by the debentures;                                                                                                                                                               
|
| |  | require the dedication of a substantial portion of any cash flow
    from operations to the payment of principal and interest on our
    indebtedness, thereby reducing the availability of such cash
    flow to fund our growth strategy, working capital, capital
    expenditures and other general corporate purposes;
|
| |  | limit our flexibility in planning for, or reacting to, changes
    in our business and our industry by restricting the funds
    available for use in addressing such changes; and                                                                                                                                         
|
| |  | place us at a competitive disadvantage relative to our
    competitors with less debt.                                                                                                                                                                                                                                     



| |                                                                                                                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our senior debentures issued in June 2003 are convertible
    into common stock under certain conditions. If either we or the
    debt holders convert the debentures into common stock our basic
    earnings per share could decrease.





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | during any fiscal quarter after September 30, 2003, if the
    sale price of our common stock for at least 20 consecutive
    trading days in the 30 consecutive trading-day period ending on
    the last trading day of the immediately preceding fiscal quarter
    exceeds 120% of the conversion price on that 30th trading day;                                                                                                  
|
| |  | during any five consecutive trading day period immediately
    following any five consecutive trading day period (the
    Debenture Measurement Period) in which the average
    trading price for the debentures during that Debenture
    Measurement Period was less than 97% of the average conversion
    value for the debentures during such period; however, the
    debentures may not be converted after June 1, 2018 if on

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| |   |                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | any trading day during such Debenture Measurement Period the
    closing sale price of shares of our common stock was between the
    then current conversion price on the debentures and 120% of the
    then conversion price of the debentures;
|
| |  | upon the occurrence of specified corporate transactions, as
    defined in the indenture; or                                                                                                                                                      
|
| |  | if we have called the debentures for redemption.                                                                                                                                                                                                  












|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A: | Quantitative and Qualitative Disclosures About Market
    Risk



| |            
| | -----------
| | Market Risk





| |                   
| | ------------------
| | Interest Rate Risk







|                        |  |                         |         |  |             |   |                         |                        |  |   |         | 
|----------------------- |  | ----------------------- | ------- |  | ----------- | - | ----------------------- | ---------------------- |  | - | ------- | 
|                        |  | Valuation of Securities |         |  |             |   | Valuation of Securities |                       
|                        |  | Given an Interest Rate  |         |  | No Change   |   |                         | Given an Interest Rate | 
|                        |  | Decrease of 100 Basis   |         |  | in Interest |   |                         | Increase of 100 Basis  | 
|                        |  | Points                  |         |  | Rates       |   |                         | Points                 | 
|                        |  |                         |         |  |             |   |                         |                        | 
|                        |  | (In thousands)          |        
|Total Fair Market Value |  | $                       | 545,041 |  |             | $ | 544,123                 |                        |  | $ | 543,158 | 

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| |            
| | -----------
| | Derivatives





| |                          
| | -------------------------
| | Financial Risk Management










Item 8: Financial Statements and Supplementary Data


45



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM








| |                                                                       
| | ----------------------------------------------------------------------
| | Consolidated financial statements and financial
    statement schedule







| |                                          
| | -----------------------------------------
| | Internal control over financial reporting



46



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| |                               
| | ------------------------------
| | /s/ PricewaterhouseCoopers LLP





47



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Electronics for Imaging, Inc.








Consolidated Balance Sheets


|                                                                                                                     |                                            |                           |          |           |      |   |          |           | 
|-------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------------------------- | -------- | --------- | ---- | - | -------- | --------- | 
|                                                                                                                     |                                            | December 31,              |         
|                                                                                                                     |                                            |                           |         
|                                                                                                                     |                                            | 2004                      |          |           | 2003 |  
|                                                                                                                     |                                            |                           |          |           |      |  
|                                                                                                                     |                                            | (In thousands, except per |         
|                                                                                                                     |                                            | share amounts)            |         
|ASSETS                                                                                                              
|Current assets:                                                                                                      |                                            |                           |          |           |      |   |          |          
|Cash and cash equivalents                                                                                            |                                            | $                         | 156,322  |           |      | $ | 113,163  |          
|Short-term investments                                                                                               |                                            |                           | 503,237  |           |      |   | 510,949  |          
|Restricted cash, cash equivalents and short-term investments                                                         |                                            |                           |         |           |      |   | 69,669   |          
|Accounts receivable, net                                                                                             |                                            |                           | 41,128   |           |      |   | 53,317   |          
|Inventories                                                                                                          |                                            |                           | 5,529    |           |      |   | 7,989    |          
|Other current assets                                                                                                 |                                            |                           | 22,157   |           |      |   | 28,718   |          
|                                                                                                                     |                                            |                           |          |           |      |  
|Total current assets                                                                                                 |                                            |                           | 728,373  |           |      |   | 783,805  |          
|Property and equipment, net                                                                                          |                                            |                           | 44,324   |           |      |   | 49,094   |          
|Restricted investments                                                                                               |                                            |                           | 88,580   |           |      |   | 43,080   |          
|Goodwill                                                                                                             |                                            |                           | 73,768   |           |      |   | 67,166   |          
|Intangible assets, net                                                                                               |                                            |                           | 40,842   |           |      |   | 51,032   |          
|Other assets                                                                                                         |                                            |                           | 41,990   |           |      |   | 19,484   |          
|                                                                                                                     |                                            |                           |          |           |      |  
|                                                                                                                     | Total assets                               |                           | $        | 1,017,877 |      |   | $        | 1,013,661 | 
|                                                                                                                     |                                            |                           |          |           |      |  
|                                                                                                                    
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                
|Current liabilities:                                                                                                 |                                            |                           |          |           |      |   |          |          
|Accounts payable                                                                                                     |                                            | $                         | 24,286   |           |      | $ | 17,995   |          
|Accrued and other liabilities                                                                                        |                                            |                           | 62,219   |           |      |   | 67,386   |          
|Income taxes payable                                                                                                 |                                            |                           | 23,812   |           |      |   | 33,231   |          
|                                                                                                                     |                                            |                           |          |           |      |  
|Total current liabilities                                                                                            |                                            |                           | 110,317  |           |      |   | 118,612  |          
|Long-term obligations                                                                                                |                                            |                           | 240,000  |           |      |   | 240,236  |          
|                                                                                                                     |                                            |                           |          |           |      |  
|                                                                                                                     | Total liabilities                          |                           |          | 350,317   |      |   |          | 358,848   | 
|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; 53,828 and 54,396 shares outstanding,
    respectively |                                            |                           | 638      |           |      |   | 620      |          
|Additional paid-in capital                                                                                           |                                            |                           | 360,489  |           |      |   | 328,358  |          
|Deferred compensation                                                                                                |                                            |                           | (1,149   | )         |      |   | (1,597   | )        
|Treasury stock, at cost, 9,963 and 7,648 shares,
    respectively                                                    |                                            |                           | (214,722 | )         |      |   | (159,077 | )        
|Accumulated other comprehensive income                                                                               |                                            |                           | (1,212   | )         |      |   | 1,012    |          
|Retained earnings                                                                                                    |                                            |                           | 523,516  |           |      |   | 485,497  |          
|                                                                                                                     |                                            |                           |          |           |      |  
|Total stockholders equity                                                                                           |                                            |                           | 667,560  |           |      |   | 654,813  |          
|                                                                                                                     |                                            |                           |          |           |      |  
|                                                                                                                     | Total liabilities and stockholders equity |                           | $        | 1,017,877 |      |   | $        | 1,013,661 | 
|                                                                                                                     |                                            |                           |          |           |      |  



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Electronics for Imaging, Inc.








Consolidated Statements of Income


|                                             |                                                                                  |                                  |         |         |      |   |         |         |   |   |         |         |  
|-------------------------------------------- | -------------------------------------------------------------------------------- | -------------------------------- | ------- | ------- | ---- | - | ------- | ------- | - | - | ------- | ------- | -
|                                             |                                                                                  | For the Years Ended December 31, |        
|                                             |                                                                                  |                                  |        
|                                             |                                                                                  | 2004                             |         |         | 2003 |   |         | 2002    |  
|                                             |                                                                                  |                                  |         |         |      |   |         |         |  
|                                             |                                                                                  | (In thousands, except per share  |        
|                                             |                                                                                  | amounts)                         |        
|Revenue                                      |                                                                                  | $                                | 394,604 |         |      | $ | 379,587 |         |   | $ | 350,185 |        
|Cost of revenue                              |                                                                                  |                                  | 138,382 |         |      |   | 148,054 |         |   |   | 167,685 |        
|                                             |                                                                                  |                                  |         |         |      |   |         |         |  
|Gross profit                                 |                                                                                  |                                  | 256,222 |         |      |   | 231,533 |         |   |   | 182,500 |        
|Operating expenses:                          |                                                                                  |                                  |         |         |      |   |         |         |   |   |         |        
|                                             | Research and development                                                         |                                  |         | 111,134 |      |   |         | 96,697  |   |   |         | 89,973  |  
|                                             | Sales and marketing                                                              |                                  |         | 74,711  |      |   |         | 61,597  |   |   |         | 50,624  |  
|                                             | General and administrative                                                       |                                  |         | 27,264  |      |   |         | 21,690  |   |   |         | 21,778  |  
|                                             | Real estate related charges                                                      |                                  |         | 14,394  |      |   |         |        |   |   |         |        |  
|                                             | Amortization of identified intangibles and other
    acquisition-related charges |                                  |         | 14,690  |      |   |         | 19,670  |   |   |         | 4,391   |  
|                                             |                                                                                  |                                  |         |         |      |   |         |         |  
|                                             | Total operating expenses                                                         |                                  |         | 242,193 |      |   |         | 199,654 |   |   |         | 166,766 |  
|                                             |                                                                                  |                                  |         |         |      |   |         |         |  
|Income from operations                       |                                                                                  |                                  | 14,029  |         |      |   | 31,879  |         |   |   | 15,734  |        
|Interest and other income, net:              |                                                                                  |                                  |         |         |      |   |         |         |   |   |         |        
|                                             | Interest and other income                                                        |                                  |         | 12,779  |      |   |         | 11,489  |   |   |         | 11,540  |  
|                                             | Interest expense                                                                 |                                  |         | (5,632  | )    |   |         | (2,886  | ) |   |         | (54     | )
|                                             | Gain on sale of product line                                                     |                                  |         | 2,994   |      |   |         |        |   |   |         |        |  
|                                             | Litigation settlement income (charges), net                                      |                                  |         | 58      |      |   |         | 2,408   |   |   |         | (4,409  | )
|                                             | Loss on equity investment                                                        |                                  |         |        |      |   |         | (1,562  | ) |   |         |        |  
|                                             |                                                                                  |                                  |         |         |      |   |         |         |  
|                                             | Total interest and other income, net                                             |                                  |         | 10,199  |      |   |         | 9,449   |   |   |         | 7,077   |  
|                                             |                                                                                  |                                  |         |         |      |   |         |         |  
|Income before income taxes                   |                                                                                  |                                  | 24,228  |         |      |   | 41,328  |         |   |   | 22,811  |        
|Benefit from (provision for) income taxes    |                                                                                  |                                  | 13,791  |         |      |   | (14,820 | )       |   |   | (6,843  | )      
|                                             |                                                                                  |                                  |         |         |      |   |         |         |  
|Net income                                   |                                                                                  | $                                | 38,019  |         |      | $ | 26,508  |         |   | $ | 15,968  |        
|                                             |                                                                                  |                                  |         |         |      |   |         |         |  
|Earnings per share:                          |                                                                                  |                                  |         |         |      |   |         |         |   |   |         |        
|Net income per basic common share            |                                                                                  | $                                | 0.71    |         |      | $ | 0.49    |         |   | $ | 0.29    |        
|                                             |                                                                                  |                                  |         |         |      |   |         |         |  
|Shares used in basic per-share calculation   |                                                                                  |                                  | 53,898  |         |      |   | 53,789  |         |   |   | 54,256  |        
|Net income per diluted common share          |                                                                                  | $                                | 0.64    |         |      | $ | 0.47    |         |   | $ | 0.29    |        
|                                             |                                                                                  |                                  |         |         |      |   |         |         |  
|Shares used in diluted per-share calculation |                                                                                  |                                  | 63,996  |         |      |   | 60,138  |         |   |   | 54,852  |        



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Electronics for Imaging, Inc.








