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Exhibit 99.1

 

For more information:       Investor Relations:
Marc Olin       JoAnn Horne
Chief Financial Officer       Market Street Partners
EFI       415-445-3235
650-357-3500      

EFI Reports Record Revenue for Fourth Quarter and Full Year 2017

Fremont, Calif. – January 31, 2018 – Electronics For Imaging, Inc. (Nasdaq: EFII), a world leader in customer-focused digital printing innovation, today announced its results for the fourth quarter and year ended December 31, 2017.

For the quarter ended December 31, 2017, the Company reported record fourth quarter revenue of $269.2 million, up 1% compared to fourth quarter 2016 revenue of $266.7 million. GAAP net loss was $25.4 million compared to GAAP net income of $19.9 million for the same period in 2016 or $(0.55) per diluted share compared to $0.42 per diluted share for the same period in 2016. Non-GAAP net income was $24.0 million, down 33% compared to non-GAAP net income of $35.7 million for the same period in 2016 or $0.52 per diluted share, down 31% compared to $0.75 per diluted share for the same period in 2016. Cash flow from operating activities was $8.9 million, down 86% compared to $65.2 million during the same period in 2016.

For the year ended December 31, 2017, the Company reported revenue of $993.3 million, up 0.1% year-over-year compared to $992.1 million for the same period in 2016. GAAP net loss was $14.4 million or $(0.31) per diluted share, compared to GAAP net income of $44.9 million or $0.94 per diluted share for the same period in 2016. Non-GAAP net income was $100.7 million or $2.14 per diluted share, compared to non-GAAP net income of $116.2 million or $2.43 per diluted share for the same period in 2016. Cash flow from operating activities was $51.3 million, down 58% compared to $121.0 million during the same period in 2016.

“The performance of our direct business drove record quarterly and full year revenue for EFI. We look for this growth from inkjet and software to accelerate in the first quarter,” said Guy Gecht, CEO of EFI. “Having just finished a very exciting Connect Users’ Conference, the EFI team is energized as we enter 2018, with a year full of new product introductions across the Company and Nozomi on track for a strong first year in the corrugated market. We are well positioned to help customers transform their businesses,” concluded Mr. Gecht.

Conference Call

EFI will discuss the Company’s financial results by conference call at 5:00 pm ET/2:00 pm PT today. Instructions for listening to the conference call over the Web are available on the Investor Relations portion of EFI’s website at www.efi.com.

About EFI

EFI™ is a global technology company, based in Silicon Valley, and is leading the worldwide transformation from analog to digital imaging. We are passionate about fueling customer success with products that increase competitiveness and boost productivity. To do that, we develop breakthrough technologies for the manufacturing of signage, packaging, textiles, ceramic tiles, and personalized documents, with a wide range of printers, inks, digital front ends, and a comprehensive business and production workflow suite that transforms and streamlines the entire production process. (www.efi.com)

Safe Harbor for Forward Looking Statements

Certain statements in this press release are 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. Statements other than statements of historical fact including words such as “accelerate”. “address”, “anticipate”, “believe”, “consider”, “continue”, “develop”, “estimate”, “expect”, “further”, “look”, “plan”, and “progress” and statements in the future tense are forward looking statements. The statements in this press release that could be deemed forward-looking statements include statements regarding EFI’s strategy, plans, expectations regarding its revenue growth, introduction of new products, product portfolio, productivity, future opportunities for EFI and its customers, demand for products, and any statements or assumptions underlying any of the foregoing.

 

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Forward-looking statements are subject to certain risks and uncertainties that could cause our actual future results to differ materially, or cause a material adverse impact on our results. Potential risks and uncertainties include, but are not necessarily limited to, intense competition in each of our businesses, including competition from products developed by EFI’s customers; our ability to remediate the material weaknesses identified in EFI’s internal control over financial reporting; the uncertainty of the outcome of the pending securities lawsuits against EFI; unforeseen expenses; fluctuations in currency exchange rates; the difficulty of aligning expense levels with revenue; management’s ability to forecast revenues, expenses and earnings; our ability to successfully integrate acquired businesses; changes in the mix of products sold; the uncertainty of market acceptance of new product introductions; challenge of managing asset levels, including inventory and variations in inventory levels; the uncertainty of continued success in technological advances; the challenges of obtaining timely, efficient and quality product manufacturing and supply of components; any world-wide financial and economic difficulties and downturns; adverse tax-related matters such as tax audits, changes in our effective tax rate or new tax legislative proposals; the unpredictability of development schedules and commercialization of products by the leading printer manufacturers and declines or delays in demand for our related products; the impact of changing consumer preferences on demand for our textile products; litigation involving intellectual property rights or other related matters; the uncertainty regarding the amount and timing of future share repurchases by EFI and the origin of funds used for such repurchases; the market prices of EFI’s common stock prior to, during and after the share repurchases; and any other risk factors that may be included from time to time in the Company’s SEC reports.

