-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, ABGHJY0Wb7NOieMaoDP6nvMPRYbIavgFKu1b7wJ6i0d07YCymrD0yr9sKNZoxQ7e K4/Nkt9yCwx9bOkgB4kB3g== 0000912057-95-002477.txt : 19950418 0000912057-95-002477.hdr.sgml : 19950418 ACCESSION NUMBER: 0000912057-95-002477 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950303 FILED AS OF DATE: 19950417 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ADOBE SYSTEMS INC CENTRAL INDEX KEY: 0000796343 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 770019522 STATE OF INCORPORATION: CA FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07033 FILM NUMBER: 95529102 BUSINESS ADDRESS: STREET 1: 1585 CHARLESTON RD CITY: MOUNTAIN VIEW STATE: CA ZIP: 94043-1225 BUSINESS PHONE: 4159614400 MAIL ADDRESS: STREET 1: P.O. BOX 7900 CITY: MOUNTAIN VIEW STATE: CA ZIP: 94039-7900 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------- FORM 10-Q (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 3, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to _____________ Commission File Number: 33-6885 ADOBE SYSTEMS INCORPORATED (Exact name of registrant as specified in its charter) California 77-0019522 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1585 Charleston Road, Mountain View, California 94043-1225 (Address of principal executive offices) (Zip Code) (415) 961-4400 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Shares Outstanding Class March 3, 1995 ----- ------------- Common stock, no par value 62,314,440 TABLE OF CONTENTS Page No. PART I -- FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements 3 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 17 PART II -- OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 27 Signature 34 Summary of Trademarks 35 Exhibits 36 2 PART I -- FINANCIAL INFORMATION ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The condensed consolidated financial statements included under this item are as follows: Sequentially Numbered Financial Statement Description Page - ------------------------------------------------------------- ------------ - - Condensed Consolidated Statements of Income Quarters Ended March 3, 1995 and February 25, 1994 4 - - Condensed Consolidated Balance Sheets March 3, 1995 and November 25, 1994 5 - - Condensed Consolidated Statements of Cash Flows Three Months Ended March 3, 1995 and February 25, 1994 6 - - Notes to Condensed Consolidated Financial Statements 8 3 ADOBE SYSTEMS INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT PER SHARE DATA)
Three Months Ended ------------------------ March 3 February 25 1995 1994 ---------- ----------- Revenue: Licensing $ 46,314 $ 36,326 Application products 122,278 99,566 ---------- ----------- Total revenue 168,592 135,892 Direct costs 32,751 26,005 ---------- ----------- Gross margin 135,841 109,887 ---------- ----------- Operating expenses: Software development costs: Research and development 26,368 21,698 Amortization of capitalized software development costs 2,560 2,621 Sales, marketing and customer support 46,032 45,668 General and administrative 11,574 11,988 ---------- ----------- Total operating expenses 86,534 81,975 ---------- ----------- Operating income 49,307 27,912 Nonoperating income: Interest, investment and other income 5,176 2,029 ---------- ----------- Income before income taxes 54,483 29,941 Provision for income taxes 20,133 10,848 ---------- ----------- Net income $ 34,350 $ 19,093 ---------- ----------- ---------- ----------- Net income per share $ .54 $ .31 ---------- ----------- ---------- ----------- Shares used in computing net income per share 64,043 61,289 ---------- ----------- ---------- -----------
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. 4 ADOBE SYSTEMS INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA)
March 3 November 25 1995 1994 ----------- ----------- ASSETS Current assets: Cash and cash equivalents $ 172,357 $ 190,091 Short-term investments 250,801 210,269 Receivables 100,031 96,585 Inventories 6,778 9,619 Other current assets 6,051 7,837 Deferred income taxes 16,838 17,962 ----------- ----------- Total current assets 552,856 532,363 Property and equipment 42,386 39,104 Other assets 56,365 45,561 Deferred income taxes 8,886 8,475 ----------- ----------- $ 660,493 $ 625,503 ----------- ----------- ----------- ----------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Trade and other payables $ 26,012 $ 30,840 Accrued expenses 82,040 79,000 Accrued restructuring costs 14,635 28,457 Income taxes payable 18,288 23,083 Deferred revenue 8,388 7,352 ----------- ----------- Total current liabilities 149,363 168,732 ----------- ----------- Shareholders' equity: Preferred stock, no par value; 2,000,000 shares authorized; none issued -- -- Common stock, no par value; 200,000,000 shares authorized; 62,314,440 and 61,150,049 shares issued and outstanding as of March 3, 1995, and November 25, 1994, respectively 164,498 142,207 Unrealized losses on investments (587) (1,088) Retained earnings 350,922 319,704 Cumulative foreign currency translation adjustments (3,703) (4,052) ----------- ----------- Total shareholders' equity 511,130 456,771 ----------- ----------- $ 660,493 $ 625,503 ----------- ----------- ----------- -----------
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. 5 ADOBE SYSTEMS INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
Three Months Ended ------------------------- March 3 February 25 1995 1994 ----------- ------------ Cash flows from operating activities: Net income $ 34,350 $ 19,093 Adjustments to reconcile net income to net cash provided by operating activities: Stock compensation expense 529 253 Depreciation and amortization 10,225 10,292 Deferred income taxes 708 (627) Unrealized loss on investments -- 423 Provision for losses on accounts receivable 307 (147) Tax benefit from employee stock plans 5,073 4,310 Changes in operating assets and liabilities: Receivables (4,237) (1,847) Inventories 2,929 547 Other current assets 887 (67) Trade and other payables (4,353) (4,358) Accrued expenses 2,050 (91) Accrued restructuring costs (12,869) -- Income taxes payable (4,908) (8,576) Deferred revenue 1,018 (1,617) ----------- ---------- Net cash provided by operating activities 31,709 17,588 ----------- ---------- Cash flows from investing activities: Purchases of short-term investments (1,455,278) (225,469) Maturities and sales of short-term investments 1,415,247 208,933 Acquisitions of property and equipment (8,913) (6,990) Capitalization of software development costs -- (2,502) Additions to other assets (15,110) (1,644) ----------- ----------- Net cash used for investing activities (64,054) (27,672) ----------- ----------- Cash flows from financing activities: Proceeds from issuance of common stock 24,453 8,388 Proceeds from sales of put warrants -- 358 Repurchase of common stock (7,765) (3,818) Payment of dividends (3,131) (2,266) ----------- ----------- Net cash provided by (used for) financing activities 13,557 2,662 ----------- ----------- (Continued)