Consolidated Statements of Stockholders Equity


|                                      |                                            |                      |        |   |            |   |     |          |  |       |              |               |        |                |        |          |        |   |               |          |  |   |        |        |        |   |         |        |        |   |         |        |        | 
|------------------------------------- | ------------------------------------------ | -------------------- | ------ | - | ---------- | - | --- | -------- |  | ----- | ------------ | ------------- | ------ | -------------- | ------ | -------- | ------ | - | ------------- | -------- |  | - | ------ | ------ | ------ | - | ------- | ------ | ------ | - | ------- | ------ | ------ | 
|                                      |                                            |                      |        |   |            |   |     |          |  | Other |              |               |        |                |       
|                                      |                                            | Common Stock         |        |   | Additional |   |     |          |  |       |              | Comprehensive |        |                |        |          | Total  |  
|                                      |                                            |                      |        |   | Paid-In    |   |     | Deferred |  |       |              |               | Income |                |        | Retained |        |   | Stockholders |         
|                                      |                                            | Shares               |        |   | Amount     |   |     | Capital  |  |       | Compensation |               |        | Treasury Stock |        |          | (Loss) |   |               | Earnings |  |   | Equity |       
|                                      |                                            |                      |        |   |            |   |     |          |  |       |              |               |        |                |        |          |        |   |               |          |  |   |        |       
|                                      |                                            | (In thousands)       |       
|Balances as of December 31, 2001      |                                            |                      | 58,356 |   |            | $ | 583 |          |  | $     | 261,703      |               |        | $              |       |          |        | $ | (99,959       | )        |  | $ | 1,219  |        |        | $ | 443,021 |        |        | $ | 606,567 |       
|Components of comprehensive income    |                                            |                      |        |   |            |   |     |          |  |       |              |               |        |                |        |          |        |   |               |          |  |   |        |        |        |   |         |        |        |   |         |       
|                                      | Net income                                 |                      |        |   |            |   |     |          |  |       |              |               |        |                |        |          |        |   |               |          |  |   |        |        |        |   |         | 15,968 |        |   |         | 15,968 |       
|                                      | Currency translation adjustment            |                      |        |   |            |   |     |          |  |       |              |               |        |                |        |          |        |   |               |          |  |   |        | 15     |        |   |         |        |        |   |         | 15     |       
|                                      | Market valuation on short-term investments |                      |        |   |            |   |     |          |  |       |              |               |        |                |        |          |        |   |               |          |  |   |        | 757    |        |   |         |       |        |   |         | 757    |       
|                                      |                                            |                      |        |   |            |   |     |          |  |       |              |               |        |                |        |          |        |   |               |          |  |   |        |       
|                                      |                                            | Comprehensive income |        |   |            |   |     |          |  |       |              |               |        |                |        |          |        |   |               |          |  |   |        |        | 772    |   |         |        | 15,968 |   |         |        | 16,740 | 
|Exercise of common stock options      |                                            |                      | 414    |   |            |   | 4   |          |  |       | 5,150        |               |        |                |        |          |        |   |               |          |  |   |        |        |        |   |         |        |        |   | 5,154   |       
|Stock issued pursuant to ESPP         |                                            |                      | 276    |   |            |   | 3   |          |  |       | 4,106        |               |        |                |        |          |        |   |               |          |  |   |        |        |        |   |         |        |        |   | 4,109   |       
|Tax benefit related to stock plans    |                                            |                      |       |   |            |   |    |          |  |       | 1,497        |               |        |                |       |          |        |   |              |          |  |   |       |        |        |   |        |        |        |   | 1,497   |       
|                                      |                                            |                      |        |   |            |   |     |          |  |       |              |               |        |                |        |          |        |   |               |          |  |   |        |       
|Balances as of December 31, 2002      |                                            |                      | 59,046 |   |            |   | 590 |          |  |       | 272,456      |               |        |                |       |          |        |   | (99,959       | )        |  |   | 1,991  |        |        |   | 458,989 |        |        |   | 634,067 |       
|Components of comprehensive income    |                                            |                      |        |   |            |   |     |          |  |       |              |               |        |                |        |          |        |   |               |          |  |   |        |        |        |   |         |        |        |   |         |       
|                                      | Net income                                 |                      |        |   |            |   |     |          |  |       |              |               |        |                |        |          |        |   |               |          |  |   |        |        |        |   |         | 26,508 |        |   |         | 26,508 |       
|                                      | Currency translation adjustment            |                      |        |   |            |   |     |          |  |       |              |               |        |                |        |          |        |   |               |          |  |   |        | 1,417  |        |   |         |        |        |   |         | 1,417  |       
|                                      | Market valuation on short-term investments |                      |        |   |            |   |     |          |  |       |              |               |        |                |        |          |        |   |               |          |  |   |        | (2,396 | )      |   |         |       |        |   |         | (2,396 | )     
|                                      |                                            |                      |        |   |            |   |     |          |  |       |              |               |        |                |        |          |        |   |               |          |  |   |        |       
|                                      |                                            | Comprehensive income |        |   |            |   |     |          |  |       |              |               |        |                |        |          |        |   |               |          |  |   |        |        | (979   | ) |         |        | 26,508 |   |         |        | 25,529 | 
|Repurchase of common stock            |                                            |                      |        |   |            |   |     |          |  |       |              |               |        |                |        |          |        |   | (59,118       | )        |  |   |        |        |        |   |         |        |        |   | (59,118 | )     
|Stock issued for acquisitions         |                                            |                      | 202    |   |            |   | 2   |          |  |       | 5,575        |               |        |                |        |          |        |   |               |          |  |   |        |        |        |   |         |        |        |   | 5,577   |       
|Exercise of common stock options      |                                            |                      | 2,425  |   |            |   | 24  |          |  |       | 36,581       |               |        |                |        |          |        |   |               |          |  |   |        |        |        |   |         |        |        |   | 36,605  |       
|Restricted stock grants               |                                            |                      | 66     |   |            |   | 1   |          |  |       | 1,643        |               |        |                | (1,597 | )        |        |   |               |          |  |   |        |        |        |   |         |        |        |   | 47      |       
|Stock issued pursuant to ESPP         |                                            |                      | 305    |   |            |   | 3   |          |  |       | 3,980        |               |        |                |        |          |        |   |               |          |  |   |        |        |        |   |         |        |        |   | 3,983   |       
|Tax benefit related to stock plans    |                                            |                      |       |   |            |   |    |          |  |       | 8,123        |               |        |                |       |          |        |   |              |          |  |   |       |        |        |   |        |        |        |   | 8,123   |       
|                                      |                                            |                      |        |   |            |   |     |          |  |       |              |               |        |                |        |          |        |   |               |          |  |   |        |       
|Balances as of December 31, 2003      |                                            |                      | 62,044 |   |            |   | 620 |          |  |       | 328,358      |               |        |                | (1,597 | )        |        |   | (159,077      | )        |  |   | 1,012  |        |        |   | 485,497 |        |        |   | 654,813 |       
|Components of comprehensive income    |                                            |                      |        |   |            |   |     |          |  |       |              |               |        |                |        |          |        |   |               |          |  |   |        |        |        |   |         |        |        |   |         |       
|                                      | Net income                                 |                      |        |   |            |   |     |          |  |       |              |               |        |                |        |          |        |   |               |          |  |   |        |        |        |   |         | 38,019 |        |   |         | 38,019 |       
|                                      | Currency translation adjustment            |                      |        |   |            |   |     |          |  |       |              |               |        |                |        |          |        |   |               |          |  |   |        | 392    |        |   |         |        |        |   |         | 392    |       
|                                      | Market valuation on short-term investments |                      |        |   |            |   |     |          |  |       |              |               |        |                |        |          |        |   |               |          |  |   |        | (2,616 | )      |   |         |       |        |   |         | (2,616 | )     
|                                      |                                            |                      |        |   |            |   |     |          |  |       |              |               |        |                |        |          |        |   |               |          |  |   |        |       
|                                      |                                            | Comprehensive income |        |   |            |   |     |          |  |       |              |               |        |                |        |          |        |   |               |          |  |   |        |        | (2,224 | ) |         |        | 38,019 |   |         |        | 35,795 | 
|Repurchase of common stock            |                                            |                      |        |   |            |   |     |          |  |       |              |               |        |                |        |          |        |   | (55,645       | )        |  |   |        |        |        |   |         |        |        |   | (55,645 | )     
|Exercise of common stock options      |                                            |                      | 1,385  |   |            |   | 14  |          |  |       | 21,951       |               |        |                |        |          |        |   |               |          |  |   |        |        |        |   |         |        |        |   | 21,965  |       
|Restricted stock grants cancelled     |                                            |                      | (5     | ) |            |   |    |          |  |       | (126         | )             |        |                |        |          |        |   |               |          |  |   |        |        |        |   |         |        |        |   | (126    | )     
|Amortization of deferred compensation |                                            |                      |        |   |            |   |     |          |  |       |              |               |        |                | 448    |          |        |   |               |          |  |   |        |        |        |   |         |        |        |   | 448     |       
|Stock issued pursuant to ESPP         |                                            |                      | 368    |   |            |   | 4   |          |  |       | 5,036        |               |        |                |        |          |        |   |               |          |  |   |        |        |        |   |         |        |        |   | 5,040   |       
|Tax benefit related to stock plans    |                                            |                      |       |   |            |   |    |          |  |       | 5,270        |               |        |                |       |          |        |   |              |          |  |   |       |        |        |   |        |        |        |   | 5,270   |       
|                                      |                                            |                      |        |   |            |   |     |          |  |       |              |               |        |                |        |          |        |   |               |          |  |   |        |       
|Balances as of December 31, 2004      |                                            |                      | 63,792 |   |            | $ | 638 |          |  | $     | 360,489      |               |        | $              | (1,149 | )        |        | $ | (214,722      | )        |  | $ | (1,212 | )      |        | $ | 523,516 |        |        | $ | 667,560 |       
|                                      |                                            |                      |        |   |            |   |     |          |  |       |              |               |        |                |        |          |        |   |               |          |  |   |        |       



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Electronics for Imaging, Inc.








Consolidated Statements of Cash Flows


|                                               |                                                                                       |                                                                        |         |          |         |   |         |            |         |   |         |          |         |  
|---------------------------------------------- | ------------------------------------------------------------------------------------- | ---------------------------------------------------------------------- | ------- | -------- | ------- | - | ------- | ---------- | ------- | - | ------- | -------- | ------- | -
|                                               |                                                                                       | Years Ended December 31,                                               |        
|                                               |                                                                                       |                                                                        |        
|                                               |                                                                                       | 2004                                                                   |         |          | 2003    |   |         | 2002       |        
|                                               |                                                                                       |                                                                        |         |          |         |   |         |            |        
|                                               |                                                                                       | (In thousands)                                                         |        
|Cash flows from operating activities:          |                                                                                       |                                                                        |         |          |         |   |         |            |         |   |         |         
|                                               | Net income                                                                            |                                                                        | $       | 38,019   |         |   | $       | 26,508     |         |   | $       | 15,968   |        
|                                               | Adjustments to reconcile net income to net cash provided by
    operating activities: |                                                                        |         |          |         |   |         |            |         |   |         |          |        
|                                               |                                                                                       | Depreciation and amortization                                          |         |          | 23,524  |   |         |            | 17,162  |   |         |          | 14,996  |  
|                                               |                                                                                       | Purchased in-process research & development                            |         |          | 1,000   |   |         |            | 13,220  |   |         |          |        |  
|                                               |                                                                                       | Deferred taxes                                                         |         |          | (13,442 | ) |         |            | 2,226   |   |         |          | 3,702   |  
|                                               |                                                                                       | Provision for allowance for bad debts and sales-related
    allowances |         |          | 1,288   |   |         |            | 96      |   |         |          | (400    | )
|                                               |                                                                                       | Tax benefit from exercise of non-qualified stock options               |         |          | 5,270   |   |         |            | 8,123   |   |         |          | 1,497   |  
|                                               |                                                                                       | Amortization of deferred compensation                                  |         |          | 448     |   |         |            |        |   |         |          |        |  
|                                               |                                                                                       | Impairment of long-lived assets                                        |         |          |        |   |         |            | 306     |   |         |          |        |  
|                                               |                                                                                       | Loss on equity investment                                              |         |          |        |   |         |            | 1,562   |   |         |          |        |  
|                                               |                                                                                       | Other                                                                  |         |          | 50      |   |         |            | 9       |   |         |          | 465     |  
|                                               | Changes in operating assets and liabilities, net of effect of
    acquired companies: |                                                                        |         |          |         |   |         |            |         |   |         |          |        
|                                               |                                                                                       | Accounts receivable                                                    |         |          | 12,197  |   |         |            | (3,049  | ) |         |          | 12,244  |  
|                                               |                                                                                       | Inventories                                                            |         |          | 2,475   |   |         |            | (3,092  | ) |         |          | 5,172   |  
|                                               |                                                                                       | Receivables from sub-contract manufacturers                            |         |          | (439    | ) |         |            | 621     |   |         |          | 1,491   |  
|                                               |                                                                                       | Other current assets                                                   |         |          | 524     |   |         |            | 217     |   |         |          | 491     |  
|                                               |                                                                                       | Accounts payable and accrued liabilities                               |         |          | (1,421  | ) |         |            | (19,184 | ) |         |          | (9,608  | )
|                                               |                                                                                       | Income taxes payable                                                   |         |          | (9,816  | ) |         |            | 1,387   |   |         |          | 3,904   |  
|                                               |                                                                                       |                                                                        |         |          |         |   |         |            |        
|                                               | Net cash provided by operating activities                                             |                                                                        |         | 59,677   |         |   |         | 46,112     |         |   |         | 49,922   |        
|Cash flows from investing activities:          |                                                                                       |                                                                        |         |          |         |   |         |            |         |   |         |         
|                                               | Purchases of short-term investments                                                   |                                                                        |         | (225,576 | )       |   |         | (1,143,532 | )       |   |         | (386,028 | )      
|                                               | Proceeds from sales/ maturities of short-term investments                             |                                                                        |         | 264,951  |         |   |         | 974,653    |         |   |         | 302,712  |        
|                                               | Net purchases of restricted cash, cash equivalents and
    short-term investments     |                                                                        |         | (472     | )       |   |         |           |         |   |         |         |        
|                                               | Transfers of investments between restricted and available                             |                                                                        |         | 34,119   |         |   |         | (69,669    | )       |   |         |         |        
|                                               | Net purchases of restricted investments                                               |                                                                        |         | (45,500  | )       |   |         |           |         |   |         | (2,945   | )      
|                                               | Purchase of property and equipment                                                    |                                                                        |         | (6,563   | )       |   |         | (5,052     | )       |   |         | (8,349   | )      
|                                               | Proceeds from sales of property and equipment                                         |                                                                        |         | 4,266    |         |   |         | 176        |         |   |         | 124      |        
|                                               | Businesses acquired, net of cash received                                             |                                                                        |         | (11,550  | )       |   |         | (58,240    | )       |   |         | (1,924   | )      
|                                               | Sale of Unimobile product line and other                                              |                                                                        |         | (1,481   | )       |   |         |           |         |   |         | 367      |        
|                                               |                                                                                       |                                                                        |         |          |         |   |         |            |        
|                                               | Net cash provided by (used for) investing activities                                  |                                                                        |         | 12,194   |         |   |         | (301,664   | )       |   |         | (96,043  | )      
|Cash flows from financing activities:          |                                                                                       |                                                                        |         |          |         |   |         |            |         |   |         |         
|                                               | Repayment of long-term obligations                                                    |                                                                        |         |         |         |   |         | (42        | )       |   |         | (53      | )      
|                                               | Proceeds from issuance of long-term debt, net                                         |                                                                        |         |         |         |   |         | 233,244    |         |   |         |         |        
|                                               | Proceeds from issuance of common stock                                                |                                                                        |         | 26,879   |         |   |         | 40,635     |         |   |         | 9,263    |        
|                                               | Purchases of treasury stock                                                           |                                                                        |         | (55,645  | )       |   |         | (59,118    | )       |   |         |         |        
|                                               |                                                                                       |                                                                        |         |          |         |   |         |            |        
|                                               | Net cash provided by financing activities                                             |                                                                        |         | (28,766  | )       |   |         | 214,719    |         |   |         | 9,210    |        
|                                               |                                                                                       |                                                                        |         |          |         |   |         |            |        
|                                               |                                                                                       | Effect of foreign exchange changes on cash & cash
    equivalents      |         |          | 54      |   |         |            | 91      |   |         |          |        |  
|                                               |                                                                                       |                                                                        |         |          |         |   |         |            |        
|                                               |                                                                                       | Increase(decrease) in cash and cash equivalents                        |         |          | 43,159  |   |         |            | (40,742 | ) |         |          | (36,911 | )
|Cash and cash equivalents at beginning of year |                                                                                       | $                                                                      | 113,163 |          |         | $ | 153,905 |            |         |   | 190,816 |         
|                                               |                                                                                       |                                                                        |         |          |         |   |         |            |        
|Cash and cash equivalents at end of year       |                                                                                       | $                                                                      | 156,322 |          |         | $ | 113,163 |            |         | $ | 153,905 |         
|                                               |                                                                                       |                                                                        |         |          |         |   |         |            |        



51



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Electronics for Imaging, Inc.








