-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TSO7KBMo5X8XkuOFWO8agUdDPKOmSmHHyll7yp5VVRtAqZxESg8JRRb8N2yV9Raw Lo56HHmSQOzSZgk+70Ls8w== 0000912057-95-010387.txt : 19951127 0000912057-95-010387.hdr.sgml : 19951127 ACCESSION NUMBER: 0000912057-95-010387 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19951028 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19951124 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: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-15175 FILM NUMBER: 95596216 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 8-K/A 1 8-K/A SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ____________________ FORM 8-K/A AMENDMENT NO. 1 CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 October 28, 1995 Date of Report (Date of earliest event reported) ADOBE SYSTEMS INCORPORATED (Exact name of registrant as specified in its charter) California 033-6885 77-0019522 (State or Other (Commission File Number) (IRS Employer Jurisdiction of Incorporation) Identification No.) 1585 Charleston Road Mountain View, California 94043-1225 (Address of principal executive offices, including zip code) (415) 961-4400 (Registrant's telephone number, including area code) Not applicable (Former name or former address, if changed since last report) 2 This Amendment No. 1 to the Registrant's Current Report on Form 8-K dated October 28, 1995 (the "REPORT"), relates to the Registrant's completion of the acquisition of Frame Technology Corporation, a corporation organized and existing under the laws of the State of California ("FRAME"), by means of a merger (the "MERGER") of J Acquisition Corporation, a corporation organized and existing under the laws of the State of California and a wholly owned subsidiary of the Registrant ("MERGER SUB"), with and into Frame, pursuant to the Agreement and Plan of Merger and Reorganization, dated as of June 22, 1995 (the "MERGER AGREEMENT"), among the Registrant, Merger Sub and Frame. The purpose of this Amendment is to amend Item 7(b) to provide the required pro forma financial information relating to the business combination between the Registrant and Frame on October 28, 1995 which was impracticable to provide at the time the Registrant filed this Report. Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (b) PRO FORMA FINANCIAL INFORMATION. PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION (UNAUDITED) The following unaudited pro forma combined condensed financial statements assume a business combination between Adobe and Frame accounted for on a pooling of interests basis. The pro forma combined condensed financial statements are based on the historical financial statements and the notes thereto of Adobe and the supplemental consolidated financial statements and the notes thereto of Frame, included or incorporated by reference in the Registrant's Registration Statement on Form S-4, as amended (Registration No. 033-62167), declared effective by the Securities and Exchange Commission on September 21, 1995 under the Securities Act of 1933, as amended (the "REGISTRATION STATEMENT") and the condensed consolidated balance sheet of Frame as of September 30, 1995 and the condensed consolidated statements of income of Frame for the nine months ended September 30, 1994 and 1995. The Adobe historical financial statement data as of September 1, 1995 and for the nine months ended August 26, 1994 and September 1, 1995 and the Frame historical financial statement data as of September 30, 1995 and for the nine months ended September 30, 1994 and 1995 have been prepared on the same basis as the historical information derived from audited financial statements and, in the opinion of management, contain all adjustments, consisting only of normal recurring accruals, necessary for the fair presentation of the results of operations for such periods. The pro forma combined condensed consolidated balance sheet combines Adobe's September 1, 1995 condensed consolidated balance sheet with Frame's September 30, 1995 condensed consolidated balance sheet, giving effect to the Merger as if it had occurred on September 1, 1995. The pro forma combined condensed statements of income combine Adobe's historical condensed consolidated statements of income for the three fiscal years ended November 27, 1992, November 26, 1993 and November 25, 1994, respectively, and the