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 6 ADOBE SYSTEMS INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (CONTINUED)
Three Months Ended ----------------------------- March 3 February 25 1995 1994 ------------ ------------ Effect of foreign currency exchange rates on cash and cash equivalents $ 1,054 $ (451) ------------ ------------ Net (decrease) in cash and cash equivalents (17,734) (7,873) Adjustment for change in Aldus Corporation fiscal year-end -- (3,554) Cash and cash equivalents at beginning of period 190,091 134,039 ------------ ------------ Cash and cash equivalents at end of period $ 172,357 $ 122,612 ------------ ------------ ------------ ------------ Supplemental disclosures: Cash paid during the period for income taxes $ 17,412 $ 13,054 ------------ ------------ ------------ ------------ Noncash investing and financing activities: Dividends declared but not paid $ 3,133 $ 2,300 ------------ ------------ ------------ ------------ Reclassification of put warrants $ -- $ (6,906) ------------ ------------ ------------ ------------
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. 7 ADOBE SYSTEMS INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS) NOTE 1. SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The accompanying unaudited condensed consolidated statements of income, balance sheets and statements of cash flows reflect all adjustments which are, in the opinion of management, necessary to present a fair statement of the condensed consolidated financial position at March 3, 1995, and the condensed consolidated statements of income and cash flows for the interim periods ended March 3, 1995 and February 25, 1994. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q and, therefore, do not include all information and footnotes necessary for a complete presentation of the results of operations, the financial position, and cash flows, in conformity with generally accepted accounting principles. The Company filed audited consolidated financial statements which included all information and footnotes necessary for such a presentation of the results of operations, financial position and cash flows for the years ended November 25, 1994, November 26, 1993 and November 27, 1992, in the Company's 1994 Form 10-K. The results of operations for the interim period ended March 3, 1995, are not necessarily indicative of the results to be expected for the full year. 8 ADOBE SYSTEMS INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS) (CONTINUED) NOTE 2. MERGER WITH ALDUS CORPORATION On August 31, 1994, the Company issued approximately 14.2 million shares of its common stock in exchange for all of the common stock of Aldus Corporation ("Aldus"). This business combination has been accounted for as a pooling of interests, and accordingly, the condensed consolidated financial statements have been restated to include the results of operations, the financial position and cash flows of Aldus. Prior to the combination, Aldus' fiscal year ended on December 31. In recording the business combination, Aldus' financial statements for the quarter ended February 25, 1994 were combined with the Company's for the same period. Aldus' financial statements for the year ended December 31, 1993 were combined with the Company's for the year ended November 26, 1993. Revenue and net income for Aldus for the month ended December 31, 1993 were $26.1 million and $4.4 million, respectively. Net income, the foreign currency translation adjustment, the issuance of common stock and the net increase in cash and cash equivalents were adjusted to eliminate the effect of including Aldus' results of operations, financial position and cash flows for the month ended December 31, 1993 in the quarter ended February 25, 1994 and the year ended November 26, 1993. 9 ADOBE SYSTEMS INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS) (CONTINUED) NOTE 3. CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS Certain cash equivalents and all investments have been classified as available-for-sale securities, and consisted of the following:
As of March 3, 1995 -------------------------------------------- Unrealized Unrealized Estimated Cost Gains Losses Fair Value -------- ---------- ---------- ---------- Money market mutual funds and time deposits $ 24,627 $ -- $ -- $ 24,627 Put bonds and weekly floaters 23,310 -- -- 23,310 Tax-exempt commercial paper and agency discount notes 89,665 -- -- 89,665 United States government treasury notes 38,592 12 (418) 38,186 State and municipal bonds and notes 146,754 262 (560) 146,456 Corporate notes 506 -- (3) 503 Auction-rate securities 59,410 -- (10) 59,400 Asset-backed securities 6,554 -- (298) 6,256 -------- ---------- ---------- ---------- $389,418 $ 274 $ (1,289) $ 388,403 -------- ---------- ---------- ---------- -------- ---------- ---------- ----------
10 ADOBE SYSTEMS INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS) (CONTINUED) NOTE 3. CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS (CONTINUED)
As of November 25, 1994 -------------------------------------------- Unrealized Unrealized Estimated Cost Gains Losses Fair Value -------- ---------- ---------- ---------- Money market mutual funds and time deposits $ 7,812 $ 4 $ -- $ 7,816 Tax-exempt commercial paper and agency discount notes 144,514 -- (4) 144,510 United States government treasury notes 30,647 -- (629) 30,018 State and municipal bonds and notes 92,931 -- (927) 92,004 Corporate notes 511 -- (6) 505 Auction-rate securities 80,865 -- -- 80,865 Asset-backed securities 7,199 -- (322) 6,877 -------- ---------- ---------- ---------- $364,479 $ 4 $ (1,888) $ 362,595 -------- ---------- ---------- ---------- -------- ---------- ---------- ----------
Unrealized losses are reported as a separate component of shareholders' equity net of taxes of $0.5 million and $0.8 million at March 3, 1995 and November 25, 1994, respectively. Net realized gains or losses are included in interest, investment and other income. Net realized losses were insignificant for the quarters ended March 3, 1995 and February 25, 1994. The Company's investments are classified as follows:
March 3 November 25 1995 1994 -------- ----------- Cash equivalents $132,108 $150,071 Short-term investments 250,801 210,269 Other assets -- restricted funds 5,494 2,255 -------- -------- $388,403 $362,595 -------- -------- -------- --------
11 ADOBE SYSTEMS INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS) (CONTINUED) NOTE 3. CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS (CONTINUED) The cost and estimated fair value of available-for-sale securities by contractual maturity consisted of the following:
March 3, 1995 November 25, 1994 -------------------- -------------------- Estimated Estimated Cost Fair Value Cost Fair Value -------- ---------- -------- ---------- One year or less $180,745 $180,738 $229,435 $228,725 One to three years 140,581 139,947 46,981 46,128 Three to five years 2,128 2,062 -- -- Auction-rate securities 59,410 59,400 80,865 80,865 -------- -------- -------- -------- 382,864 382,147 357,281 355,718 -------- -------- -------- -------- Asset-backed securities 6,554 6,256 7,198 6,877 -------- -------- -------- -------- $389,418 $388,403 $364,479 $362,595 -------- -------- -------- -------- -------- -------- -------- --------
Included in auction-rate securities are Select Auction Variable Rate Securities (SAVRS) whose stated maturities exceed ten years; however, the Company had the option of adjusting the respective interest rates or liquidating these investments at auction on stated auction dates every 35 days. 12 ADOBE SYSTEMS INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS) (CONTINUED) NOTE 4. RECEIVABLES Receivables consisted of the following:
March 3 November 25 1995 1994 -------- ----------- Trade receivables $ 68,750 $ 69,628 Royalty receivables 30,915 26,800 Interest and other receivables 4,059 3,410 -------- ----------- 103,724 99,838 Less allowance for doubtful accounts 3,693 3,253 -------- ----------- $100,031 $ 96,585 -------- ----------- -------- -----------
NOTE 5. PROPERTY AND EQUIPMENT Property and equipment consisted of the following:
March 3 November 25 1995 1994 -------- ----------- Land $ 782 $ 782 Building 4,615 4,615 Equipment 90,465 88,285 Furniture and fixtures 17,664 15,487 Leasehold improvements 7,270 4,146 -------- ----------- 120,796 113,315 Less accumulated depreciation and amortization 78,410 74,211 -------- ----------- $ 42,386 $ 39,104 -------- ----------- -------- -----------
13 ADOBE SYSTEMS INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS) (CONTINUED) NOTE 6. OTHER ASSETS Other assets consisted of the following:
March 3 November 25 1995 1994 ------- ----------- Licensing agreements $15,608 $ 15,565 Goodwill 22,034 22,034 Purchased technology 8,715 325 Software development costs 27,199 27,199 Miscellaneous other assets 23,588 16,123 ------- ----------- 97,144 81,246 Less accumulated amortization 40,779 35,685 ------- ----------- $56,365 $ 45,561 ------- ----------- ------- -----------
Unamortized software development costs were $6.2 million and $9.1 million at March 3, 1995 and November 25, 1994, respectively. Amortization of software development costs was $2.6 million and $2.6 million for the quarters ended March 3, 1995 and February 25, 1994, respectively. NOTE 7. ACCRUED EXPENSES Accrued expenses consisted of the following:
March 3 November 25 1995 1994 ------- ----------- Royalties $13,821 $ 10,824 Accrued compensation and benefits 17,995 17,039 Sales and marketing allowances 23,649 19,445 Miscellaneous accrued expenses 26,575 31,692 ------- ----------- $82,040 $ 79,000 ------- ----------- ------- -----------
14 ADOBE SYSTEMS INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS) (CONTINUED) NOTE 8. ACCRUED RESTRUCTURING COSTS On August 31, 1994, the Company merged with Aldus, described in "Note 2 -- Merger with Aldus Corporation," and initiated a plan to combine the operations of the two companies. On this date, the Company recorded a $72.2 million charge to operating expenses related to the merger transaction and restructuring costs. Merger transaction costs consist principally of transaction fees for investment bankers, attorneys, accountants, financial printing and other related charges. Restructuring costs include the elimination of redundant information systems and equipment, severance and outplacement of terminated employees, the write-off of certain assets related to product lines to be divested or eliminated, and cancellation of certain contractual agreements. Activity in accrued restructuring costs is as follows:
Accrued as of Quarter Ended March 3, 1995 Accrued as of November 25 Cash March 3 1994 Write-offs Payments 1995 ------------- ---------- ---------- ------------- Merger transaction costs $ 5,863 $ -- $ 5,175 $ 688 Restructuring costs: Severance and outplacement 11,548 -- 6,436 5,112 Impaired assets and cancellation of facility leases 11,046 1,548 663 8,835 ----------- -------- --------- ------------ $ 28,457 $ 1,548 $ 12,274 $ 14,635 ----------- -------- --------- ------------ ----------- -------- --------- ------------
The nature, timing and extent of restructuring costs follows: SEVERANCE AND OUTPLACEMENT As a result of the merger, certain technical support, customer service, distribution and administrative functions were combined and reduced. Restructuring included severance and outplacement charges related to approximately 500 terminated employees. Affected employees had received notification of their termination by September 9, 1994. 15 ADOBE SYSTEMS INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS) (CONTINUED) NOTE 8. ACCRUED RESTRUCTURING COSTS (CONTINUED) IMPAIRED ASSETS AND CANCELLATION OF FACILITY LEASES The Company plans to consolidate duplicate offices in Europe, Japan, Canada and the United States. Lease payments resulting from the planned closure of these facilities are expected to continue through the lease term or negotiated early termination date, if applicable. NOTE 9. SUBSEQUENT EVENT On March 31, 1995, the Company entered into an agreement with the developers of the technology underlying its Adobe Photoshop product under which the Company will obtain all rights to the technology for a lump sum payment of $34.5 million. This transaction will be recorded in the second quarter of 1995. Prior to this agreement, the Company paid the developers a royalty on each copy of Adobe Photoshop sold by the Company. 