Notes to Consolidated Financial Statements




|        |                                                    
|------- | ---------------------------------------------------
|Note 1: | The Company and Its Significant Accounting Policies



| |                             
| | ----------------------------
| | The Company and Its Business





| |                                
| | -------------------------------
| | Significant Accounting Policies



| |                      
| | ---------------------
| | Basis of Presentation





| |                  
| | -----------------
| | Reclassifications





| |                 
| | ----------------
| | Use of Estimates





| |                                                  
| | -------------------------------------------------
| | Cash, Cash Equivalents and Short-term Investments





52



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Electronics for Imaging, Inc.


Notes to Consolidated Financial
Statements  (Continued)




| |                                                                 
| | ----------------------------------------------------------------
| | Allowance for Doubtful Accounts and Sales-related
    Allowances





| |                      
| | ---------------------
| | Concentration of Risk











| |            
| | -----------
| | Inventories





| |                       
| | ----------------------
| | Property and Equipment





53



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Electronics for Imaging, Inc.


Notes to Consolidated Financial
Statements  (Continued)








| |                      
| | ---------------------
| | Internal Use Software

Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use.




| |                  
| | -----------------
| | Long-lived Assets





| |                                    
| | -----------------------------------
| | Fair Value of Financial Instruments





| |                                            
| | -------------------------------------------
| | Amortization of Purchased Intangible Assets

Goodwill and Other Intangible
Assets








| |         
| | --------
| | Warranty

Accounting for Contingencies


54



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Electronics for Imaging, Inc.


Notes to Consolidated Financial
Statements  (Continued)




| |                         
| | ------------------------
| | Research and Development





| |                    
| | -------------------
| | Revenue Recognition

Software Revenue Recognition Modification of SOP 97-2, Software
Recognition, With Respect to Certain Transactions,










| |            
| | -----------
| | Advertising





| |             
| | ------------
| | Income Taxes



55



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##### Table of Contents



Electronics for Imaging, Inc.


Notes to Consolidated Financial
Statements  (Continued)






| |                      
| | ---------------------
| | Business Combinations

Business
Combinations,




| |                                  
| | ---------------------------------
| | Employee Stock-Based Compensation

Accounting for Stock-Based
Compensation Accounting for Stock Issued to Employees




56



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Electronics for Imaging, Inc.


Notes to Consolidated Financial
Statements  (Continued)




|                                                                                                                                                  |  |  |             |                                 |  |   |        |  |  |      |        |  |  |   |        |  
|------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | ----------- | ------------------------------- |  | - | ------ |  |  | ---- | ------ |  |  | - | ------ | -
|                                                                                                                                                  |  |  |             | Years Ended December 31,        | 
|                                                                                                                                                  |  |  |             |                                 | 
|                                                                                                                                                  |  |  |             | 2004                            |  |   | 2003   |  |  | 2002 |       
|                                                                                                                                                  |  |  |             |                                 |  |   |        |  |  |      |       
|                                                                                                                                                  |  |  |             | (In thousands, except per share | 
|                                                                                                                                                  |  |  |             | amounts)                        | 
|Net income (loss)                                                                                                                                 |  |  | As reported |                                 |  | $ | 38,019 |  |  | $    | 26,508 |  |  | $ | 15,968 |  
|Add: Stock-based employee compensation expenses included in
    reported net income, net of related tax effect                                    |  |  |             |                                 |  |   | 322    |  |  |      | 30     |  |  |   |       |  
|Deduct: Stock-based employee compensation expense determined
    under the fair value based method for all awards, net of related
    tax effects |  |  |             |                                 |  |   | 17,235 |  |  |      | 17,859 |  |  |   | 21,841 |  
|                                                                                                                                                  |  |  |             |                                 |  |   |        |  |  |      |        | 
|                                                                                                                                                  |  |  | Pro forma   |                                 |  | $ | 21,106 |  |  | $    | 8,679  |  |  | $ | (5,873 | )
|                                                                                                                                                  |  |  |             |                                 |  |   |        |  |  |      |        | 
|After-tax equivalent of expense related to 1.50% senior
    convertible debentures                                                                |  |  |             |                                 |  |   | 2,999  |  |  |      |       |  |  |   |       |  
|Income for dilution calculation                                                                                                                   |  |  | Pro forma   |                                 |  | $ | 24,105 |  |  | $    | 8,679  |  |  | $ | (5,873 | )
|                                                                                                                                                  |  |  |             |                                 |  |   |        |  |  |      |        | 
|Net income (loss) per basic common share                                                                                                          |  |  | As reported |                                 |  | $ | 0.71   |  |  | $    | 0.49   |  |  | $ | 0.29   |  
|                                                                                                                                                  |  |  |             |                                 |  |   |        |  |  |      |        | 
|                                                                                                                                                  |  |  | Pro forma   |                                 |  | $ | 0.39   |  |  | $    | 0.16   |  |  | $ | (0.11  | )
|                                                                                                                                                  |  |  |             |                                 |  |   |        |  |  |      |        | 
|Net income (loss) per diluted common share                                                                                                        |  |  | As reported |                                 |  | $ | 0.64   |  |  | $    | 0.48   |  |  | $ | 0.29   |  
|                                                                                                                                                  |  |  |             |                                 |  |   |        |  |  |      |        | 
|                                                                                                                                                  |  |  | Pro forma   |                                 |  | $ | 0.38   |  |  | $    | 0.16   |  |  | $ | (0.11  | )
|                                                                                                                                                  |  |  |             |                                 |  |   |        |  |  |      |        | 





| |                             
| | ----------------------------
| | Foreign Currency Translation





| |                                           
| | ------------------------------------------
| | Computation of Net Income per Common Share



57



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Electronics for Imaging, Inc.


Notes to Consolidated Financial
Statements  (Continued)




|                                                                                                      |                                                                                    |                                       |        |        |      |   |        |        |  |   |        |        | 
|----------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------- | ------------------------------------- | ------ | ------ | ---- | - | ------ | ------ |  | - | ------ | ------ | 
|                                                                                                      |                                                                                    | Years Ended December 31,              |       
|                                                                                                      |                                                                                    |                                       |       
|                                                                                                      |                                                                                    | 2004                                  |        |        | 2003 |   |        | 2002   | 
|                                                                                                      |                                                                                    |                                       |        |        |      |   |        |        | 
|                                                                                                      |                                                                                    | (In thousands, except per share data) |       
|Basic net income per share:                                                                           |                                                                                    |                                       |        |        |      |   |        |        |  |   |        |       
|Net income available to common shareholders                                                           |                                                                                    | $                                     | 38,019 |        |      | $ | 26,508 |        |  | $ | 15,968 |       
|                                                                                                      |                                                                                    |                                       |        |        |      |   |        |        | 
|Weighted average common shares outstanding                                                            |                                                                                    |                                       | 53,898 |        |      |   | 53,789 |        |  |   | 54,256 |       
|Basic net income per share                                                                            |                                                                                    | $                                     | 0.71   |        |      | $ | 0.49   |        |  | $ | 0.29   |       
|                                                                                                      |                                                                                    |                                       |        |        |      |   |        |        | 
|Dilutive net income per share                                                                         |                                                                                    |                                       |        |        |      |   |        |        |  |   |        |       
|                                                                                                      | Net income                                                                         |                                       | $      | 38,019 |      |   | $      | 26,508 |  |   | $      | 15,968 | 
|                                                                                                      | After-tax equivalent of expense related to 1.50% senior
    convertible debentures |                                       |        | 2,999  |      |   |        | 1,724  |  |   |        |       | 
|                                                                                                      |                                                                                    |                                       |        |        |      |   |        |        | 
|Income for purposes of computing diluted net income per share                                         |                                                                                    | $                                     | 41,018 |        |      | $ | 28,232 |        |  | $ | 15,968 |       
|                                                                                                      |                                                                                    |                                       |        |        |      |   |        |        | 
|Weighted average common share outstanding                                                             |                                                                                    |                                       | 53,898 |        |      |   | 53,789 |        |  |   | 54,256 |       
|                                                                                                      | Dilutive stock options(1)                                                          |                                       |        | 1,014  |      |   |        | 1,050  |  |   |        | 596    | 
|                                                                                                      | Weighted average assumed conversion of 1.50% senior
    convertible debentures     |                                       |        | 9,084  |      |   |        | 5,299  |  |   |        |       | 
|                                                                                                      |                                                                                    |                                       |        |        |      |   |        |        | 
|Weighted average common shares outstanding for purposes of
    computing diluted net income per share |                                                                                    |                                       | 63,996 |        |      |   | 60,138 |        |  |   | 54,852 |       
|                                                                                                      |                                                                                    |                                       |        |        |      |   |        |        | 
|Dilutive net income per share                                                                         |                                                                                    | $                                     | 0.64   |        |      | $ | 0.47   |        |  | $ | 0.29   |       
|                                                                                                      |                                                                                    |                                       |        |        |      |   |        |        | 






|    |                                                                                                                                                                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Anti-dilutive weighted shares of common stock of 3,323; 4,313;
    and 5,276 as of December 31, 2004, 2003 and 2002,
    respectively, have been excluded from the effect of dilutive
    securities because the options exercise prices were
    greater than the average market price of the common shares for
    the years then ended.



| |                                                              
| | -------------------------------------------------------------
| | Accounting for Derivative Instruments and Risk
    Management

Accounting for Derivative Instruments
and Hedging Activities,




| |                           
| | --------------------------
| | Variable Interest Entities

Consolidation of Variable Interest Entities, as amended




58



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Electronics for Imaging, Inc.


Notes to Consolidated Financial
Statements  (Continued)




| |                                 
| | --------------------------------
| | Recent Accounting Pronouncements



| |         
| | --------
| | SFAS 153

Exchanges
of Nonmonetary Assets  An Amendment of APB Opinion
No. 29




| |                        
| | -----------------------
| | SFAS 123 (Revised 2004)

Share-Based Payment Accounting for Stock-Based
Compensation Accounting for Stock Issued to Employees, Statement of Cash Flows.






| |          
| | ---------
| | EITF 03-1



59



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Electronics for Imaging, Inc.


Notes to Consolidated Financial
Statements  (Continued)




|        |                                   
|------- | ----------------------------------
|Note 2: | Supplemental Cash Flow Information

|                                                                                                               |  |                          |         |   |      |   |         |      |  |   |        |  
|-------------------------------------------------------------------------------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------- | ---- |  | - | ------ | -
|                                                                                                               |  | Years Ended December 31, |        
|                                                                                                               |  |                          |        
|                                                                                                               |  | 2004                     |         |   | 2003 |   |         | 2002 | 
|                                                                                                               |  |                          |         |   |      |   |         |      | 
|                                                                                                               |  | (In thousands)           |        
|Supplemental disclosures of cash flow information:                                                             |  |                          |         |   |      |   |         |      |  |   |        |  
|Cash paid for interest expense                                                                                 |  | $                        | (3,698  | ) |      | $ | (1,777  | )    |  | $ | (54    | )
|                                                                                                               |  |                          |         |   |      |   |         |      | 
|Cash (paid) refunded for income taxes                                                                          |  | $                        | (4,048  | ) |      | $ | 166     |      |  | $ | 2,382  |  
|                                                                                                               |  |                          |         |   |      |   |         |      | 
|Acquisition related activities:                                                                                |  |                          |         |   |      |   |         |      |  |   |        |  
|Cash paid for acquisitions                                                                                     |  | $                        | (11,811 | ) |      | $ | (58,832 | )    |  | $ | (1,926 | )
|Cash acquired in acquisitions                                                                                  |  |                          | 261     |   |      |   | 592     |      |  |   | 2      |  
|                                                                                                               |  |                          |         |   |      |   |         |      | 
|Net cash paid for acquisitions                                                                                 |  | $                        | (11,550 | ) |      | $ | (58,240 | )    |  | $ | (1,924 | )
|                                                                                                               |  |                          |         |   |      |   |         |      | 
|Common stock issued in connection with acquisitions                                                            |  |                          |        |   |      | $ | (5,011  | )    |  |   |       |  
|                                                                                                               |  |                          |         |   |      |   |         |      | 
|Non-cash financing transactions:                                                                               |  |                          |         |   |      |   |         |      |  |   |        |  
|Tax benefit from the exercise of non-qualified stock options
    recorded as a reduction of income tax payable |  | $                        | 5,270   |   |      | $ | 8,123   |      |  | $ | 1,497  |  
|                                                                                                               |  |                          |         |   |      |   |         |      | 



|        |                         
|------- | ------------------------
|Note 3: | Mergers and Acquisitions



| |                  
| | -----------------
| | 2004 Acquisitions



| |                                
| | -------------------------------
| | Automated Dispatch Systems Inc.



|                                                  |  |                |        |  
|------------------------------------------------- |  | -------------- | ------ | -
|                                                  |  | (In thousands) |       
|Cash                                              |  | $              | 261    |  
|Other tangible assets                             |  |                | 336    |  
|In-process research and development               |  |                | 1,000  |  
|Acquired technology                               |  |                | 3,800  |  
|Other intangible assets                           |  |                | 1,200  |  
|Goodwill                                          |  |                | 8,613  |  
|                                                  |  |                |       
|                                                  |  |                | 15,210 |  
|Liabilities assumed                               |  |                | (1,791 | )
|Deferred tax liability related to assets acquired |  |                | (1,608 | )
|                                                  |  |                |       
|                                                  |  | $              | 11,811 |  
|                                                  |  |                |       



60



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Electronics for Imaging, Inc.