unaudited nine months ended August 26, 1994 and September 1, 1995 with the corresponding Frame condensed consolidated statements of operations for each of the three fiscal years ended December 31, 1992, 1993 and 1994 and the unaudited nine months ended September 30, 1994 and 1995, respectively giving effect to the Merger as if it had occurred on November 30, 1991. On July 28, 1995, Frame acquired Mastersoft, a developer of file conversion, viewing and document comparison software for original equipment manufacturers and end users through a pooling of interests. Accordingly, Frame's historical consolidated financial statements have been restated to include the results of operations, financial position and cash flows of Mastersoft for all periods presented. The pro forma information is presented for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the Merger had been consummated at the beginning of the periods presented, nor is it necessarily indicative of future operating results or financial position. The unaudited pro forma combined condensed financial statements do not incorporate any benefits from cost savings or synergies of operations of the combined company. Adobe and Frame estimate that they will incur direct transaction costs of approximately $11.5 million associated with the Merger which will be charged to operations during the quarter ending December 1, 1995. In addition, it is expected that following the Merger, Adobe will incur a restructuring charge to operations, currently estimated to be between $15.0 million and $25.0 million in the quarter ending December 1, 1995 to reflect costs associated with combining the two companies. This amount is a preliminary estimate only and is therefore subject to change. There can be no assurance that Adobe will not incur additional charges in subsequent quarters to reflect costs associated with the Merger or that management will be successful in their efforts to integrate the operations of the two companies. The costs in connection with the Mastersoft Acquisition are not anticipated to be significant. These pro forma combined condensed financial statements should be read in conjunction with the historical consolidated financial statements and the related notes thereto of Adobe and the consolidated financial statements and the notes thereto of Frame included or incorporated by reference in the Registration Statement. 3 PRO FORMA COMBINED CONDENSED BALANCE SHEET (IN THOUSANDS) (UNAUDITED)
ADOBE FRAME SYSTEMS TECHNOLOGY ADOBE/ PRO FORMA INCORPORATED CORPORATION FRAME COMBINED SEPTEMBER 1, SEPTEMBER 30, PRO FORMA SEPTEMBER 1, 1995 1995 ADJUSTMENTS 1995 ------------ ----------------- ------------ ------------ ASSETS Current assets: Cash and cash equivalents... $108,817 $11,205 -- $120,022 Short-term investments...... 365,469 34,430 -- 399,899 Receivables................. 92,762 22,001 -- 114,763 Inventories................. 6,983 1,412 -- 8,395 Other current assets........ 9,912 4,674 -- 14,586 Deferred income taxes....... 19,675 -- $ 1,465(5) 21,140 ------------ -------- ------------ ------------ Total current assets.......... 603,618 73,722 1,465 678,805 Property and equipment........ 43,531 8,450 -- 51,981 Other assets.................. 91,089 6,708 -- 97,797 Deferred income taxes......... 9,802 -- 1,940(3) 11,742 ------------ -------- ------------ ------------ $748,040 $88,880 $ 3,405 $840,325 ------------ -------- ------------ ------------ ------------ -------- ------------ ------------ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Trade and other payables.... $ 21,916 $ 4,405 -- $ 26,321 Accrued expenses............ 82,699 10,223 -- 92,922 Accrued merger transaction and restructuring costs.... -- -- $ 36,500 (3) 36,500 Income taxes payable........ 23,695 2,458 (7,310)(3) 18,843 Deferred revenue............ 8,573 8,095 16,668 ------------ -------- ------------ ------------ Total current liabilities..... 136,883 25,181 29,190 191,254 ------------ -------- ------------ ------------ Shareholders' equity: Preferred stock............. -- -- -- -- Common stock................ 206,536 61,539 1,100 (5) 269,175 Retained earnings........... 407,872 2,320 365 (5) 383,307 (27,250)(3) Unrealized gains on investments................ 1,656 24 -- 1,680 Cumulative foreign currency translation adjustments.... (4,907) (184) (5,091) ------------ -------- ------------ ------------ Total shareholders' equity.... 611,157 63,699 (25,785) 649,071 ------------ -------- ------------ ------------ $748,040 $88,880 $ 3,405 $840,325 ------------ -------- ------------ ------------ ------------ -------- ------------ ------------