16 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THE FOLLOWING DISCUSSION (PRESENTED IN MILLIONS, EXCEPT PER SHARE AMOUNTS) SHOULD BE READ IN CONJUNCTION WITH THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO. RESULTS OF OPERATIONS OVERVIEW Adobe develops, markets and supports computer software products and technologies that enable users to create, display, print and communicate electronic documents. The Company licenses its technology to major computer, printing and publishing suppliers, and markets a line of application software and typeface products for authoring visually rich documents. Additionally, the Company markets a line of powerful, but easy to use, products for home and small business users. The Company has subsidiaries in Europe and the Pacific Rim serving a worldwide network of dealers and distributors. In August 1994, the Company merged with Aldus Corporation ("Aldus"). Aldus began operations in 1984 and created computer software solutions that help people throughout the world effectively communicate information and ideas. Aldus focused on three lines of business: applications for the professional print publishing, graphics and prepress markets; applications for the general consumer market; and applications for the interactive publishing market. To effect the combination, approximately 14.2 million shares of Adobe's common stock were issued in exchange for all of the outstanding common stock of Aldus. The merger was accounted for by the pooling of interests method, and accordingly, all interim financial information prior to the merger has been restated to combine the results of the Company and Aldus. REVENUE
1995 Change 1994 ------- ------- ------- First quarter period: TOTAL REVENUE $168.6 24% $135.9
Revenue growth for the quarter was due to increases in both licensing activity and sales of application products. The divestiture of FreeHand effective January 1, 1995, and the discontinuance of PhotoStyler in late 1994, as further discussed below, partially offset the revenue increase. Product unit volume (as opposed to price) growth was the principal factor in the Company's revenue growth in application products revenue. 17
1995 Change 1994 ------ ------ ------ First quarter period: PRODUCT GROUP REVENUE -- LICENSING $46.3 27% $36.3 Percentage of total revenue 27.5% 26.7%
Licensing revenue is derived from shipments by original equipment manufacturers ("OEM") of products containing the Adobe-TM- PostScript-TM- interpreter and the Display PostScript-TM- system. Such products include printers in both Roman and Japanese languages, imagesetters and workstations. Licensing revenue is also derived from shipments of products containing the Configurable PostScript Interpreter ("CPSI") by OEM customers. CPSI is a fully functional PostScript interpreter that resides on the host computer system rather than in a dedicated controller integrated into an output device. The configuration flexibility of CPSI allows OEMs and software developers to create and market a variety of PostScript products independently of controller hardware development. The number of units shipped by OEMs continued to grow on a quarterly basis. Royalty per unit is generally calculated as a percentage of the end user list price of a printer, although there are some components of licensing revenue based on a flat dollar amount per unit which typically do not change with list price changes. Some OEMs continued to reduce list prices on their lower-end printers, which resulted in lower royalties per unit on such printers. However, in the first quarter of 1995, this trend was offset by increased demand for CPSI and color capability, as well as increased penetration into the Japanese market, all of which have higher royalties per unit. The Company has seen year-to-year increases in the number of OEM customers from which it is receiving licensing revenue, demonstrating continued acceptance of PostScript software, as well as reflecting a diversification of the Company's customer base across Macintosh, IBM PC and compatibles, and multiple platform markets.
1995 Change 1994 ------ ------ ------ First quarter period: PRODUCT GROUP REVENUE -- APPLICATION PRODUCTS $122.3 23% $99.6 Percentage of total revenue 72.5% 73.3%
Application products revenue is derived from shipments of application software programs through retail and distribution channels; however, the information products are becoming more widely distributed through VARs and systems integrators. During the first quarter of 1995, application products revenue grew due to increased demand for Adobe Illustrator-TM-, Adobe Photoshop-TM-, Adobe Premiere-TM- and Adobe PageMaker-TM-. These products are primarily used for image editing, line art editing, video editing and for page design and layout, respectively. In the first quarter, the Company released Adobe Premiere 4.0 for the Windows platform and the Adobe PageMaker Enhancement Package Volume 2 for both Macintosh and Windows platforms. The enhancement package is designed to update Adobe PageMaker features between major 18 releases. In addition, the Company released Japanese versions of several of its products during the first quarter of 1995, including Adobe Premiere 4.0 and Adobe Persuasion-TM- 3.0 for the Macintosh, and Adobe Photoshop 3.0 for the Windows platform. These releases combined with continued strong demand for versions of Adobe Illustrator, Adobe Photoshop and Adobe Premiere for the Macintosh platform released in the second half of fiscal 1994 all contributed ot the increased revenue from application products. The first quarter of 1994 includes revenue from FreeHand, which was divested effective January 1, 1995, and PhotoStyler, which was discontinued in late 1994. These two products aggregated $14.3 million of revenue in the first quarter of 1994. DIRECT COSTS 1995 Change 1994 ------ ------- ------ First quarter period: DIRECT COSTS $32.8 26% $26.0 Percentage of total revenue 19.4% 19.1%
Direct costs include royalties; amortization of acquired technologies; and direct product, packaging and shipping costs. During 1994, direct costs also included amortization of typeface production costs, which totaled $1.1 million in the first quarter of 1994. Gross margins are affected by the mix of licensing revenue versus application products revenue, as well as the product mix within application products. In the first quarter of 1995, direct costs increased slightly as a percentage of total revenue due to increased revenue from certain application products, primarily Adobe Photoshop, which bear relatively higher royalty expense. These higher costs were partially offset by the increased proportion of licensing revenue which typically has higher gross margins than application products revenue. The Company also delivers its type library on its Type On Call-TM- CD-ROM media, and end users wishing to license typeface designs call the Company with a credit card number to receive the unlocking code for the desired typeface. This method of delivery also contributes to reduced direct costs. Other applications are also available through the Company's distributors on CD-ROM. On March 31, 1995, the Company entered into an agreement with the developers of the technology underlying its Adobe Photoshop product under which the Company will obtain all rights to the technology for a lump sum payment of $34.5 million. This transaction will be recorded in the second quarter of 1995. Prior to this agreement, the Company paid the developers a royalty on each copy of Adobe Photoshop sold by the Company. The Company expects that the future reduction in royalty costs achieved by obtaining the rights to the Adobe Photoshop technology will be approximately offset by the amortization of the acquired technology. 19 OPERATING EXPENSES