Notes to Consolidated Financial
Statements  (Continued)






| |                  
| | -----------------
| | 2003 Acquisitions



| |          
| | ---------
| | Best GmbH



|                                                                  |  |                |        |  
|----------------------------------------------------------------- |  | -------------- | ------ | -
|                                                                  |  | (In thousands) |       
|Cash acquired                                                     |  | $              | 196    |  
|Other tangible assets                                             |  |                | 1,594  |  
|In-process research and development                               |  |                | 1,220  |  
|Acquired technology                                               |  |                | 2,080  |  
|Trademarks and trade names, license and distributor relationships |  |                | 240    |  
|Other intangible assets                                           |  |                | 2,620  |  
|Goodwill                                                          |  |                | 5,341  |  
|                                                                  |  |                |       
|                                                                  |  |                | 13,291 |  
|Liabilities assumed                                               |  |                | (1,754 | )
|Deferred tax liability related to assets acquired                 |  |                | (1,952 | )
|                                                                  |  |                |       
|                                                                  |  | $              | 9,585  |  
|                                                                  |  |                |       









| |                         
| | ------------------------
| | Printcafe Software, Inc.



61



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Electronics for Imaging, Inc.


Notes to Consolidated Financial
Statements  (Continued)




|                                    |  |                |         |  
|----------------------------------- |  | -------------- | ------- | -
|                                    |  | (In thousands) |        
|Cash acquired                       |  | $              | 604     |  
|Other tangible assets acquired      |  |                | 19,096  |  
|In-process research and development |  |                | 8,600   |  
|Acquired technology                 |  |                | 7,400   |  
|Trademarks and trade names          |  |                | 700     |  
|Other intangible assets             |  |                | 19,100  |  
|Goodwill                            |  |                | 12,508  |  
|                                    |  |                |        
|                                    |  |                | 68,008  |  
|Liabilities assumed                 |  |                | (34,607 | )
|                                    |  |                |        
|                                    |  | $              | 33,401  |  
|                                    |  |                |        







62



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Electronics for Imaging, Inc.


Notes to Consolidated Financial
Statements  (Continued)




| |                   
| | ------------------
| | T/ R Systems, Inc.



|                                    |  |                |        |  
|----------------------------------- |  | -------------- | ------ | -
|                                    |  | (In thousands) |       
|Cash overdraft acquired             |  | $              | (208   | )
|Other tangible assets acquired      |  |                | 11,968 |  
|In-process research and development |  |                | 3,400  |  
|Acquired technology                 |  |                | 5,600  |  
|Trademarks and trade names          |  |                | 200    |  
|Other intangible assets             |  |                | 1,300  |  
|Goodwill                            |  |                | 5,325  |  
|                                    |  |                |       
|                                    |  |                | 27,585 |  
|Liabilities assumed                 |  |                | (7,564 | )
|                                    |  |                |       
|                                    |  | $              | 20,021 |  
|                                    |  |                |       









| |                      
| | ---------------------
| | Valuation Methodology





| |                      
| | ---------------------
| | Pro forma Information



63



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##### Table of Contents



Electronics for Imaging, Inc.


Notes to Consolidated Financial
Statements  (Continued)






|                                    |  |                           |         |  |      |   |         | 
|----------------------------------- |  | ------------------------- | ------- |  | ---- | - | ------- | 
|                                    |  | Year Ended December 31,   |        
|                                    |  |                           |        
|                                    |  | 2004                      |         |  | 2003 |  
|                                    |  |                           |         |  |      |  
|                                    |  | (In thousands, except per |        
|                                    |  | share data)               |        
|Revenue                             |  | $                         | 396,686 |  |      | $ | 426,082 | 
|                                    |  |                           |         |  |      |  
|Net income (loss)                   |  | $                         | 39,274  |  |      | $ | 25,433  | 
|                                    |  |                           |         |  |      |  
|Net income per basic common share   |  | $                         | 0.73    |  |      | $ | 0.47    | 
|                                    |  |                           |         |  |      |  
|Net income per diluted common share |  | $                         | 0.66    |  |      | $ | 0.42    | 
|                                    |  |                           |         |  |      |  



|        |                         
|------- | ------------------------
|Note 4: | Balance Sheet Components

|                                |                                                |                |        |         |      |   |        |         |  
|------------------------------- | ---------------------------------------------- | -------------- | ------ | ------- | ---- | - | ------ | ------- | -
|                                |                                                | December 31,   |       
|                                |                                                |                |       
|                                |                                                | 2004           |        |         | 2003 |  
|                                |                                                |                |        |         |      |  
|                                |                                                | (In thousands) |       
|Accounts receivable, net:       |                                                |                |        |         |      |   |        |        
|                                | Accounts receivable                            |                | $      | 44,214  |      |   | $      | 57,211  |  
|                                | Less allowances                                |                |        | (3,086  | )    |   |        | (3,894  | )
|                                |                                                |                |        |         |      |  
|                                |                                                | $              | 41,128 |         |      | $ | 53,317 |        
|                                |                                                |                |        |         |      |  
|Inventories, net of allowances: |                                                |                |        |         |      |   |        |        
|                                | Raw materials                                  |                | $      | 3,475   |      |   | $      | 5,542   |  
|                                | Finished goods                                 |                |        | 2,054   |      |   |        | 2,447   |  
|                                |                                                |                |        |         |      |  
|                                |                                                | $              | 5,529  |         |      | $ | 7,989  |        
|                                |                                                |                |        |         |      |  
|Other current assets:           |                                                |                |        |         |      |   |        |        
|                                | Deferred income taxes, current portion         |                | $      | 16,666  |      |   | $      | 23,725  |  
|                                | Receivable from subcontract manufacturers      |                |        | 1,377   |      |   |        | 938     |  
|                                | Other                                          |                |        | 4,114   |      |   |        | 4,055   |  
|                                |                                                |                |        |         |      |  
|                                |                                                | $              | 22,157 |         |      | $ | 28,718 |        
|                                |                                                |                |        |         |      |  
|Property and equipment, net:    |                                                |                |        |         |      |   |        |        
|                                | Land, building and improvements                |                | $      | 37,018  |      |   | $      | 38,857  |  
|                                | Equipment and purchased software               |                |        | 42,767  |      |   |        | 45,733  |  
|                                | Furniture and leasehold improvements           |                |        | 14,231  |      |   |        | 13,994  |  
|                                |                                                |                |        |         |      |  
|                                |                                                |                | 94,016 |         |      |   | 98,584 |        
|                                | Less accumulated depreciation and amortization |                |        | (49,692 | )    |   |        | (49,490 | )
|                                |                                                |                |        |         |      |  
|                                |                                                | $              | 44,324 |         |      | $ | 49,094 |        
|                                |                                                |                |        |         |      |  

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Electronics for Imaging, Inc.


Notes to Consolidated Financial
Statements  (Continued)


|                               |                                            |                |        |        |      |   |        |        | 
|------------------------------ | ------------------------------------------ | -------------- | ------ | ------ | ---- | - | ------ | ------ | 
|                               |                                            | December 31,   |       
|                               |                                            |                |       
|                               |                                            | 2004           |        |        | 2003 |  
|                               |                                            |                |        |        |      |  
|                               |                                            | (In thousands) |       
|Other assets:                  |                                            |                |        |        |      |   |        |       
|                               | Deferred income taxes, non-current portion |                | $      | 35,184 |      |   | $      | 12,788 | 
|                               | Debt issuance costs                        |                |        | 4,726  |      |   |        | 5,953  | 
|                               | Other                                      |                |        | 2,080  |      |   |        | 743    | 
|                               |                                            |                |        |        |      |  
|                               |                                            | $              | 41,990 |        |      | $ | 19,484 |       
|                               |                                            |                |        |        |      |  
|Accrued and other liabilities: |                                            |                |        |        |      |   |        |       
|                               | Accrued compensation and benefits          |                | $      | 18,089 |      |   | $      | 18,993 | 
|                               | Deferred revenue                           |                |        | 16,113 |      |   |        | 14,070 | 
|                               | Warranty provision                         |                |        | 1,838  |      |   |        | 2,103  | 
|                               | Accrued royalty payments                   |                |        | 6,347  |      |   |        | 7,916  | 
|                               | Other accrued liabilities                  |                |        | 19,832 |      |   |        | 24,304 | 
|                               |                                            |                |        |        |      |  
|                               |                                            | $              | 62,219 |        |      | $ | 67,386 |       
|                               |                                            |                |        |        |      |  



|        |                                     
|------- | ------------------------------------
|Note 5: | Goodwill and Other Intangible Assets

|                                    |  |          |         |                   |          |   |                   |              |  |     |          |   |       |          |        |  |              |     |        |          |  |   |         |   |  |   |        | 
|----------------------------------- |  | -------- | ------- | ----------------- | -------- | - | ----------------- | ------------ |  | --- | -------- | - | ----- | -------- | ------ |  | ------------ | --- | ------ | -------- |  | - | ------- | - |  | - | ------ | 
|                                    |  |          |         | December 31, 2004 |          |   | December 31, 2003 |             
|                                    |  |          |         |                   |          |   |                   |             
|                                    |  | Weighted |         |                   | Gross    |   |                   |              |  | Net |          |   | Gross |          |        |  |              | Net |       
|                                    |  | Average  |         |                   | Carrying |   |                   | Accumulated  |  |     | Carrying |   |       | Carrying |        |  | Accumulated  |     |        | Carrying | 
|                                    |  | Life     |         |                   | Amount   |   |                   | Amortization |  |     | Amount   |   |       | Amount   |        |  | Amortization |     |        | Amount   | 
|                                    |  |          |         |                   |          |   |                   |              |  |     |          |   |       |          |        |  |              |     |        |          | 
|                                    |  |          |         | (In thousands)    |         
|Goodwill                            |  |          |         |                   |          | $ | 73,768            |              |  |     |         |   |       | $        | 73,768 |  |              | $   | 67,166 |          |  |   |        |   |  | $ | 67,166 | 
|                                    |  |          |         |                   |          |   |                   |              |  |     |          |   |       |          |        |  |              |     |        |          | 
|Acquired technology                 |  |          | 5.8 yrs |                   |          | $ | 37,971            |              |  | $   | (17,465  | ) |       | $        | 20,506 |  |              | $   | 36,281 |          |  | $ | (10,472 | ) |  | $ | 25,809 | 
|Patents, trademarks and trade names |  |          | 5.1 yrs |                   |          |   | 10,708            |              |  |     | (6,647   | ) |       |          | 4,061  |  |              |     | 11,186 |          |  |   | (4,780  | ) |  |   | 6,406  | 
|Other intangible assets             |  |          | 4.5 yrs |                   |          |   | 20,965            |              |  |     | (4,690   | ) |       |          | 16,275 |  |              |     | 19,525 |          |  |   | (708    | ) |  |   | 18,817 | 
|                                    |  |          |         |                   |          |   |                   |              |  |     |          |   |       |          |        |  |              |     |        |          | 
|Amortizable intangible assets       |  |          | 5.4 yrs |                   |          | $ | 69,644            |              |  | $   | (28,802  | ) |       | $        | 40,842 |  |              | $   | 66,992 |          |  | $ | (15,960 | ) |  | $ | 51,032 | 
|                                    |  |          |         |                   |          |   |                   |              |  |     |          |   |       |          |        |  |              |     |        |          | 



|                    |  |                |        | 
|------------------- |  | -------------- | ------ | 
|                    |  | (In thousands) |       
|2005                |  | $              | 12,862 | 
|2006                |  |                | 12,495 | 
|2007                |  |                | 9,475  | 
|2008                |  |                | 3,873  | 
|2009 and thereafter |  |                | 2,137  | 

65



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Electronics for Imaging, Inc.


Notes to Consolidated Financial
Statements  (Continued)


Goodwill and Other Intangible Assets


|                                   |  |                |        |     
|---------------------------------- |  | -------------- | ------ | ----
|                                   |  | (In thousands) |       
|Beginning balance, January 1, 2003 |  | $              | 43,552 |     
|Additions                          |  |                | 23,560 | (1) 
|Impairments                        |  |                |       |     
|Other                              |  |                | 54     | (2) 
|                                   |  |                |       
|Ending Balance, December 31, 2003  |  | $              | 67,166 |     
|                                   |  |                |       
|Additions                          |  |                | 8,613  | (3) 
|Impairments                        |  |                |       |     
|Other                              |  |                | (2,011 | )(4)
|                                   |  |                |       
|Ending Balance, December 31, 2004  |  | $              | 73,768 |     
|                                   |  |                |       






|    |                                                                                                                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The additions to goodwill include $5.3 million for Best
    GmbH, $12.5 million for Printcafe and $5.3 million for
    T/ R Systems and $0.4 million for Unimobile.                                                                                                 
|   
|(2) | Translation adjustments on the Best GmbH balance of
    $0.6 million and an adjustment to tax accruals related to
    the 2000 Splash acquisition of $0.5 million are included in
    the Other line.                                                               
|   
|(3) | The additions to goodwill include $8.6 million for ADS
    Technology                                                                                                                                                                                               
|   
|(4) | Included in the Other line are translation adjustments on the
    Best GmbH balance of $0.5 million, an adjustment to tax
    accruals related to the 2000 Splash acquisition of
    ($2.3 million), and adjustments to our 2003 acquisitions of
    ($0.2 million).

Note 6: Short-term and Restricted Short-term
Investments






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Electronics for Imaging, Inc.