The statements in this press release are made as of the date of this press release and are subject to revision until the Company will have filed its Annual Report on Form 10-K for the year ended December 31,2017. EFI undertakes no obligation to update information contained in this press release. Amounts are subject to rounding.

For further information regarding risks and uncertainties associated with EFI’s businesses, please refer to the section entitled “Risk Factors” in the Company’s SEC filings, including, but not limited to, its annual report on Form 10-K and its quarterly reports on Form 10-Q, copies of which may be obtained by contacting EFI’s Investor Relations Department by phone at 650-357-3828 or by email at investor.relations@efi.com or EFI’s Investor Relations website at www.efi.com.

Impact of the Tax Cuts and Jobs Act of 2017

On December 22, 2017, the Tax Cuts and Jobs Act was enacted, which will have wide-ranging impacts on EFI including, but not limited to, a Deemed Repatriation Transition Tax and the revaluation of current U.S. deferred tax assets and liabilities. We have recorded a $27.3 million charge in the current quarter as a provisional estimate related to the aforementioned items. The SEC staff issued Staff Accounting Bulletin (“SAB”) 118, which allows companies to record a provisional estimate of the income tax effects in the quarter in which it can make reasonable estimates of the effects of the new law. While we have calculated a reasonable estimate of the impact of the U.S. tax rate reduction and the amount of the Deemed Repatriation Transition Tax, we are still gathering additional information to refine and finalize our calculation of the impacts of the new tax law on our U.S. deferred tax assets and liabilities, the Deemed Repatriation Transition Tax, and other provisions associated with the Tax Cuts and Jobs Act. As we obtain additional information, we may record material adjustments in current or subsequent quarters, and will finalize the income tax effects in the fourth quarter of 2018, or in an earlier quarter if our analysis is complete.

Use of Non-GAAP Financial Information

To supplement our condensed consolidated financial results prepared under generally accepted accounting principles, or GAAP, we use non-GAAP measures of net income and earnings per diluted share that are GAAP net income and GAAP earnings per diluted share adjusted to exclude certain costs, expenses, and gains. A reconciliation of the adjustments to GAAP results for the three and twelve months ended December 31, 2017 and 2016 is provided below. In addition, an explanation of how management uses non-GAAP financial information to evaluate its business, the substance behind management’s decision to use this non-GAAP financial information, the material limitations associated with the use of non-GAAP financial information, the manner in which management compensates for those limitations, and the substantive reasons management believes that this non-GAAP financial information provides useful information to investors is included under “About our Non-GAAP Net Income and Adjustments” after the tables below.

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

 

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Electronics For Imaging, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

 

     Three Months Ended     Twelve Months Ended  
     December 31,     December 31,  
     2017     2016     2017     2016  

Revenue

   $ 269,163     $ 266,707     $ 993,260     $ 992,065  

Cost of revenue

     140,947       127,180       486,804       483,900  
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     128,216       139,527       506,456       508,165  

Operating expenses:

        

Research and development

     39,157       39,664       157,358       151,395  

Sales and marketing

     44,679       41,682       173,697       169,042  

General and administrative

     24,498       19,252       91,737       85,618  

Amortization of identified intangibles

     12,510       10,200       47,339       39,560  

Restructuring and other

     2,140       998       7,562       6,731  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     122,984       111,796       477,693       452,346  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

     5,232       27,731       28,763       55,819  

Interest expense

     (4,967     (4,473     (19,505     (17,716

Interest income and other income (expense), net

     1,286       (569     4,088       545  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     1,551       22,689       13,346       38,648  

Benefit from (provision for) income taxes

     (26,975     (2,740     (27,770     6,301  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (25,424   $ 19,949     $ (14,424   $ 44,949  
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted EPS calculation

        

Net income (loss)

   $ (25,424   $ 19,949     $ (14,424   $ 44,949  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per diluted common share

   $ (0.55   $ 0.42     $ (0.31   $ 0.94  
  

 

 

   

 

 

   

 

 

   

 

 

 

Shares used in diluted per share calculation

     46,345       47,460       47,066       47,797  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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Electronics For Imaging, Inc.