1995 Change 1994 ------ ------ ------ First quarter period: SOFTWARE DEVELOPMENT COSTS -- RESEARCH AND DEVELOPMENT $26.4 22% $21.7 Percentage of total revenue 15.6% 16.0%
Research and development expenses consist principally of salaries and benefits for software developers, contracted development efforts, related facilities costs, and expenses associated with computer equipment used in software development. Research and development expense has increased in absolute dollars as the Company invested in new technologies, new product development and the infrastructure to support such activities. The increase reflects the expansion of the Company's engineering staff and related costs required to support its continued emphasis on developing new products and enhancing existing products. Many of these engineers are working with OEM customers to design and implement Adobe PostScript Level 2 devices. The Company continues to work with many of its OEM customers in a co-development program. This allows customers to be more self-sufficient in new device development by taking on more of the implementation task themselves rather than relying so heavily on the Company's engineers. While this mitigates certain costs, the Company continues to make significant investments in development of its PostScript and application software products. The Company believes that continued investments in research and development are necessary to remain competitive in the marketplace, and are directly related to continued, timely development of new and enhanced products. The Company intends to continue recruiting and hiring experienced software developers, but expects that research and development expenditures for all of 1995 will approximate 1994 spending levels as a percentage of revenue.
1995 Change 1994 ------ ------ ------ First quarter period: SOFTWARE DEVELOPMENT COSTS -- AMORTIZATION OF CAPITALIZED SOFTWARE DEVELOPMENT COSTS $2.6 -2% $2.6 Percentage of total revenue 1.5% 1.9%
In the implementation of Statement of Financial Accounting Standards (SFAS) No. 86, "Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed," software development expenditures on Adobe products, after achieving technological feasibility, were deemed to be immaterial. Certain software development expenditures on Aldus products have been capitalized and are being amortized over the lives of the respective products. In the first quarter of 1995, software development expenditures on all products, after reaching technological feasibility, were immaterial and the Company anticipates that this trend will continue in the future. Accordingly, 1995 20 will reflect the expense of amortizing software development costs acquired in connection with the Company's merger with Aldus in addition to the actual development expenditures (classified as research and development) made prior to achieving technological feasibility. It is expected that amortization of software development costs will decrease both in absolute dollars and as a percentage of total revenue during 1995 as these costs become fully amortized.
1995 Change 1994 ------ ------ ------ First quarter period: SALES, MARKETING AND CUSTOMER SUPPORT $46.0 1% $45.7 Percentage of total revenue 27.3% 33.6%
Sales, marketing and customer support expenses generally include salaries and benefits, sales commissions, travel expenses and related facilities costs for the Company's sales, marketing, customer support and distribution personnel. Sales, marketing and customer support expenses also include the costs of programs aimed at increasing revenue, such as advertising, trade shows and other market development programs. Sales, marketing and customer support expenses increased slightly in the first quarter of 1995 compared with the first quarter of 1994. Historically, these expenses are lowest in the first quarter as travel and trade show expenses usually are lowest in the first quarter. In the first quarter of 1995, advertising costs were also low. Continuing efforts to expand markets and increase penetration into targeted software markets, as well as increasing competition in the software industry are expected to cause sales, marketing and customer support expenditures for all of 1995 to approximate 1994 spending levels.
1995 Change 1994 ------ ------ ------ First quarter period: GENERAL AND ADMINISTRATIVE $11.6 -3% $12.0 Percentage of total revenue 6.9% 8.8%
General and administrative expenses consist principally of salaries and benefits, travel expenses and related facility costs for the finance, human resources, legal, information services and administrative personnel of the Company. General and administrative expenses also include outside legal and accounting fees, bad debts and expenses associated with computer equipment and software used in the administration of the business. 21 In the first quarter of 1995, general and administrative expenses reflect savings related to the restructuring of the combined company after the merger with Aldus. The Company expects general and administrative spending to be a lower percentage of revenue for all of 1995 than was achieved in 1994, although the percentage is expected to increase over that of the first quarter of 1995. NONOPERATING INCOME
1995 Change 1994 ------ ------ ------ First quarter period: INTEREST, INVESTMENT AND OTHER INCOME $5.2 155% $2.0 Percentage of total revenue 3.1% 1.5%
The increase in interest, investment and other income is primarily due to generally higher interest rates and a larger investment base. In addition, the Company has placed more of its invested cash in higher-yielding taxable securities because it has become beneficial to do so on an after-tax basis. PROVISION FOR INCOME TAXES