Notes to Consolidated Financial
Statements  (Continued)




|                                                       |  |           |         |                |            |   |       |            |  |   |            |   |  |   |         |  
|------------------------------------------------------ |  | --------- | ------- | -------------- | ---------- | - | ----- | ---------- |  | - | ---------- | - |  | - | ------- | -
|                                                       |  |           |         | Gross          |            |   | Gross |            |  |  
|                                                       |  | Amortized |         |                | Unrealized |   |       | Unrealized |  |   |           
|                                                       |  | Cost      |         |                | Gains      |   |       | Losses     |  |   | Fair Value |  
|                                                       |  |           |         |                |            |   |       |            |  |   |            |  
|                                                       |  |           |         | (In thousands) |            |   |      
|December 31, 2004                                      |  |           |         |                |            |   |       |            |  |   |            |   |  |   |         |  
|Municipal Securities                                   |  | $         | 28,509  |                |            | $ | 13    |            |  | $ | (151       | ) |  | $ | 28,371  |  
|U.S. Government Securities                             |  |           | 168,789 |                |            |   |      |            |  |   | (1,121     | ) |  |   | 167,668 |  
|Corporate Securities                                   |  |           | 310,574 |                |            |   |      |            |  |   | (3,376     | ) |  |   | 307,198 |  
|                                                       |  |           |         |                |            |   |       |            |  |   |            |  
|Total short-term investments                           |  | $         | 507,872 |                |            | $ | 13    |            |  | $ | (4,648     | ) |  | $ | 503,237 |  
|                                                       |  |           |         |                |            |   |       |            |  |   |            |  
|December 31, 2003                                      |  |           |         |                |            |   |       |            |  |   |            |   |  |   |         |  
|Municipal Securities                                   |  | $         | 128,552 |                |            | $ | 478   |            |  | $ | (7         | ) |  | $ | 129,023 |  
|U.S. Government Securities                             |  |           | 245,343 |                |            |   | 6     |            |  |   | (642       | ) |  |   | 244,707 |  
|Corporate Securities                                   |  |           | 196,925 |                |            |   | 7     |            |  |   | (119       | ) |  |   | 196,813 |  
|                                                       |  |           |         |                |            |   |       |            |  |   |            |  
|Total short-term and restricted short-term investments |  |           | 570,820 |                |            |   | 491   |            |  |   | (768       | ) |  |   | 570,543 |  
|Less: Restricted short-term investments                |  |           | (59,589 | )              |            |   | (5    | )          |  |   |           |   |  |   | (59,594 | )
|                                                       |  |           |         |                |            |   |       |            |  |   |            |  
|Total short-term investments                           |  | $         | 511,231 |                |            | $ | 486   |            |  | $ | (768       | ) |  | $ | 510,949 |  
|                                                       |  |           |         |                |            |   |       |            |  |   |            |  



|                             |  |                |         |  |            |   |         | 
|---------------------------- |  | -------------- | ------- |  | ---------- | - | ------- | 
|                             |  | Amortized      |         |  |           
|                             |  | Cost           |         |  | Fair Value |  
|                             |  |                |         |  |            |  
|                             |  | (In thousands) |        
|Less than one year           |  | $              | 15,053  |  |            | $ | 15,042  | 
|Due in 1-2 years             |  |                | 175,572 |  |            |   | 174,672 | 
|Due in 2-3 years             |  |                | 317,247 |  |            |   | 313,523 | 
|                             |  |                |         |  |            |  
|Total short-term investments |  | $              | 507,872 |  |            | $ | 503,237 | 
|                             |  |                |         |  |            |  



|                             |       |                |         |            |        |   |        |        |  
|---------------------------- | ----- | -------------- | ------- | ---------- | ------ | - | ------ | ------ | -
|                             |       |                |         | Unrealized |       
|                             |       | Fair Value     |         |            | Losses |  
|                             |       |                |         |            |        |  
|                             |       | (In thousands) |        
|Municipal Securities         |       | $              | 12,778  |            |        | $ | (119   | )     
|U.S. Governmental Securities |       |                | 94,119  |            |        |   | (776   | )     
|Corporate Securities         |       |                | 221,191 |            |        |   | (2,352 | )     
|                             |       |                |         |            |        |  
|                             | Total |                | $       | 328,088    |        |   | $      | (3,247 | )
|                             |       |                |         |            |        |  

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Electronics for Imaging, Inc.


Notes to Consolidated Financial
Statements  (Continued)




|                             |       |                |        |            |        |   |      |        |  
|---------------------------- | ----- | -------------- | ------ | ---------- | ------ | - | ---- | ------ | -
|                             |       |                |        | Unrealized |       
|                             |       | Fair Value     |        |            | Losses |  
|                             |       |                |        |            |        |  
|                             |       | (In thousands) |       
|Municipal Securities         |       | $              | 10,767 |            |        | $ | (66  | )     
|U.S. Governmental Securities |       |                | 87,623 |            |        |   | (545 | )     
|Corporate Securities         |       |                | 71,307 |            |        |   | (817 | )     
|                             |       |                |        |            |        |  
|                             | Total |                | $      | 169,697    |        |   | $    | (1,428 | )
|                             |       |                |        |            |        |  



|        |               
|------- | --------------
|Note 7: | Long-Term Debt



|                                                                                                                |  |                |         |  |              |   |         | 
|--------------------------------------------------------------------------------------------------------------- |  | -------------- | ------- |  | ------------ | - | ------- | 
|                                                                                                                |  | December 31,   |         |  | December 31, |  
|                                                                                                                |  | 2004           |         |  | 2003         |  
|                                                                                                                |  |                |         |  |              |  
|                                                                                                                |  | (In thousands) |        
|1.50% convertible debentures due June 1, 2023, with
    interest payable semi-annually on June 1 and December 1 |  | $              | 240,000 |  |              | $ | 240,000 | 
|Bonds due to City of Foster City, variable interest rate,
    interest and principal payments due semi-annually |  |                |        |  |              |   | 236     | 
|                                                                                                                |  |                |         |  |              |  
|                                                                                                                |  | $              | 240,000 |  |              | $ | 240,236 | 
|                                                                                                                |  |                |         |  |              |  

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Electronics for Imaging, Inc.


Notes to Consolidated Financial
Statements  (Continued)




|        |                              
|------- | -----------------------------
|Note 8: | Commitments and Contingencies



| |       
| | ------
| | Leases



| |                                                              
| | -------------------------------------------------------------
| | Off-Balance Sheet Financing  Synthetic Lease
    Arrangement









Consolidation of Variable Interest Entities, as
revised




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Electronics for Imaging, Inc.


Notes to Consolidated Financial
Statements  (Continued)




|                    |  |                |        | 
|------------------- |  | -------------- | ------ | 
|Fiscal Year         |  |               
|                    |  |               
|                    |  | (In thousands) |       
|2005                |  | $              | 8,184  | 
|2006                |  |                | 7,887  | 
|2007                |  |                | 7,482  | 
|2008                |  |                | 6,331  | 
|2009                |  |                | 5,976  | 
|2010 and thereafter |  |                | 22,869 | 
|                    |  |                |       
|Total               |  | $              | 58,729 | 
|                    |  |                |       







| |                     
| | --------------------
| | Purchase Commitments





| |                                  
| | ---------------------------------
| | Guarantees and Product Warranties

Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others




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Electronics for Imaging, Inc.


Notes to Consolidated Financial
Statements  (Continued)




|                                       |  |                |        |  
|-------------------------------------- |  | -------------- | ------ | -
|                                       |  | (In thousands) |       
|Balance at December 31, 2002           |  | $              | 2,515  |  
|Provision for warranty during the year |  |                | 1,493  |  
|Settlements                            |  |                | (1,905 | )
|                                       |  |                |       
|Balance at December 31, 2003           |  | $              | 2,103  |  
|Provision for warranty during the year |  |                | 1,742  |  
|Settlements                            |  |                | (2,007 | )
|                                       |  |                |       
|Balance at December 31, 2004           |  | $              | 1,838  |  
|                                       |  |                |       







| |                  
| | -----------------
| | Legal Proceedings



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Electronics for Imaging, Inc.


Notes to Consolidated Financial
Statements  (Continued)














|        |                                 
|------- | --------------------------------
|Note 9: | Common Stock Repurchase Programs





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Electronics for Imaging, Inc.


Notes to Consolidated Financial
Statements  (Continued)










|         |             
|-------- | ------------
|Note 10: | Income Taxes



|        |       |                          |        |        |      |   |        |        |  |   |        |        | 
|------- | ----- | ------------------------ | ------ | ------ | ---- | - | ------ | ------ |  | - | ------ | ------ | 
|        |       | Years Ended December 31, |       
|        |       |                          |       
|        |       | 2004                     |        |        | 2003 |   |        | 2002   | 
|        |       |                          |        |        |      |   |        |        | 
|        |       | (In thousands)           |       
|U.S.    |       | $                        | 8,080  |        |      | $ | 21,648 |        |  | $ | 7,222  |       
|Foreign |       |                          | 16,148 |        |      |   | 19,680 |        |  |   | 15,589 |       
|        |       |                          |        |        |      |   |        |        | 
|        | Total |                          |        | 24,228 |      |   |        | 41,328 |  |   |        | 22,811 | 
|        |       |                          |        |        |      |   |        |        | 



|                                           |                |                          |        |       |      |   |         |         |   |   |        |        |  
|------------------------------------------ | -------------- | ------------------------ | ------ | ----- | ---- | - | ------- | ------- | - | - | ------ | ------ | -
|                                           |                | Years Ended December 31, |       
|                                           |                |                          |       
|                                           |                | 2004                     |        |       | 2003 |   |         | 2002    |  
|                                           |                |                          |        |       |      |   |         |         |  
|                                           |                | (In thousands)           |       
|Current:                                   |                |                          |        |       |      |   |         |         |   |   |        |       
|U.S. Federal                               |                | $                        | 8,233  |       |      | $ | (10,120 | )       |   | $ | (907   | )     
|State                                      |                |                          | 1,454  |       |      |   | (1,447  | )       |   |   | (157   | )     
|Foreign                                    |                |                          | (1,224 | )     |      |   | (1,490  | )       |   |   | (2,690 | )     
|                                           |                |                          |        |       |      |   |         |         |  
|                                           | Total current  |                          |        | 8,463 |      |   |         | (13,057 | ) |   |        | (3,754 | )
|                                           |                |                          |        |       |      |   |         |         |  
|Deferred:                                  |                |                          |        |       |      |   |         |         |   |   |        |       
|U.S. Federal                               |                |                          | 4,946  |       |      |   | (3,536  | )       |   |   | (4,116 | )     
|State                                      |                |                          | (241   | )     |      |   | 1,734   |         |   |   | 976    |       
|Foreign                                    |                |                          | 623    |       |      |   | 39      |         |   |   | 51     |       
|                                           |                |                          |        |       |      |   |         |         |  
|                                           | Total deferred |                          |        | 5,328 |      |   |         | (1,763  | ) |   |        | (3,089 | )
|                                           |                |                          |        |       |      |   |         |         |  
|Total provision (benefit) for income taxes |                | $                        | 13,791 |       |      | $ | (14,820 | )       |   | $ | (6,843 | )     
|                                           |                |                          |        |       |      |   |         |         |  

73



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Electronics for Imaging, Inc.


Notes to Consolidated Financial
Statements  (Continued)




|                                            |  |                |         |   |      |   |         |  
|------------------------------------------- |  | -------------- | ------- | - | ---- | - | ------- | -
|                                            |  | December 31,   |        
|                                            |  |                |        
|                                            |  | 2004           |         |   | 2003 |  
|                                            |  |                |         |   |      |  
|                                            |  | (In thousands) |        
|Depreciation                                |  | $              | (2,239  | ) |      | $ | (5,193  | )
|Amortization of intangibles                 |  |                | (4,847  | ) |      |   | (6,614  | )
|Convertible debt                            |  |                | (9,055  | ) |      |   | (3,352  | )
|Unremitted earnings of foreign subsidiaries |  |                |        |   |      |   | (15,668 | )
|                                            |  |                |         |   |      |  
|Gross deferred tax liabilities              |  |                | (16,141 | ) |      |   | (30,827 | )
|                                            |  |                |         |   |      |  
|Inventory allowances                        |  |                | 2,240   |   |      |   | 3,246   |  
|Other allowances and accruals               |  |                | 7,970   |   |      |   | 7,092   |  
|Accrued compensation and benefits           |  |                | 2,952   |   |      |   | 1,727   |  
|Deferred tax on intercompany transactions   |  |                |        |   |      |   | 2,557   |  
|Net operating loss carryforwards            |  |                | 31,384  |   |      |   | 26,989  |  
|Tax credit carryforwards                    |  |                | 21,712  |   |      |   | 20,750  |  
|Deferred revenue                            |  |                | 945     |   |      |   | 4,656   |  
|Other                                       |  |                | 2,740   |   |      |   | 2,275   |  
|                                            |  |                |         |   |      |  
|Gross deferred tax assets                   |  |                | 69,943  |   |      |   | 69,292  |  
|                                            |  |                |         |   |      |  
|Deferred tax valuation allowance            |  |                | (1,952  | ) |      |   | (1,952  | )
|                                            |  |                |         |   |      |  
|Total deferred tax assets, net              |  | $              | 51,850  |   |      | $ | 36,513  |  
|                                            |  |                |         |   |      |  



|                                                             |  |                          |         |   |      |                |       |      |  |   |        |   |  |   |      |   |   |   |        |   |  |  |       |  
|------------------------------------------------------------ |  | ------------------------ | ------- | - | ---- | -------------- | ----- | ---- |  | - | ------ | - |  | - | ---- | - | - | - | ------ | - |  |  | ----- | -
|                                                             |  | Years Ended December 31, |        
|                                                             |  |                          |        
|                                                             |  | 2004                     |         |   | 2003 |                |       | 2002 | 
|                                                             |  |                          |         |   |      |                |       |      | 
|                                                             |  | $                        |         |   | %    |                |       | $    |  |   | %      |   |  | $ |      |   | % |  
|                                                             |  |                          |         |   |      |                |       |      |  |   |        |   |  |   |      |   |   |  
|                                                             |  |                          |         |   |      | (In thousands) |       |      |  |   |       
|Tax expense at federal statutory rate                        |  | $                        | 8,480   |   |      |                | 35.0  |      |  | $ | 14,465 |   |  |   | 35.0 |   |   | $ | 7,983  |   |  |  | 35.0  |  
|State income taxes, net of federal benefit                   |  |                          | 608     |   |      |                | 2.5   |      |  |   | 2,007  |   |  |   | 4.9  |   |   |   | 507    |   |  |  | 2.2   |  
|Tax-exempt interest income                                   |  |                          | (348    | ) |      |                | (1.4  | )    |  |   | (1,772 | ) |  |   | (4.3 | ) |   |   | (2,927 | ) |  |  | (12.8 | )
|Research and development credits                             |  |                          | (4,076  | ) |      |                | (16.8 | )    |  |   | (3,341 | ) |  |   | (8.1 | ) |   |   | (1,066 | ) |  |  | (4.7  | )
|Foreign tax rate differential                                |  |                          | (495    | ) |      |                | (2.0  | )    |  |   | (1,022 | ) |  |   | (2.5 | ) |   |   | 1,992  |   |  |  | 8.7   |  
|In-process technology and amortization of goodwill           |  |                          | 350     |   |      |                | 1.4   |      |  |   | 4,200  |   |  |   | 10.2 |   |   |   |       |   |  |  | 0.0   |  
|Change in Accounting for Foreign Earnings                    |  |                          | (11,077 | ) |      |                | (45.7 | )    |  |   |       |   |  |   | 0.0  |   |   |   |       |   |  |  | 0.0   |  
|Reduction in accrual for estimated potential tax assessments |  |                          | (7,857  | ) |      |                | (32.5 | )    |  |   |       |   |  |   | 0.0  |   |   |   |       |   |  |  | 0.0   |  
|Other                                                        |  |                          | 624     |   |      |                | 2.6   |      |  |   | 283    |   |  |   | 0.7  |   |   |   | 354    |   |  |  | 1.6   |  
|                                                             |  |                          |         |   |      |                |       |      |  |   |        |   |  |   |      |   |   |  
|                                                             |  | $                        | (13,791 | ) |      |                | (56.9 | )    |  | $ | 14,820 |   |  |   | 35.9 |   |   | $ | 6,843  |   |  |  | 30.0  |  



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Electronics for Imaging, Inc.