Reconciliation of GAAP Net Income (Loss) to Non-GAAP Net Income

(in thousands, except per share data)

(unaudited)

 

     Three Months Ended     Twelve Months Ended  
     December 31,     December 31,  
                 Ex-Currency                 Ex-Currency  
     2017     2016     2017     2017     2016     2017  

Net income (loss)

   $ (25,424   $ 19,949     $ (25,424   $ (14,424   $ 44,949     $ (14,424
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cost of revenue related to fair value inventory adjustment

     123       —         123       1,383       —         1,383  

Ex-currency adjustment

     —         —         (890     —         —         94  

Stock based compensation – Cost of revenue

     576       1,065       576       2,561       3,252       2,561  

Stock based compensation – Research and development

     1,621       2,065       1,621       9,177       10,696       9,177  

Stock based compensation – Sales and marketing

     1,407       1,573       1,407       6,583       8,242       6,583  

Stock based compensation – General and administrative

     387       482       387       8,211       12,696       8,211  

Amortization of identified intangibles

     12,510       10,200       12,510       47,339       39,560       47,339  

Restructuring and other

     2,140       998       2,140       7,562       6,731       7,562  

General and administrative:

            

Acquisition-related transaction costs

     237       541       237       2,057       2,241       2,057  

Changes in fair value of contingent consideration

     3,069       629       3,069       5,256       6,939       5,256  

Revenue recognition review costs and litigation settlements

     1,776       115       1,776       6,879       1,027       6,879  

Asset impairment

     880       —         880       880       —         880  

Interest income and other income (expense), net

            

Non-cash interest expense related to our convertible notes

     3,336       3,163       3,336       13,049       12,400       13,049  

Foreign exchange fluctuation related to contingent consideration

     —         588       —         45       1,049       45  

Balance sheet currency remeasurement impact

     —         —         235       —         —         1,579  

Tax effect of non-GAAP adjustments

     21,348       (5,642     21,530       4,147       (33,564     3,831  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP net income

   $ 23,986     $ 35,726     $ 23,513     $ 100,705     $ 116,218     $ 102,062  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP net income per diluted common share

   $ 0.52     $ 0.75     $ 0.51     $ 2.14     $ 2.43     $ 2.17  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Shares used in diluted per share calculation

     46,345       47,460       46,345       47,066       47,797       47,066  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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Electronics For Imaging, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

 

     December 31,  
     2017      2016  

Assets

     

Cash and cash equivalents

   $ 170,345      $ 164,313  

Short-term investments

     148,697        295,428  

Accounts receivable, net

     244,416        220,813  

Inventories

     125,813        96,338  

Other current assets

     50,178        36,637  
  

 

 

    

 

 

 

Total current assets

     739,449        813,529  

Property and equipment, net

     98,762        103,474  

Goodwill

     397,133        359,841  

Intangible assets, net

     123,008        122,997  

Restricted investments and cash equivalents

     32,531        6,252  

Other assets

     60,292        72,836  
  

 

 

    

 

 

 

Total assets

   $ 1,451,175      $ 1,478,929  
  

 

 

    

 

 

 

Liabilities & Stockholders’ equity

     

Accounts payable

   $ 123,548      $ 114,287  

Accrued and other liabilities

     157,322        139,318  

Income taxes payable

     5,309        10,256  
  

 

 

    

 

 

 

Total current liabilities

     286,179        263,861  

Convertible senior notes, net

     318,957        304,484  

Imputed financing obligation related to build-to-suit lease

     13,975        14,152  

Noncurrent contingent and other liabilities

     24,156        42,786  

Deferred tax liabilities

     11,652        15,601  

Noncurrent income taxes payable

     20,169        12,030  
  

 

 

    

 

 

 

Total liabilities

     675,088        652,914  

Total stockholders’ equity

     776,087        826,015  
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 1,451,175      $ 1,478,929  
  

 

 

    

 

 

 

 

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Electronics For Imaging, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