1995 Change 1994 ------ ------ ------ First quarter period: PROVISION FOR INCOME TAXES $20.1 86% $10.8 Percentage of total revenue 11.9% 8.0% Effective tax rate 37.0% 36.2%
The effective tax rate for the first quarter of 1995 was slightly higher than the same quarter of 1994 due to a decrease in research and development tax credits and lower tax exempt investment earnings. NET INCOME AND NET INCOME PER SHARE
1995 Change 1994 ------ ------ ------ First quarter period: NET INCOME $34.4 80% $19.1 Percentage of total revenue 20.4% 14.1% NET INCOME PER SHARE $0.54 74% $0.31 Weighted shares (In thousands) 64,043 61,289
Net income for the first quarter of 1995 increased 80 percent from the first quarter of 1994. Earnings per share were $.54, a 74 percent increase from the first quarter of 1994. The increase in earnings per share was caused by significantly increased revenues, lower expense levels as a percentage of revenues and a relatively constant tax rate. 22 FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS The Company believes that in the future its results of operations could be impacted by factors such as the ability of the Company to integrate Adobe and Aldus product lines, renegotiation of royalty arrangements, delays in shipment of the Company's new products and major new versions of existing products, market acceptance of new products and upgrades, growth in worldwide personal computer and printer sales and sales price adjustments, consolidation in the OEM printer business, and adverse changes in general economic conditions in any of the countries in which the Company does business. In connection with the merger with Aldus, the Company has sought to reduce combined expenses by the elimination of duplicate or unnecessary facilities, employees, marketing programs and other expenses. The Company believes that the major impact of such reductions occurred in the fourth quarter of 1994 but experienced some additional impact in the first quarter of 1995. The Company expects that these reductions will benefit future operating results, but the reductions could adversely impact the earnings of the combined company. In addition, there can be no assurance that the integration of the product lines of the two companies will not have a material adverse effect on the results of operations. As previously stated, effective January 1, 1995, the Company no longer markets FreeHand and discontinued marketing PhotoStyler in late 1994. These two products aggregated $53.2 million of revenue and $35.4 million of gross profit in 1994. There can be no assurance that the Company will be able to replace this lost revenue or that it will be able to do so as profitably. The Company's OEM customers on occasion seek to renegotiate their royalty arrangements. The Company evaluates these requests on a case-by-case basis. If an agreement is not reached, a customer may decide to pursue other options, including licensing a PostScript language compatible interpreter from a third party, which could result in lower licensing revenue for the Company. As a result of the merger with Aldus, the Company will derive a larger portion of its revenue from its subsidiaries located in Europe and the Pacific Rim. While most of the revenue of these subsidiaries is denominated in U.S. dollars, the majority of their expense transactions are denominated in foreign currencies. As a result, the Company's operating results are subject to fluctuations in foreign currency exchange rates. To date, the Company has not engaged in any significant activities to hedge its exposure to foreign currency exchange rate fluctuations. The Company's ability to develop and market products, including upgrades of currently shipping products, that successfully adapt to current market needs may also have an impact on the results of operations. A portion of the Company's future revenue will come from these products. Delays in such introductions could have an adverse effect on the Company's revenue, earnings or stock price. The Company cannot determine the ultimate effect that these new products or upgrades will have on its sales or results of operations. Due to the factors noted above, the Company's future earnings and stock price may be subject to significant volatility, particularly on a quarterly basis. Any shortfall in revenue 23 or earnings from levels expected by securities analysts could have an immediate and significant adverse effect on the trading price of the Company's common stock in any given period. Additionally, the Company may not learn of such shortfalls until late in the fiscal quarter, which could result in an even more immediate and adverse effect on the trading price of the Company's common stock. Finally, the Company participates in a highly dynamic industry, which often results in significant volatility of the Company's common stock price. FINANCIAL CONDITION CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
March 3 November 25 1995 Change 1994 ------- ------ ----------- CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS $423.2 6% $400.4
The Company's cash balances and short-term investments have increased each year due to profitable operations, partially offset by modest expenditures for capital outlays and other investments. Cash equivalents consist of highly liquid money market instruments. Certain cash equivalents and all of the Company's short-term investments, consisting principally of municipal bonds, commercial paper, auction rate securities, United States government and government agency securities and asset-backed securities, are classified as available-for-sale under the provisions of SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities." The securities are carried at fair value with the unrealized gains and losses, net of tax, reported as a separate component of shareholders' equity. The Company does not invest in securities which involve a high degree of risk or complexity. SHAREHOLDERS' EQUITY
March 3 November 25 1995 Change 1994 ------- ------ ----------- SHAREHOLDERS' EQUITY $511.1 12% $456.8
The Company has no long-term debt or other noncurrent liabilities. The Board of Directors of the Company declared a cash dividend on the Company's common stock of $.05 per common share on March 20, 1995, for the first quarter of 1995. The dividend will be for shareholders of record as of April 6, 1995, and will be paid on April 20, 1995. The declaration of future dividends is within the discretion of the Board of Directors of the Company and will depend upon business conditions, results of operations, the financial condition of the Company and other factors. Under its stock repurchase program, the Company repurchased 244,003 shares at a cost of $7.8 million in the first quarter of 1995. These share repurchases are intended to fund the employee stock purchase and stock option plans. The Company plans to continue a 24 regular repurchase program during 1995 to continue to fund employee stock plans. WORKING CAPITAL