Notes to Consolidated Financial
Statements  (Continued)














|         |                       
|-------- | ----------------------
|Note 11: | Employee Benefit Plans





| |                   
| | ------------------
| | Stock Option Plans



75



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Electronics for Imaging, Inc.


Notes to Consolidated Financial
Statements  (Continued)




|                                                  |                                           |        |  |          |  |               |           |           | 
|------------------------------------------------- | ----------------------------------------- | ------ |  | -------- |  | ------------- | --------- | --------- | 
|                                                  |                                           |        |  |          |  | Shares       
|                                                  |                                           |        |  |          |  | Available for
|Plan Name                                         |                                           | Status |  | Origin   |  | Distribution 
|                                                  |                                           |        |  |          |  |              
|2004 Equity Incentive Plan                        |                                           | Open   |  | Original |  |               | 3,703,150 |          
|1999 Equity Incentive Plan                        |                                           | Open   |  | Original |  |               | 596,165   |          
|Splash 1996 Stock Option Plan                     |                                           | Open   |  | Assumed  |  |               | 8,812     |          
|Printcafe 2002 Stock Incentive Plan               |                                           | Open   |  | Assumed  |  |               | 8,889     |          
|Printcafe 2002 Key Executive Stock Incentive Plan |                                           | Open   |  | Assumed  |  |               | 54,609    |          
|T/ R Systems                                      |                                           | Open   |  | Assumed  |  |               | 173,173   |          
|1990 Stock Plan                                   |                                           | Closed |  | Original |  |               | n/a       |          
|MGI 1985 Nonqualified Stock Option Plan           |                                           | Closed |  | Assumed  |  |               | n/a       |          
|Prograph 1999 Stock Incentive Plan                |                                           | Closed |  | Assumed  |  |               | n/a       |          
|Printcafe Inc. 2000 Stock Incentive Plan          |                                           | Closed |  | Assumed  |  |               | n/a       |          
|                                                  |                                           |        |  |          |  |               |           |          
|                                                  | Total shares available, December 31, 2004 |        |  |          |  |               |           | 4,544,798 | 
|                                                  |                                           |        |  |          |  |               |           |          



|                                               |  |                          |  |                 |  |              
|---------------------------------------------- |  | ------------------------ |  | --------------- |  | -------------
|                                               |  | Years Ended December 31,
|                                               |  |                         
|Black Scholes Assumptions & Fair Value         |  | 2004                     |  | 2003            |  | 2002         
|                                               |  |                          |  |                 |  |              
|Expected Volatility                            |  | 46.1%  56.9%            |  | 62.4%  68.1%   |  | 69.1%        
|Dividend Yield                                 |  | 0.0%                     |  | 0.0%            |  | 0.0%         
|Risk Free Interest Rate                        |  | 2.25 to 3.40%            |  | 2.0 to 2.75%    |  | 2.16 to 2.99%
|Weighted Average Expected Option Term          |  | 3.6  3.75 years         |  | 3.4  4.0 years |  | 4.0 years    
|Weighted Average Fair Value of Options Granted |  | $12.08                   |  | $11.99          |  | $10.28       



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Electronics for Imaging, Inc.


Notes to Consolidated Financial
Statements  (Continued)




|                                       |  |                          |        |          |       |   |       |        |          |  |        |   |  |          |        |  |       |  |        |   |  |   |       | 
|-------------------------------------- |  | ------------------------ | ------ | -------- | ----- | - | ----- | ------ | -------- |  | ------ | - |  | -------- | ------ |  | ----- |  | ------ | - |  | - | ----- | 
|                                       |  | Years Ended December 31, |       
|                                       |  |                          |       
|                                       |  | 2004                     |        |          | 2003  |   |       | 2002   |         
|                                       |  |                          |        |          |       |   |       |        |         
|                                       |  |                          |        | Average  |       |   |       |        | Average  |  |        |   |  | Average  |       
|                                       |  |                          |        | Exercise |       |   |       |        | Exercise |  |        |   |  | Exercise |       
|                                       |  | Shares                   |        |          | Price |   |       | Shares |          |  | Price  |   |  | Shares   |        |  | Price | 
|                                       |  |                          |        |          |       |   |       |        |          |  |        |   |  |          |        |  |       | 
|                                       |  | (Shares in thousands)    |       
|Options outstanding, beginning of year |  |                          | 11,487 |          |       | $ | 24.21 |        |          |  | 11,128 |   |  | $        | 21.25  |  |       |  | 9,376  |   |  | $ | 22.96 | 
|Granted                                |  |                          | 344    |          |       |   | 24.09 |        |          |  | 3,269  |   |  |          | 20.48  |  |       |  | 3,172  |   |  |   | 17.06 | 
|Assumed thru acquisitions              |  |                          |       |          |       |   |      |        |          |  | 140    |   |  |          | 189.96 |  |       |  |       |   |  |   |      | 
|Exercised                              |  |                          | (1,384 | )        |       |   | 15.85 |        |          |  | (2,425 | ) |  |          | 15.11  |  |       |  | (414   | ) |  |   | 11.44 | 
|Forfeited                              |  |                          | (700   | )        |       |   | 32.33 |        |          |  | (625   | ) |  |          | 23.61  |  |       |  | (1,006 | ) |  |   | 25.99 | 
|                                       |  |                          |        |          |       |   |       |        |          |  |        |   |  |          |        |  |       | 
|Options outstanding, end of year       |  |                          | 9,747  |          |       | $ | 24.81 |        |          |  | 11,487 |   |  | $        | 24.21  |  |       |  | 11,128 |   |  | $ | 21.25 | 
|                                       |  |                          |        |          |       |   |       |        |          |  |        |   |  |          |        |  |       | 
|Options exercisable, end of year       |  |                          | 7,212  |          |       | $ | 26.20 |        |          |  | 6,693  |   |  | $        | 27.06  |  |       |  | 7,122  |   |  | $ | 23.75 | 
|                                       |  |                          |        |          |       |   |       |        |          |  |        |   |  |          |        |  |       | 



|                         |  |                     |       |                       |                     |  |      |                |  |   |             |  |  |                |       |  |  |   |         | 
|------------------------ |  | ------------------- | ----- | --------------------- | ------------------- |  | ---- | -------------- |  | - | ----------- |  |  | -------------- | ----- |  |  | - | ------- | 
|                         |  | Options Outstanding |       |                       | Options Exercisable | 
|                         |  |                     |       |                       |                     | 
|                         |  | Number              |       |                       | Weighted Avg.       |  |      | Weighted Avg.  |  |   | Number      |  |  | Weighted Avg.  |      
|Range of Exercise Prices |  | Outstanding         |       |                       | Remaining Life      |  |      | Exercise Price |  |   | Exercisable |  |  | Exercise Price |      
|                         |  |                     |       |                       |                     |  |      |                |  |   |             |  |  |                |      
|                         |  |                     |       | (Shares in thousands) |                     |  |     
|$9.96 to $13.75          |  |                     | 1,057 |                       |                     |  | 5.64 |                |  | $ | 12.8889     |  |  |                | 1,047 |  |  | $ | 12.8822 | 
|$13.81 to $16.57         |  |                     | 477   |                       |                     |  | 5.68 |                |  |   | 15.5737     |  |  |                | 342   |  |  |   | 15.4628 | 
|$16.60 to $17.15         |  |                     | 1,268 |                       |                     |  | 7.33 |                |  |   | 17.1427     |  |  |                | 1,046 |  |  |   | 17.1500 | 
|$17.33 to $17.50         |  |                     | 238   |                       |                     |  | 7.29 |                |  |   | 17.4914     |  |  |                | 203   |  |  |   | 17.4994 | 
|$17.52 to $19.45         |  |                     | 2,207 |                       |                     |  | 5.76 |                |  |   | 19.4129     |  |  |                | 793   |  |  |   | 19.4075 | 
|$19.50 to $22.32         |  |                     | 1,211 |                       |                     |  | 5.82 |                |  |   | 21.8022     |  |  |                | 1,126 |  |  |   | 21.9161 | 
|$22.37 to $26.59         |  |                     | 1,055 |                       |                     |  | 5.12 |                |  |   | 25.1147     |  |  |                | 560   |  |  |   | 24.9243 | 
|$26.63 to $27.74         |  |                     | 158   |                       |                     |  | 6.13 |                |  |   | 27.3455     |  |  |                | 40    |  |  |   | 27.4215 | 
|$27.75 to 33.82          |  |                     | 1,111 |                       |                     |  | 4.15 |                |  |   | 33.6415     |  |  |                | 1,099 |  |  |   | 33.6990 | 
|$34.37 to $7,467.09      |  |                     | 965   |                       |                     |  | 3.69 |                |  |   | 59.5003     |  |  |                | 956   |  |  |   | 59.1389 | 
|                         |  |                     |       |                       |                     |  |      |                |  |   |             |  |  |                |      
|$9.96 to $7,467.09       |  |                     | 9,747 |                       |                     |  | 5.54 |                |  | $ | 24.8080     |  |  |                | 7,212 |  |  | $ | 26.2006 | 
|                         |  |                     |       |                       |                     |  |      |                |  |   |             |  |  |                |      



| |                        
| | -----------------------
| | Restricted Stock Grants



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Electronics for Imaging, Inc.


Notes to Consolidated Financial
Statements  (Continued)




| |                             
| | ----------------------------
| | Employee Stock Purchase Plan





| |                     
| | --------------------
| | Employee 401(k) Plan





|         |                                                                 
|-------- | ----------------------------------------------------------------
|Note 12: | Information Concerning Business Segments and Major
    Customers



| |                                        
| | ---------------------------------------
| | Information about Products and Services

Disclosures About Segments of
an Enterprise and Related Information,




|                                   |  |                          |         |  |      |   |         |      |  |   |         | 
|---------------------------------- |  | ------------------------ | ------- |  | ---- | - | ------- | ---- |  | - | ------- | 
|                                   |  | Years Ended December 31, |        
|                                   |  |                          |        
|                                   |  | 2004                     |         |  | 2003 |   |         | 2002 | 
|                                   |  |                          |         |  |      |   |         |      | 
|                                   |  | (In thousands)           |        
|Servers                            |  | $                        | 170,943 |  |      | $ | 178,948 |      |  | $ | 185,806 | 
|Embedded Products                  |  |                          | 121,890 |  |      |   | 139,936 |      |  |   | 122,408 | 
|Professional Printing Applications |  |                          | 68,484  |  |      |   | 21,782  |      |  |   | 3,970   | 
|Miscellaneous                      |  |                          | 33,287  |  |      |   | 38,921  |      |  |   | 38,001  | 
|                                   |  |                          |         |  |      |   |         |      | 
|Total Revenue                      |  | $                        | 394,604 |  |      | $ | 379,587 |      |  | $ | 350,185 | 
|                                   |  |                          |         |  |      |   |         |      | 

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Electronics for Imaging, Inc.


Notes to Consolidated Financial
Statements  (Continued)




| |                                   
| | ----------------------------------
| | Information about Geographic Areas





|              |  |                          |         |  |      |   |         |      |  |   |         | 
|------------- |  | ------------------------ | ------- |  | ---- | - | ------- | ---- |  | - | ------- | 
|              |  | Years Ended December 31, |        
|              |  |                          |        
|              |  | 2004                     |         |  | 2003 |   |         | 2002 | 
|              |  |                          |         |  |      |   |         |      | 
|              |  | (In thousands)           |        
|North America |  | $                        | 217,069 |  |      | $ | 192,326 |      |  | $ | 184,891 | 
|Europe        |  |                          | 105,168 |  |      |   | 113,914 |      |  |   | 108,978 | 
|Japan         |  |                          | 56,799  |  |      |   | 57,231  |      |  |   | 38,541  | 
|Rest of World |  |                          | 15,568  |  |      |   | 16,116  |      |  |   | 17,775  | 
|              |  |                          |         |  |      |   |         |      | 
|Total Revenue |  | $                        | 394,604 |  |      | $ | 379,587 |      |  | $ | 350,185 | 
|              |  |                          |         |  |      |   |         |      | 



|                       |  |                |        |  |      |   |        | 
|---------------------- |  | -------------- | ------ |  | ---- | - | ------ | 
|                       |  | December 31,   |       
|                       |  |                |       
|                       |  | 2004           |        |  | 2003 |  
|                       |  |                |        |  |      |  
|                       |  | (In thousands) |       
|Goodwill               |  | $              | 6,882  |  |      | $ | 6,349  | 
|Intangible Assets, net |  |                | 4,541  |  |      |   | 5,107  | 
|                       |  |                |        |  |      |  
|                       |  | $              | 11,423 |  |      | $ | 11,456 | 



| |                                  
| | ---------------------------------
| | Information about Major Customers



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Electronics for Imaging, Inc.