SEE ACCOMPANYING NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS. 4 PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
ADOBE FRAME SYSTEMS TECHNOLOGY PRO FORMA INCORPORATED CORPORATION COMBINED YEAR ENDED YEAR ENDED YEAR ENDED NOVEMBER 27, DECEMBER 31, PRO FORMA NOVEMBER 27, 1992 1992 ADJUSTMENTS 1992 ----------- ---------- ----------- ----------- Revenue: Licensing................... $152,701 -- -- $152,701 Application products........ 287,362 $79,968 -- 367,330 ----------- ---------- ----- ----------- Total revenue........... 440,063 79,968 -- 520,031 Direct costs.................. 87,871 11,854 -- 99,725 ----------- ---------- ----- ----------- Gross margin.................. 352,192 68,114 -- 420,306 ----------- ---------- ----- ----------- Operating expenses: Software development costs: Research and development.............. 65,181 14,862 -- 80,043 Amortization of capitalized software development costs 10,128 829 -- 10,957 Sales, marketing and customer support........... 145,748 34,529 -- 180,277 General and administrative............. 50,344 8,492 -- 58,836 Write-off of acquired in process research and development................ 6,325 -- -- 6,325 ----------- ---------- ----- ----------- Total operating expenses................ 277,726 58,712 -- 336,438 ----------- ---------- ----- ----------- Operating income.............. 74,466 9,402 -- 83,868 Nonoperating income (expense): Interest, investment and other income............... 10,982 1,131 -- 12,113 Loss on real estate partnership................ (6,000) -- -- (6,000) ----------- ---------- ----- ----------- Income before income taxes.... 79,448 10,533 -- 89,981 Income tax provision.......... 29,059 3,258 -- 32,317 ----------- ---------- ----- ----------- Net income.................... $ 50,389 $ 7,275 -- $ 57,664 ----------- ---------- ----- ----------- ----------- ---------- ----- ----------- Net income per share.......... $ 0.82 $ 0.51 $ 0.84 ----------- ---------- ----------- ----------- ---------- ----------- Shares used in computing net income per share............. 61,193 14,366 68,663 ----------- ---------- ----------- ----------- ---------- -----------
SEE ACCOMPANYING NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS. 5 PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
ADOBE FRAME SYSTEMS TECHNOLOGY PRO FORMA INCORPORATED CORPORATION COMBINED YEAR ENDED YEAR ENDED YEAR ENDED NOVEMBER 26, DECEMBER 31, PRO FORMA NOVEMBER 26, 1993 1993 ADJUSTMENTS 1993 ----------- ----------- ------------- ----------- Revenue: Licensing................... $146,176 -- -- $146,176 Application products........ 374,061 $ 59,866 -- 433,927 ----------- ----------- ------------- ----------- Total revenue........... 520,237 59,866 -- 580,103 Direct costs.................. 96,638 11,154 -- 107,792 ----------- ----------- ------------- ----------- Gross margin.................. 423,599 48,712 -- 472,311 ----------- ----------- ------------- ----------- Operating expenses: Software development costs: Research and development.............. 86,727 13,473 -- 100,200 Amortization of capitalized software development costs........ 10,208 290 -- 10,498 Sales, marketing and customer support........... 170,945 36,001 -- 206,946 General and administrative............. 59,203 6,845 -- 66,048 Write-off of acquired in process research and development................ 4,285 -- -- 4,285 Restructuring and other charges.................... -- 25,800 -- 25,800 ----------- ----------- ------------- ----------- Total operating expenses................ 331,368 82,409 -- 413,777 ----------- ----------- ------------- ----------- Operating income (loss)....... 92,231 (33,697) -- 58,534 Interest, investment and other income....................... 12,829 995 -- 13,824 ----------- ----------- ------------- ----------- Income (loss) before income taxes........................ 105,060 (32,702) -- 72,358 Income tax provision (benefit).................... 38,515 (310) $ (6,616)(5) 31,589 ----------- ----------- ------------- ----------- Net income (loss)............. $ 66,545 $(32,392) $ 6,616 $ 40,769 ----------- ----------- ------------- ----------- ----------- ----------- ------------- ----------- Net income (loss) per share... $ 1.11 $ (2.21) $ 0.60 ----------- ----------- ----------- ----------- ----------- ----------- Shares used in computing net income (loss) per share...... 60,144 14,644 68,252 ----------- ----------- ----------- ----------- ----------- -----------