     Twelve Months Ended  
     December 31,  
     2017     2016  

Cash flows from operating activities:

    

Net income (loss)

   $ (14,424   $ 44,949  

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

    

Depreciation and amortization

     65,647       55,081  

Deferred taxes

     9,221       (11,091

Stock-based compensation, net of cash settlements

     26,532       31,726  

Provision for inventory obsolescence

     6,312       5,716  

Provision for bad debts and sales-related allowances

     12,416       10,678  

Contingent consideration payments related to businesses acquired

     (5,906     —    

Non-cash accretion of interest expense on convertible notes and imputed financing obligation

     14,981       13,489  

Other non-cash charges and gains

     11,320       5,443  

Changes in operating assets and liabilities, net of effect of acquired businesses

     (74,804     (34,987
  

 

 

   

 

 

 

Net cash provided by operating activities

     51,295       121,004  
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Purchases of short-term investments

     (87,623     (216,349

Proceeds from sales and maturities of short-term investments

     233,633       252,856  

Purchases of restricted investments and cash equivalents

     (26,274     (6,252

Purchases, net of proceeds from sales, of property and equipment

     (13,754     (22,373

Businesses purchased, net of cash acquired and disposition

     (29,559     (19,932
  

 

 

   

 

 

 

Net cash provided by (used for) investing activities

     76,423       (12,050
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Proceeds from issuance of common stock

     12,074       11,100  

Purchases of treasury stock and net share settlements

     (101,844     (83,292

Repayment of debt assumed through business acquisitions and debt issuance costs

     (11,094     (8,803

Contingent consideration payments related to businesses acquired

     (25,018     (28,111
  

 

 

   

 

 

 

Net cash used for financing activities

     (125,882     (109,106
  

 

 

   

 

 

 

Effect of foreign exchange rate changes on cash and cash equivalents

     4,196       374  
  

 

 

   

 

 

 

Increase in cash and cash equivalents

     6,032       222  

Cash and cash equivalents at beginning of year

     164,313       164,091  
  

 

 

   

 

 

 

Cash and cash equivalents at end of year

   $ 170,345     $ 164,313  
  

 

 

   

 

 

 

 

6


Electronics For Imaging, Inc.

Revenue by Operating Segment and Geographic Area

(in thousands)

(unaudited)

 

     Three Months Ended      Twelve Months Ended  
     December 31,      December 31,  
     2017     2016      2017     2016  

Revenue by Operating Segment

         

Industrial Inkjet

   $ 162,802     $ 153,657      $ 570,688     $ 562,583  

Productivity Software

     45,269       43,183        156,561       151,737  

Fiery

     61,092       69,867        266,011       277,745  
  

 

 

   

 

 

    

 

 

   

 

 

 

Total

   $ 269,163     $ 266,707      $ 993,260     $ 992,065  
  

 

 

   

 

 

    

 

 

   

 

 

 

Revenue by Geographic Area

         

Americas

   $ 134,571     $ 136,434      $ 487,968     $ 500,411  

EMEA

     94,975       95,836        369,610       360,305  

APAC

     39,617       34,437        135,682       131,349  
  

 

 

   

 

 

    

 

 

   

 

 

 

Total

   $ 269,163     $ 266,707      $ 993,260     $ 992,065  
  

 

 

   

 

 

    

 

 

   

 

 

 

Revenue Ex-Currency Adjustment

     (7,346     —          (5,694     —    
  

 

 

   

 

 

    

 

 

   

 

 

 

Total

   $ 261,817     $ 266,707      $ 987,566     $ 992,065  
  

 

 

   

 

 

    

 

 

   

 

 

 

 

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About our Non-GAAP Net Income and Adjustments

Use of Non-GAAP Financial Information

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

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

Use and Economic Substance of Non-GAAP Financial Measures

We compute non-GAAP net income, and non-GAAP earnings per diluted share by adjusting GAAP net income and GAAP earnings per diluted share to remove the impact of amortization of acquisition-related intangibles, stock-based compensation expense, restructuring and other expenses, acquisition-related transaction expenses, costs to integrate such acquisitions into our business, asset impairment, incremental cost of revenue due to the fair value adjustment to inventories acquired in business acquisitions, changes in the fair value of contingent consideration including the related foreign exchange fluctuation impact, revenue recognition review costs and litigation settlement charges, and non-cash interest expense related to our 0.75% convertible senior notes (“Notes”). We use a constant non-GAAP tax rate of 19%, which we believe reflects the long-term average tax rate based on our international structure and geographic distribution of revenue and profit.