Notes to Consolidated Financial
Statements  (Continued)




|         |                                                       
|-------- | ------------------------------------------------------
|Note 13: | Unaudited Quarterly Consolidated Financial Information



|                                            |  |                                       |         |   |    |   |         |    |  |   |         |   |  |   |        |  
|------------------------------------------- |  | ------------------------------------- | ------- | - | -- | - | ------- | -- |  | - | ------- | - |  | - | ------ | -
|2004:                                       |  | Q1                                    |         |   | Q2 |   |         | Q3 |  |   | Q4      |  
|                                            |  |                                       |         |   |    |   |         |    |  |   |         |  
|                                            |  | (In thousands, except per share data) |        
|Revenue                                     |  | $                                     | 106,682 |   |    | $ | 109,107 |    |  | $ | 97,586  |   |  | $ | 81,229 |  
|Gross profit                                |  |                                       | 68,562  |   |    |   | 71,050  |    |  |   | 63,597  |   |  |   | 53,013 |  
|Income (loss) from operations               |  |                                       | 11,341  |   |    |   | 13,026  |    |  |   | (7,972  | ) |  |   | (2,366 | )
|Net income                                  |  |                                       | 11,009  |   |    |   | 10,138  |    |  |   | 16,059  |   |  |   | 813    |  
|In-process research and development charges |  |                                       | (1,000  | ) |    |   |        |    |  |   |        |   |  |   |       |  
|Gain on sale of assets                      |  |                                       | (2,994  | ) |    |   |        |    |  |   |        |   |  |   |       |  
|Real estate related charges                 |  |                                       |        |   |    |   |        |    |  |   | (14,394 | ) |  |   |       |  
|Benefit from settlement of IRS audit        |  |                                       |        |   |    |   |        |    |  |   | 18,935  |   |  |   |       |  
|Net income for dilution calculation(1)      |  |                                       | 11,759  |   |    |   | 10,888  |    |  |   | 16,809  |   |  |   | 813    |  
|Net income per basic common share           |  | $                                     | 0.20    |   |    | $ | 0.19    |    |  | $ | 0.30    |   |  | $ | 0.02   |  
|Net income per diluted common share(1)      |  | $                                     | 0.18    |   |    | $ | 0.17    |    |  | $ | 0.27    |   |  | $ | 0.02   |  

|                                            |  |    |        |   |    |   |        |    |  |   |        |  |  |   |         |  
|------------------------------------------- |  | -- | ------ | - | -- | - | ------ | -- |  | - | ------ |  |  | - | ------- | -
|2003:                                       |  | Q1 |        |   | Q2 |   |        | Q3 |  |   | Q4     | 
|                                            |  |    |        |   |    |   |        |    |  |   |        | 
|Revenue                                     |  | $  | 85,715 |   |    | $ | 88,689 |    |  | $ | 97,330 |  |  | $ | 107,853 |  
|Gross profit                                |  |    | 49,486 |   |    |   | 53,430 |    |  |   | 59,678 |  |  |   | 68,938  |  
|Income from operations                      |  |    | 4,411  |   |    |   | 8,641  |    |  |   | 14,359 |  |  |   | 4,468   |  
|Net income                                  |  |    | 5,102  |   |    |   | 8,091  |    |  |   | 12,249 |  |  |   | 1,066   |  
|In-process research and development charges |  |    | (1,220 | ) |    |   |       |    |  |   |       |  |  |   | (12,000 | )
|Litigation settlement income                |  |    |       |   |    |   |       |    |  |   | 1,568  |  |  |   | 840     |  
|Net income for dilution calculation(1)      |  |    | 5,102  |   |    |   | 8,316  |    |  |   | 12,999 |  |  |   | 1,066   |  
|Net income per basic common share           |  | $  | 0.09   |   |    | $ | 0.15   |    |  | $ | 0.23   |  |  | $ | 0.02    |  
|Net income per diluted common share(1)      |  | $  | 0.09   |   |    | $ | 0.14   |    |  | $ | 0.21   |  |  | $ | 0.02    |  






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The quarterly information for 2003 and 2004 have been restated
    to reflect the dilutive effect of the 9,084,192 shares of
    common stock related to the 1.50% senior convertible
    debentures issued in the second quarter of 2003. Net income for
    dilution was calculated by adding back the after-tax effect of
    interest and other debt-related expense for each period. In the
    fourth quarter of 2003 and 2004 the shares were anti-dilutive,
    and were excluded from the calculation.

80



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|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9: | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure








|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures



| |                                                     
| | ----------------------------------------------------
| | Evaluation of Disclosure Controls and
    Procedures







| |                                                                     
| | --------------------------------------------------------------------
| | Managements Report on Internal Control over
    Financial Reporting













| |                                                         
| | --------------------------------------------------------
| | Changes in Internal Control over Financial
    Reporting



81



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##### Table of Contents






PART III







|         |                                                   
|-------- | --------------------------------------------------
|Item 10: | Directors and Executive Officers of the Registrant

Election of Directors Executive
Officers Section 16 (a) Beneficial Ownership Reporting
Compliance Committees of the Board of Directors Committees of the Board of
Directors Committees of
the Board of Directors







|         |                       
|-------- | ----------------------
|Item 11: | Executive Compensation

Executive Compensation







|         |                                                                                                    
|-------- | ---------------------------------------------------------------------------------------------------
|Item 12: | Security Ownership of Certain Beneficial Owners and
    Management and Related Stockholder Matters.

Security Ownership






|                                                       |  |                      |           |                  |              |   |       |                                    |  |  |           | 
|------------------------------------------------------ |  | -------------------- | --------- | ---------------- | ------------ | - | ----- | ---------------------------------- |  |  | --------- | 
|                                                       |  |                      |           | Weighted-        |              |   |      
|                                                       |  |                      |           | Average Exercise |              |   |      
|                                                       |  | Number of Securities |           |                  | Price of     |   |       | Number of Securities Remaining     | 
|                                                       |  | to be Issued upon    |           |                  | Outstanding  |   |       | Available for Future Issuance      | 
|                                                       |  | Exercise of          |           |                  | Options,     |   |       | under Equity Compensation Plans    | 
|                                                       |  | Outstanding Options, |           |                  | Warrants and |   |       | (Excluding Securities Reflected in | 
|Plan Category                                          |  | Warrants and Rights  |           |                  | Rights       |   |       | Column 1)                          | 
|                                                       |  |                      |           |                  |              |   |       |                                    | 
|Equity compensation plans approved by stockholders     |  |                      | 9,737,177 |                  |              | $ | 23.77 |                                    |  |  | 4,544,798 | 
|Equity compensation plans not approved by stockholders |  |                      |          |                  |              |   |      |                                    |  |  |          | 
|                                                       |  |                      |           |                  |              |   |       |                                    | 
|TOTAL                                                  |  |                      | 9,737,177 |                  |              | $ | 23.77 |                                    |  |  | 4,544,798 | 
|                                                       |  |                      |           |                  |              |   |       |                                    | 








|         |                                               
|-------- | ----------------------------------------------
|Item 13: | Certain Relationships and Related Transactions

Related Transactions


82



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##### Table of Contents








|         |                                       
|-------- | --------------------------------------
|Item 14: | Principal Accountant Fees and Services

Principal Accountant Fees and Services





PART IV







|         |                                                                      
|-------- | ---------------------------------------------------------------------
|Item 15: | Exhibits, Financial Statement Schedules and Reports on
    Form 10-K.

(a) Documents Filed as Part of this Report


Index to Financial Statements




|                                                                                                |  |      |    | 
|----------------------------------------------------------------------------------------------- |  | ---- | -- | 
|Index to Financial Statements                                                                   |  | Page
|                                                                                                |  |     
|Report of Independent Independent Registered Public Accounting
    Firm                         |  |      | 46 | 
|Consolidated Balance Sheets at December 31, 2004 and 2003                                       |  |      | 48 | 
|Consolidated Statements of Income for the three years ended
    December 31, 2004               |  |      | 49 | 
|Consolidated Statements of Stockholders Equity for the
    three years ended December 31, 2004 |  |      | 50 | 
|Consolidated Statements of Cash Flows for the three years ended
    December 31, 2004           |  |      | 51 | 
|Notes to Consolidated Financial Statements                                                      |  |      | 52 | 

Financial Statement Schedule






| |                                                                                                                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (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 report.)

Exhibits


|        |  |                                                                                                                                                                                                                           
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                           
|No.     |  | Description                                                                                                                                                                                                               
|        |  |                                                                                                                                                                                                                           
|2.1     |  | Agreement and Plan of Merger, dated as of August 30, 2000,
    by and among the Company, Vancouver Acquisition Corp. and Splash
    Technology Holdings, Inc.(6)                                                          
|       
|2.2     |  | Amendment No. 1, dated as of October 19, 2000, to the
    Agreement and Plan of Merger, dated as of August 30, 2000,
    by and among the Company, Vancouver Acquisition Corp. and Splash
    Technology Holdings, Inc.(7)
|       
|2.3     |  | Agreement and Plan of Merger and Reorganization, dated as of
    July 14, 1999, among the Company, Redwood Acquisition Corp.
    and Management Graphics, Inc.(4)                                                         
|       
|2.4     |  | Agreement and Plan of Merger, dated as of February 26, 2003
    by and among the Company, Strategic Value Engineering, Inc. and
    Printcafe Software, Inc.(15)                                                          
|       
|3.1     |  | Amended and Restated Certificate of Incorporation(2)                                                                                                                                                                      
|       
|3.2     |  | Bylaws as amended(1)                                                                                                                                                                                                      
|       
|4.2     |  | Specimen Common Stock certificate of the Company(1)                                                                                                                                                                       
|       
|4.3     |  | Indenture dated as of June 4, 2003 between the Company and
    U.S. Bank National Association, as Trustee, relating to
    convertible senior debentures due 2023(8)                                                      
|       
|4.4     |  | Form of Convertible Senior Debenture due 2023 (Exhibit A to
    Indenture filed as Exhibit 4.3 above)(8)                                                                                                                  
|       
|4.5     |  | Registration Rights Agreement, dated as of June 4, 2003,
    among the Company, UBS Warburg LLC, C.E. Unterberg Towbin and
    Morgan Stanley Incorporated(8)                                                             
|       
|10.1+   |  | Agreement dated December 6, 2000, by and between Adobe
    Systems Incorporated and the Company(5)                                                                                                                        

83



---



##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                                                     
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                     
|No.     |  | Description                                                                                                                                                                                                                                                                                                         
|        |  |                                                                                                                                                                                                                                                                                                                     
|       
|10.2    |  | 1990 Stock Plan of the Company(1)                                                                                                                                                                                                                                                                                   
|       
|10.3    |  | Management Graphics, Inc. 1985 Nonqualified Stock Option Plan(17)                                                                                                                                                                                                                                                   
|       
|10.4    |  | The 1999 Equity Incentive Plan as amended(3)                                                                                                                                                                                                                                                                        
|       
|10.5    |  | 2000 Employee Stock Purchase Plan as amended(3)                                                                                                                                                                                                                                                                     
|       
|10.7    |  | Splash Technology Holdings, Inc. 1996 Stock Option Plan as
    amended to date(13)                                                                                                                                                                                                                                  
|       
|10.8    |  | Prographics, Inc. 1999 Stock Option Plan(10)                                                                                                                                                                                                                                                                        
|       
|10.9    |  | Printcafe Software, Inc. 2000 Stock Incentive Plan(10)                                                                                                                                                                                                                                                              
|       
|10.10   |  | Printcafe Software, Inc. 2002 Key Executive Stock Incentive
    Plan(10)                                                                                                                                                                                                                                            
|       
|10.11   |  | Printcafe Software, Inc. 2002 Employee Stock Incentive Plan(10)                                                                                                                                                                                                                                                     
|       
|10.12   |  | T/R Systems, Inc. 1999 Stock Option Plan(11)                                                                                                                                                                                                                                                                        
|       
|10.13   |  | Electronics for Imaging, Inc. 2004 Equity Incentive Plan(12)                                                                                                                                                                                                                                                        
|       
|10.14   |  | Form of Indemnification Agreement(1)                                                                                                                                                                                                                                                                                
|       
|10.15   |  | Employment Agreement dated August 1, 2003, by and between
    Fred Rosenzweig and the Company(9)                                                                                                                                                                                                                    
|       
|10.16   |  | Employment Agreement dated August 1, 2003, by and between
    Joseph Cutts and the Company(9)                                                                                                                                                                                                                       
|       
|10.17   |  | Employment Agreement dated August 1, 2003, by and between
    Guy Gecht and the Company(9)                                                                                                                                                                                                                          
|       
|10.18   |  | Master Lease Financing of Properties Located in Foster City,
    California, dated as of July 16, 2004, among the Company,
    Société Générale Financial Corporation and
    Société Générale(14)                                                                                                                  
|       
|10.19   |  | Amended and Restated Master Lease Financing of Properties
    Located in Foster City, California, dated as of
    September 30, 2004, among the Company, Société
    Générale Financial Corporation and Société
    Générale(16)                                                                                    
|       
|21      |  | List of Subsidiaries                                                                                                                                                                                                                                                                                                
|       
|23.1    |  | Consent of Independent Registerd Public Accounting Firm                                                                                                                                                                                                                                                             
|       
|24.1    |  | Power of Attorney (see signature page)                                                                                                                                                                                                                                                                              
|       
|31.1    |  | Certification of Chief Executive Officer pursuant to
    18 U.S.C. Section 1350 as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                            
|       
|31.2    |  | Certification of Chief Financial Officer pursuant to
    18 U.S.C. Section 1350 as adopted pursuant to
    Section 906 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.








|    |                                                                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Filed as an exhibit to the Companys Registration Statement
    on Form S-1 (No. 33-50966) and incorporated herein by
    reference.                                   
|   
|(2) | Filed as an exhibit to the Companys Registration Statement
    on Form S-1 (File No. 33-57382) and incorporated
    herein by reference.                              
|   
|(3) | Filed as an exhibit to the Companys Registration Statement
    on Form S-8 on June 24, 2003 and incorporated herein
    by reference.                                 
|   
|(4) | Filed as an exhibit to the Companys Report of Unscheduled
    Events on Form 8-K on September 8, 1999 (File No.
    000-18805) and incorporated herein by reference.  
|   
|(5) | 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.
|   
|(6) | Filed as exhibit (d) (1) to the Companys
    Schedule TO-T on September 14, 2000 and incorporated
    herein by reference.                                            

84



---



##### Table of Contents





|    |                                                                                                                                                                              
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(7) | Filed as exhibit (d) (5) to the Companys TO/ A
    Number 3 on October 20, 2000 and incorporated herein
    by reference.                                                   
|   
|(8) | Filed as an exhibit to the Companys Quarterly Report on
    Form 10Q for the quarter ended June 30, 2003 (File
    No. 000-18805) and incorporated herein by reference.     
|   
|(9) | Filed as an exhibit to the Companys Quarterly Report on
    Form 10Q for the quarter ended September 30, 2003
    (File No. 000-18805) and incorporated herein by reference.



|     |                                                                                                                                                                          
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Filed as an exhibit to Printcafe Software, Inc.s
    Registration Statement on Form S-1 (File
    No. 333-82646) and incorporated herein by reference.                  
|    
|(11) | Filed as an exhibit to T/ R Systems, Inc.s Registration
    Statement on Form S-1 (File No. 333-82646) and
    incorporated herein by reference.                        
|    
|(12) | Filed as an exhibit to the Companys Registration Statement
    on Form S-8 on June 16, 2004 and incorporated herein
    by reference.                                   
|    
|(13) | Filed as an exhibit to the Companys Quarterly Report on
    Form 10Q for the quarter ended March 31, 2004 (File
    No. 000-18805) and incorporated herein by reference.
|    
|(14) | Filed as an exhibit to the Companys Quarterly Report on
    Form 10Q for the quarter ended June 30, 2004 (File
    No. 000-18805) and incorporated herein by reference. 
|    
|(15) | Filed as exhibit 10 to Amendment No. 2 to the Schedule
    13D filed on February 26, 2003 and incorporated herein by
    reference.                                      
|    
|(16) | Filed as an exhibit to the Companys Form 8-K filed on
    October 6, 2004 (File No. 000-18805 and incorporated
    herein by reference.                                 
|    
|(17) | Filed as an exhibit to the Companys Annual Report on
    Form 10-K for the year ended December 31, 1999 (File
    No. 000-18805) and incorporated herein by reference.  