March 3 November 25 1995 Change 1994 ------- ------ ----------- WORKING CAPITAL $403.5 11% $363.6
Net working capital grew to $403.5 million as of March 3, 1995, compared to $363.6 million as of November 26, 1994. Cash flow provided by operations during the first three months of 1995 was $31.7 million. Expenditures for property and equipment totaled $8.9 million. Such expenditures are expected to continue, including computer systems for development, sales and marketing, product support, and administrative staff. In the future, cash may be used to acquire technology, or to invest in companies owning key technologies, where appropriate. No significant acquisitions or investments were made in the first quarter of 1995. However, on March 31, 1995, the Company entered into an agreement with the developers of the technology underlying its Adobe Photoshop product to obtain that technology for a lump sum payment of $34.5 million. Net cash provided by financing activities during the first three months of 1995 was $13.6 million; $24.5 million was provided by proceeds from issuance of common stock; $7.8 million was used to repurchase common stock; and $3.1 million was used to pay cash dividends. The Company's principal commitments as of March 3, 1995, consisted of obligations under operating leases for facilities, a real estate development agreement and various service and lease guarantee agreements with a related party. The Company has entered into a real estate development agreement for the construction of an office facility and in 1996 will enter into an operating lease agreement for this facility. The Company will have the option to purchase the facility at the end of the lease term. In the event the Company chooses not to exercise this option, the Company is obligated to arrange the sale of the facility to an unrelated party and is required to pay the lessor any difference between the net sales proceeds and the lessor's net investment in the facility, in an amount not to exceed that which would preclude classification of the lease as an operating lease, approximately $52.0 million. The Company also is required, periodically during the construction period, to deposit funds with the lessor to secure the performance of its obligations under the lease and as of March 3, 1995, the Company had deposited approximately $5.5 million in time deposit securities. The Company has entered into various agreements with McQueen Holdings Limited ("McQueen"), a European operating entity, whereby the Company has agreed to guarantee obligations under operating leases for certain European facilities utilized by McQueen, and to guarantee certain levels of business between Adobe and McQueen. The Company currently owns approximately 16 percent of the outstanding stock in McQueen. 25 The Company believes that existing cash, cash equivalents and short-term investments, together with cash generated from operations, will provide sufficient funds for the Company to meet its operating cash requirements in the foreseeable future. 26 PART II -- OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Index to Exhibits
Sequentially Numbered Incorporated by Reference Exhibit ------------------------------- Number Exhibit Description Page Form Date Number --------- -------------------------- ----------- ------ --------- -------- 10.1 1984 Stock Option Plan N/A S-1 07/01/86 10.1 10.1.1 1984 Stock Option Plan, N/A 10-K 11/30/87 10.1.1 as amended 10.1.2 1984 Stock Option Plan, N/A 10-K 11/30/88 10.1.2 as amended 10.1.3 1984 Stock Option Plan, N/A 10-K 11/30/89 10.1.3 as amended 10.1.4 1984 Stock Option Plan, N/A 10-K 11/30/90 10.1.4 as amended 10.1.5 1984 Stock Option Plan, N/A 10-K 11/27/92 10.1.5 as amended 10.1.6 1984 Stock Option Plan, N/A 10-Q 07/02/93 10.1.6 as amended 10.1.7 1994 Stock Option Plan N/A 10-Q 07/06/94 10.1.7 10.2 Common Stock Purchase N/A S-1 07/01/86 10.2 Agreement of John E. Warnock dated December 29, 1982, and, as amended November 30, 1983 10.3 Common Stock Purchase N/A S-1 07/01/86 10.3 Agreement of Charles M. Geschke dated December 29, 1982, and, as amended November 30, 1983 10.4 Common Stock Purchase N/A S-1 07/01/86 10.4 Agreement of Q.T. Wiles dated December 29, 1982 10.5 Common Stock Purchase N/A S-1 07/01/86 10.5 Agreement of David Evans dated December 29, 1982 (Continued) 27 a) Index to Exhibits (Continued) Sequentially Incorporated by Reference Exhibit Numbered ------------------------------ Number Exhibit Description Page Form Date Number --------- -------------------------- ----------- ------ --------- -------- 10.6 Common Stock Purchase N/A S-1 07/01/86 10.6 Agreement of William Hambrecht dated December 29, 1982 10.7 Exchange Agreement N/A S-1 07/01/86 10.7 dated December 29, 1983, for John E. Warnock 10.8 Exchange Agreement N/A S-1 07/01/86 10.8 dated December 29, 1983, for Charles M. Geschke 10.9 Form of Shareholders N/A S-1 07/01/86 10.9 Exchange Agreement used in connection with the exchange of shares of Old Adobe for shares of the Company 10.10 Form of Agreement for N/A S-1 07/01/86 10.10 Assignment of Limited Partnership Interest used in connection with exchange of limited partnership interests in Adobe Systems Limited, a California limited partnership, for shares of the Series B Preferred Stock of the Company 10.11 Registration Rights N/A S-1 07/01/86 10.11 Agreement dated December 29, 1983 10.12 Old Adobe's 1983 Stock N/A S-1 07/01/86 10.12 Purchase Plan and the Company's 1984 Stock Purchase Plan with standard form of Stock Purchase Agreement 10.12.1 1988 Employee Stock N/A 10-Q 07/06/94 10.12.1 Purchase Plan, as amended (Continued) 28 a) Index to Exhibits (Continued) Sequentially Incorporated by Reference Exhibit Numbered ------------------------------- Number Exhibit Description Page Form Date Number --------- -------------------------- ----------- ------ --------- -------- 10.13 Form of Employee N/A S-1 07/01/86 10.13 Common Stock Purchase Agreement dated July 23, 1984 10.14 Warrant to Purchase Series N/A S-1 07/01/86 10.14 C Preferred Stock to Apple Computer, Inc., dated November 26, 1984, with executed subscription form dated November 28, 1984 10.15 Warrant to Purchase N/A S-1 07/01/86 10.15 Series C Preferred Stock to Evans & Sutherland Computer Corporation dated April 25, 1984, with executed subscription form dated June 19, 1986 10.16 License Agreement N/A S-1 07/01/86 10.16 between the Company and Evans & Sutherland Computer Corporation dated April 25, 1984 10.17 License Agreement N/A S-1 07/01/86 10.17 between the Company and Apple Computer, Inc., dated November 12, 1985 (confidential treatment granted) 10.17.1 License Agreement N/A 10-K 11/30/88 10.17.1 Restatement between the Company and Apple Computer, Inc., dated April 1, 1987 (confidential treatment granted) (Continued) 29 (a) Index to Exhibits (Continued) Sequentially Incorporated by Reference Exhibit Numbered ------------------------------ Number Exhibit Description Page Form Date Number --------- -------------------------- ----------- ------ --------- -------- 10.17.2 Amendment No. 1 to the N/A 10-K 11/30/90 10.17.2 License Agreement Restatement between the Company and Apple Computer, Inc., dated November 27, 1990 (confidential treatment granted). 10.18 Lease Agreement dated N/A S-1 07/01/86 10.18 November 11, 1983, between Mozart Family Trust and Epson America Inc. 10.19 Assignment of Lease N/A S-1 07/01/86 10.19 dated November 11, 1983, between Epson America Inc. and the Company dated February 1, 1986 10.20 Lease Agreement N/A S-1 07/01/86 10.20 between Mozart Family Trust and the Company dated November 30, 1983 10.21 Bonus Plans N/A S-1 07/01/86 10.21 10.21.1 Revised Bonus Plan N/A 10-K 11/27/92 10.21.1 10.21.2 Revised Bonus Plan N/A 10-K 11/26/93 10.21.2 10.22 Restricted Stock Option N/A 10-K 11/30/87 10.22 Plan 10.22.1 Restricted Stock Option N/A 10-K 11/30/89 10.22.1 Plan, as amended 10.22.2 Restricted Stock Option N/A 10-K 11/30/90 10.22.2 Plan, as amended 10.22.3 Restricted Stock Option N/A 10-K 11/29/91 10.22.3 Plan, as amended 10.22.4 Restricted Stock Option N/A 10-Q 07/06/94 10.22.4 Plan, as amended (Continued) 30 (a) Index to Exhibits (Continued) Sequentially Incorporated by Reference Exhibit Numbered ------------------------------ Number Exhibit Description Page Form Date Number --------- -------------------------- ----------- ------ --------- -------- 10.23 Amended and Restated N/A 10-K 11/30/88 10.23 Software License Agree- ment between the Company and QMS, Inc., dated May 15, 1987 (confidential treatment granted) 10.24 1989 Restricted Stock Plan N/A 10-K 11/30/88 10.24 10.24.1 1994 Performance and N/A S-4 07/27/94 10.1 Restricted Stock Plan 10.25 Form of Indemnity Agree- N/A 10-K 11/30/88 10.25 ment 10.26 Lease Agreement by and N/A 10-K 11/30/88 10.26 between Charleston Place Associates and Adobe Systems Incorporated dated April 14, 1987 10.26.1 Amendment One to Lease N/A 10-K 11/30/88 10.26.1 Agreement dated March 1, 1988 10.26.2 Amendment Two to Lease N/A 10-K 11/30/88 10.26.2 Agreement dated September 1, 1988 10.27 Lease Agreement by and N/A 10-K 11/30/88 10.27 between John Mozart and Adobe Systems Incorporated dated July 20, 1988 10.28 Limited Partnership N/A 10-K 11/29/91 10.28 Agreement of University Circle Building I, Ltd., dated May 22, 1991 10.29 University Centre N/A 10-K 11/29/91 10.29 Building I Lease Agree- ment dated May 22, 1991 10.30 University Circle N/A 10-K 11/27/92 10.30 Termination and Security Agreement and Mutual Release dated January 7, 1993 (Continued) 31 (a) Index to Exhibits (Continued) Sequentially Incorporated by Reference Exhibit Numbered ------------------------------ Number Exhibit Description Page Form Date Number --------- -------------------------- ----------- ------ --------- -------- 10.31 Restated Agreement and N/A S-4 07/13/94 10.31 and Plan of Merger and Reorganization By and Among Adobe Systems Incorporated, P Acquisition Corp and Aldus Corporation 10.32 Sublease of the Land and N/A 10-K 11/25/94 10.32 Lease of the Improvements By and Between Sumitomo Bank Leasing and Finance Inc. and Adobe Systems Incorporated 11 Computation of Earnings 37 N/A N/A N/A Per Common Share 27 Financial Data Schedule 38 N/A N/A N/A
32 (b) Reports on Form 8-K No reports on Form 8-K were filed in the quarter ended March 3, 1995. 33 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ADOBE SYSTEMS INCORPORATED Date: April 14, 1995 By /s/ M. Bruce Nakao ---------------------------- M. Bruce Nakao, Senior Vice President, Finance and Administration, Chief Financial Officer, Treasurer and Assistant Secretary (Principal Financial Officer) 34 SUMMARY OF TRADEMARKS The following trademarks of Adobe Systems Incorporated, which may be registered in certain jurisdictions, are referenced in this Form 10-Q: Adobe Adobe Illustrator Adobe PageMaker Adobe Persuasion Adobe Photoshop Adobe Premiere Display PostScript PostScript Type On Call All other brand or product names are trademarks or registered trademarks of their respective holders. 35 EXHIBITS The exhibits filed as part of this report are provided in this separate section. The exhibits included in this section are as follows:
Sequentially Exhibit Numbered Number Exhibit Description Page - ---------- ------------------------------------ ------------- 11 Computation of Earnings per Common Share 37 27 Financial Data Schedule 38
36 EX-11 2 EXHIBIT 11 ADOBE SYSTEMS INCORPORATED EXHIBIT 11 COMPUTATION OF EARNINGS PER COMMON SHARE (In thousands, except per share data)
Quarters Ended ------------------------ March 3 February 25 1995 1994 ---------- ---------- Net income $ 34,350 $ 19,093 ---------- ---------- ---------- ---------- Primary shares outstanding: Weighted average shares outstanding during the period 61,562 58,844 Common stock equivalent shares 2,481 2,445 ---------- ---------- 64,043 61,289 ---------- ---------- ---------- ---------- Fully diluted shares outstanding: Weighted average shares outstanding during the period 61,562 58,844 Common stock equivalent shares 2,929 2,849 ---------- ---------- 64,491 61,693 ---------- ---------- ---------- ---------- Primary net income per common stock and common stock equivalent share $ .54 $ .31 ---------- ---------- ---------- ---------- Fully diluted net income per common stock and common stock equivalent share $ .53 $ .31 ---------- ---------- ---------- ----------
37 EX-27 3 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AT MARCH 3, 1995, AND THE CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED MARCH 3, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-01-1995 NOV-26-1994 MAR-03-1995 172,357 250,801 103,724 3,693 6,778 552,856 120,796 78,410 660,493 149,363 0 164,498 0 0 346,632 660,493 46,314 168,592 32,751 32,751 49,000 307 0 54,483 20,133 34,350 0 0 0 34,350 0.54 0.53
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