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

These excluded items are described below:

 

    Inventory acquired in the acquisition of the Free Flow Print Server business (“FFPS”) is required to be recorded at fair value rather than historical cost in accordance with ASC 805, Business Combinations. The fair value of FFPS inventory reflects the manufacturing cost plus a portion of the expected gross profit. We have adjusted our cost of revenue to reflect the expected gross profit that was included in the inventory valuation under ASC 805. We believe this adjustment is useful to investors to understand the gross profit trends of our ongoing business.

 

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

 

    Stock-based compensation expense of $26.5 and $34.9 million during the twelve months ended December 31, 2017 and 2016, respectively, consists of $26.5 and $31.8 million of stock-based compensation expense recognized in accordance with ASC 718, Stock Compensation, and the non-cash settlement of $3.1 million of vacation liabilities settled through the issuance of RSUs during the twelve months ended December 31, 2016, which is not included in the GAAP presentation of our stock-based compensation expense.

 

8


    Restructuring and other expenses consists of:

 

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

 

    Expenses incurred to integrate businesses acquired of $1.2 and $2.2 million for the three and twelve months ended December 31, 2017, respectively, and $0.7 and $2.1 million for the three and twelve months ended December 31, 2016 respectively.

 

    Integration depreciation of $0.3 million was recognized during the year ended December 31, 2017, which resulted from assets required to integrate acquired businesses. We have acquired 18 businesses in the last 5 years, which have required significant information technology investment to integrate them into our business. Depreciation related to assets purchased to integrate businesses acquired during the periods reported have been included in the integration expenses that we have excluded from non-GAAP operating results.

 

    Acquisition-related transaction costs associated with businesses acquired during the periods reported and anticipated transactions of $0.2 and $2.1 million for the three and twelve months ended December 31, 2017, respectively, and $0.5 and $2.2 million for the three and twelve months ended December 31, 2016, respectively.

 

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

 

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

 

    Revenue recognition review costs and litigation settlements. As described in “Item 9A, Controls and Procedures” of our annual report on Form 10-K, for the year ended December 31, 2016, as amended, our management concluded that we had material weaknesses in our internal control over financial reporting as of December 31, 2016 related to revenue recognition practices and therefore did not maintain effective internal control over financial reporting or effective disclosure controls and procedures, both of which are requirements of the Securities Exchange Act of 1934, as of that date. The review of our revenue recognition practices has required that we expend significant management time and incur significant accounting, legal, and other expenses totaling $1.7 and $6.4 million during the three and twelve months ended December 31, 2017, respectively, and we expect to incur additional costs in the future periods.

We settled or accrued reserves related to several litigation claims of $0.1 and $0.4 million for the three and twelve months ended December 31, 2017, respectively, and $0.1 and $1.0 million during the three and twelve months ended December 31, 2016, respectively.

 

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    Asset impairment. During the fourth quarter of 2017, our management approved a plan to sell approximately 31.5 acres of land and the related buildings (“facility”) located in Meredith, New Hampshire. Assets previously recorded within property and equipment, net, of $5.1 million have been reclassified to assets held for sale within other current assets in our Condensed Consolidated Balance Sheet as of December 31, 2017. The fair value of the facility based on the expected sales proceeds, less cost to sell, will be less than the carrying amount of the assets. As a result, an impairment loss of approximate $0.9 million was recognized for the three and twelve months ended December 31, 2017.

 

    Tax effect of non-GAAP adjustments. We use a constant non-GAAP tax rate of 19%, which we believe reflects the long-term average tax rate based on our international structure and geographic distribution of revenue and profit. The long-term average tax rate is calculated in accordance with the principles of ASC 740, Income Taxes, to estimate the non-GAAP income tax provision in each jurisdiction in which we operate after excluding the tax effect of the non-GAAP items described above, $10.3 million of previously unrecognized tax benefits associated with the 2012 sale of our Foster City building and land, which we recognized in the twelve months ended December 31, 2016, and $27.3 million of tax charges recognized in Q4 2017 as a result of the US Tax Cuts and Jobs Act, which was enacted on December 22, 2017.

 

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