(b) Reports on Form 8-K




| |                                                                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On October 6, 2004 we filed an 8-K, reporting the entry
    into a material definitive agreement under Item 1.01.                                                                                       
|
| | On October 20, 2004, Electronics for Imaging, Inc under
    Item 2.02 of Form 8-K, announced its financial results
    for the third fiscal quarter of 2004 ended September 30,
    2004.               
|
| | On December 16, 2004, Electronics for Imaging, Inc., under
    Item 2.02 of Form 8-K, announced its anticipated
    financial results for the fourth fiscal quarter of 2004 ended
    December 31, 2004.

(c) List of Exhibits




| |                 
| | ----------------
| | See Item 15 (a).

85



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##### Table of Contents



(d) Consolidated Financial Statement Schedule II for
the years ended December 31, 2004, 2003 and 2002,
respectively .


ELECTRONICS FOR IMAGING, INC.


Schedule II


Valuation and Qualifying Accounts


|                                                             |  |                |       |  |             |   |       |             |  |   |            |      |            |        |      |   |  |   |       | 
|------------------------------------------------------------ |  | -------------- | ----- |  | ----------- | - | ----- | ----------- |  | - | ---------- | ---- | ---------- | ------ | ---- | - |  | - | ----- | 
|                                                             |  | Balance at     |       |  | Charged to  |   |       | Charged to/ |  |   |            |      | Balance at |       
|                                                             |  | Beginning      |       |  | Revenue and |   |       | from other  |  |   |            |      | End of     |       
|Description                                                  |  | of Period      |       |  | Expenses    |   |       | Accounts    |  |   | Deductions |      |            | Period |     
|                                                             |  |                |       |  |             |   |       |             |  |   |            |      |            |        |     
|                                                             |  | (In thousands) |      
|Year Ended December 31, 2004                                 |  |                |       |  |             |   |       |             |  |   |            |      |            |        |      |   |  |   |       | 
|Allowance for doubtful accounts and sales-related allowances |  | $              | 3,794 |  |             | $ | 1,319 |             |  | $ | (1,145     | )(1) |            | $      | (882 | ) |  | $ | 3,086 | 
|Year Ended December 31, 2003                                 |  |                |       |  |             |   |       |             |  |   |            |      |            |        |      |   |  |   |       | 
|Allowance for doubtful accounts and sales-related allowances |  | $              | 1,238 |  |             | $ | 580   |             |  | $ | 2,237      | (2)  |            | $      | (261 | ) |  | $ | 3,794 | 
|Year Ended December 31, 2002                                 |  |                |       |  |             |   |       |             |  |   |            |      |            |        |      |   |  |   |       | 
|Allowance for doubtful accounts and sales-related allowances |  | $              | 1,631 |  |             | $ | (196  | )           |  | $ | 20         |      |            | $      | (217 | ) |  | $ | 1,238 | 






|    |                                                                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Adjustment to acquired bad debt allowances: T/ R
    Systems  $(175), Prinitcafe Software,
    Inc.  $(1,070); sales-related allowance 
    $100                                
|   
|(2) | Bad debt allowance received through acquisition of Best
    GmbH  $30, Printcafe Software, Inc. 
    $1,713 and T/ R Systems, Inc  $394, and sales-related
    allowance  $100.

86



---



##### Table of Contents






SIGNATURES






| |                              
| | -----------------------------
| | ELECTRONICS FOR IMAGING, INC.



| |     |              
| | --- | -------------
| | By: | /s/ Guy Gecht

| |                        
| | -----------------------
| |                        
| | Guy Gecht              
| | Chief Executive Officer



POWER OF ATTORNEY






|                                               |  |                                                                              |  |                |  | 
|---------------------------------------------- |  | ---------------------------------------------------------------------------- |  | -------------- |  | 
|Signature                                      |  | Title                                                                        |  | Date          
|                                               |  |                                                                              |  |               
|                                              
|/s/ Guy GechtGuy
    Gecht                     |  | Chief Executive Officer, Director                                            |  | March 15, 2005
|                                              
|/s/ Fred RosenzweigFred
    Rosenzweig         |  | President, Director                                                          |  | March 15, 2005
|                                              
|/s/ Joseph CuttsJoseph
    Cutts               |  | Chief Financial Officer, Chief Operating Officer and Corporate
    Secretary |  | March 15, 2005
|                                              
|/s/ Gill CoganGill
    Cogan                   |  | Director                                                                     |  | March 15, 2005
|                                              
|/s/ Jean-Louis
    GasséeJean-Louis
    Gassée |  | Director                                                                     |  | March 15, 2005
|                                              
|/s/ Dan MaydanDan
    Maydan                   |  | Director                                                                     |  | March 15, 2005
|                                              
|/s/ Thomas UnterbergThomas
    Unterberg       |  | Director                                                                     |  | March 15, 2005

87



---



##### Table of Contents



|                                             |  |          |  |                |  | 
|-------------------------------------------- |  | -------- |  | -------------- |  | 
|Signature                                    |  | Title    |  | Date          
|                                             |  |          |  |               
|                                            
|/s/ James S. GreeneJames
    S. Greene       |  | Director |  | March 15, 2005
|                                            
|/s/ David PeterschmidtDavid
    Peterschmidt |  | Director |  | March 15, 2005
|                                            
|/s/ Chris PaisleyChris
    Paisley           |  | Director |  | March 15, 2005

88



---



##### Table of Contents






Exhibit Index


|        |  |                                                                                                                                                                                                                                 
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                 
|No.     |  | Description                                                                                                                                                                                                                     
|        |  |                                                                                                                                                                                                                                 
|2.1     |  | Agreement and Plan of Merger, dated as of August 30, 2000,
    by and among the Company, Vancouver Acquisition Corp. and Splash
    Technology Holdings, Inc.(6)                                                                
|       
|2.2     |  | Amendment No. 1, dated as of October 19, 2000, to the
    Agreement and Plan of Merger, dated as of August 30, 2000,
    by and among the Company, Vancouver Acquisition Corp. and Splash
    Technology Holdings, Inc.(7)      
|       
|2.3     |  | Agreement and Plan of Merger and Reorganization, dated as of
    July 14, 1999, among the Company, Redwood Acquisition Corp.
    and Management Graphics, Inc.(4)                                                               
|       
|2.4     |  | Agreement and Plan of Merger, dated as of February 26, 2003
    by and among the Company, Strategic Value Engineering, Inc. and
    Printcafe Software, Inc.(15)                                                                
|       
|3.1     |  | Amended and Restated Certificate of Incorporation(2)                                                                                                                                                                            
|       
|3.2     |  | Bylaws as amended(1)                                                                                                                                                                                                            
|       
|4.2     |  | Specimen Common Stock certificate of the Company(1)                                                                                                                                                                             
|       
|4.3     |  | Indenture dated as of June 4, 2003 between the Company and
    U.S. Bank National Association, as Trustee, relating to
    convertible senior debentures due 2023(8)                                                            
|       
|4.4     |  | Form of Convertible Senior Debenture due 2023 (Exhibit A to
    Indenture filed as Exhibit 4.3 above)(8)                                                                                                                        
|       
|4.5     |  | Registration Rights Agreement, dated as of June 4, 2003,
    among the Company, UBS Warburg LLC, C.E. Unterberg Towbin and
    Morgan Stanley Incorporated(8)                                                                   
|       
|10.1+   |  | Agreement dated December 6, 2000, by and between Adobe
    Systems Incorporated and the Company(5)                                                                                                                              
|       
|10.2    |  | 1990 Stock Plan of the Company(1)                                                                                                                                                                                               
|       
|10.3    |  | Management Graphics, Inc. 1985 Nonqualified Stock Option Plan(17)                                                                                                                                                               
|       
|10.4    |  | The 1999 Equity Incentive Plan as amended(3)                                                                                                                                                                                    
|       
|10.5    |  | 2000 Employee Stock Purchase Plan as amended(3)                                                                                                                                                                                 
|       
|10.7    |  | Splash Technology Holdings, Inc. 1996 Stock Option Plan as
    amended to date(13)                                                                                                                                              
|       
|10.8    |  | Prographics, Inc. 1999 Stock Option Plan(10)                                                                                                                                                                                    
|       
|10.9    |  | Printcafe Software, Inc. 2000 Stock Incentive Plan(10)                                                                                                                                                                          
|       
|10.10   |  | Printcafe Software, Inc. 2002 Key Executive Stock Incentive
    Plan(10)                                                                                                                                                        
|       
|10.11   |  | Printcafe Software, Inc. 2002 Employee Stock Incentive Plan(10)                                                                                                                                                                 
|       
|10.12   |  | T/R Systems, Inc. 1999 Stock Option Plan(11)                                                                                                                                                                                    
|       
|10.13   |  | Electronics for Imaging, Inc. 2004 Equity Incentive Plan(12)                                                                                                                                                                    
|       
|10.14   |  | Form of Indemnification Agreement(1)                                                                                                                                                                                            
|       
|10.15   |  | Employment Agreement dated August 1, 2003, by and between
    Fred Rosenzweig and the Company(9)                                                                                                                                
|       
|10.16   |  | Employment Agreement dated August 1, 2003, by and between
    Joseph Cutts and the Company(9)                                                                                                                                   
|       
|10.17   |  | Employment Agreement dated August 1, 2003, by and between
    Guy Gecht and the Company(9)                                                                                                                                      
|       
|10.18   |  | Master Lease Financing of Properties Located in Foster City,
    California, dated as of July 16, 2004, among the Company,
    Société Générale Financial Corporation and
    Société Générale(14)                              
|       
|10.19   |  | Amended and Restated Master Lease Financing of Properties
    Located in Foster City, California, dated as of
    September 30, 2004, among the Company, Société
    Générale Financial Corporation and Société
    Générale(16)
|       
|21      |  | List of Subsidiaries                                                                                                                                                                                                            
|       
|23.1    |  | Consent of Independent Registerd Public Accounting Firm                                                                                                                                                                         
|       
|24.1    |  | Power of Attorney (see signature page)                                                                                                                                                                                          
|       
|31.1    |  | Certification of Chief Executive Officer pursuant to
    18 U.S.C. Section 1350 as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002                                                                        



---



##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                                                     
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                     
|No.     |  | Description                                                                                                                                                                                                                                                                                                         
|        |  |                                                                                                                                                                                                                                                                                                                     
|       
|31.2    |  | Certification of Chief Financial Officer pursuant to
    18 U.S.C. Section 1350 as adopted pursuant to
    Section 906 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.








|    |                                                                                                                                                                              
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Filed as an exhibit to the Companys Registration Statement
    on Form S-1 (No. 33-50966) and incorporated herein by
    reference.                                         
|   
|(2) | Filed as an exhibit to the Companys Registration Statement
    on Form S-1 (File No. 33-57382) and incorporated
    herein by reference.                                    
|   
|(3) | Filed as an exhibit to the Companys Registration Statement
    on Form S-8 on June 24, 2003 and incorporated herein
    by reference.                                       
|   
|(4) | Filed as an exhibit to the Companys Report of Unscheduled
    Events on Form 8-K on September 8, 1999 (File No.
    000-18805) and incorporated herein by reference.        
|   
|(5) | 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.      
|   
|(6) | Filed as exhibit (d) (1) to the Companys
    Schedule TO-T on September 14, 2000 and incorporated
    herein by reference.                                                  
|   
|(7) | Filed as exhibit (d) (5) to the Companys TO/ A
    Number 3 on October 20, 2000 and incorporated herein
    by reference.                                                   
|   
|(8) | Filed as an exhibit to the Companys Quarterly Report on
    Form 10Q for the quarter ended June 30, 2003 (File
    No. 000-18805) and incorporated herein by reference.     
|   
|(9) | Filed as an exhibit to the Companys Quarterly Report on
    Form 10Q for the quarter ended September 30, 2003
    (File No. 000-18805) and incorporated herein by reference.



|     |                                                                                                                                                                          
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Filed as an exhibit to Printcafe Software, Inc.s
    Registration Statement on Form S-1 (File
    No. 333-82646) and incorporated herein by reference.                  
|    
|(11) | Filed as an exhibit to T/ R Systems, Inc.s Registration
    Statement on Form S-1 (File No. 333-82646) and
    incorporated herein by reference.                        
|    
|(12) | Filed as an exhibit to the Companys Registration Statement
    on Form S-8 on June 16, 2004 and incorporated herein
    by reference.                                   
|    
|(13) | Filed as an exhibit to the Companys Quarterly Report on
    Form 10Q for the quarter ended March 31, 2004 (File
    No. 000-18805) and incorporated herein by reference.
|    
|(14) | Filed as an exhibit to the Companys Quarterly Report on
    Form 10Q for the quarter ended June 30, 2004 (File
    No. 000-18805) and incorporated herein by reference. 
|    
|(15) | Filed as exhibit 10 to Amendment No. 2 to the Schedule
    13D filed on February 26, 2003 and incorporated herein by
    reference.                                      
|    
|(16) | Filed as an exhibit to the Companys Form 8-K filed on
    October 6, 2004 (File No. 000-18805 and incorporated
    herein by reference.                                 
|    
|(17) | Filed as an exhibit to the Companys Annual Report on
    Form 10-K for the year ended December 31, 1999 (File
    No. 000-18805) and incorporated herein by reference.