SEE ACCOMPANYING NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS. 6 PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
ADOBE FRAME SYSTEMS TECHNOLOGY PRO FORMA INCORPORATED CORPORATION COMBINED YEAR ENDED YEAR ENDED YEAR ENDED NOVEMBER 25, DECEMBER 31, PRO FORMA NOVEMBER 25, 1994 1994 ADJUSTMENTS 1994 ----------- ----------- ----------- ----------- Revenue: Licensing................... $156,652 -- -- $156,652 Application products........ 441,120 $ 77,845 -- 518,965 ----------- ----------- ----------- ----------- Total revenue (a)....... 597,772 77,845 -- 675,617 Direct costs.................. 111,810 10,213 -- 122,023 ----------- ----------- ----------- ----------- Gross margin (a).............. 485,962 67,632 -- 553,594 ----------- ----------- ----------- ----------- Operating expenses: Software development costs: Research and development.............. 98,995 14,802 -- 113,797 Amortization of capitalized software development costs........ 13,316 1,013 -- 14,329 Sales, marketing and customer support........... 200,993 33,778 -- 234,771 General and administrative............. 54,021 6,510 -- 60,531 Write-off of acquired in process research and development................ 15,469 -- -- 15,469 Merger transaction and restructuring costs (b).... 72,183 -- -- 72,183 ----------- ----------- ----------- ----------- Total operating expenses................ 454,977 56,103 -- 511,080 ----------- ----------- ----------- ----------- Operating income.............. 30,985 11,529 -- 42,514 Interest, investment and other income....................... 9,012 1,420 -- 10,432 ----------- ----------- ----------- ----------- Income before income taxes.... 39,997 12,949 -- 52,946 Income tax provision.......... 33,688 1,079 $ 2,297(5) 37,064 ----------- ----------- ----------- ----------- Net income.................... $ 6,309 $ 11,870 $ (2,297) $ 15,882 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Net income per share.......... $ 0.10 $ 0.70 $ 0.23 ----------- ----------- ----------- ----------- ----------- ----------- Shares used in computing net income per share............. 61,620 16,851 70,383 ----------- ----------- ----------- ----------- ----------- ----------- - ------------------------------ (a) In connection with the merger with Aldus, Adobe discontinued marketing two products, FreeHand and PhotoStyler, which generated aggregate revenue and gross margin of $53.2 million and $35.4 million, respectively, in 1994. (b) Reflects incremental costs incurred in connection with the merger with Aldus.
SEE ACCOMPANYING NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS. 7 PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
ADOBE FRAME SYSTEMS TECHNOLOGY PRO FORMA INCORPORATED CORPORATION COMBINED NINE MONTHS NINE MONTHS NINE MONTHS ENDED ENDED ENDED AUGUST 26, SEPTEMBER 30, PRO FORMA AUGUST 26, 1994 1994 ADJUSTMENTS 1994 ----------- ----------- ----------- ----------- Revenue: Licensing................... $115,713 -- -- $115,713 Application products........ 316,609 $ 55,646 -- 372,255 ----------- ----------- ----------- ----------- Total revenue (a)....... 432,322 55,646 -- 487,968 Direct costs.................. 80,061 7,462 -- 87,523 ----------- ----------- ----------- ----------- Gross margin (a).............. 352,261 48,184 -- 400,445 ----------- ----------- ----------- ----------- Operating expenses: Software development costs: Research and development.............. 69,537 10,656 -- 80,193 Amortization of capitalized software development costs........ 10,689 700 -- 11,389 Sales, marketing and customer support........... 149,401 24,692 -- 174,093 General and administrative............. 39,068 4,424 -- 43,492 Write-off of acquired in process research and development................ 3,045 -- -- 3,045 ----------- ----------- ----------- ----------- Total operating expenses................ 271,740 40,472 -- 312,212 ----------- ----------- ----------- ----------- Operating income.............. 80,521 7,712 -- 88,233 Interest, investment and other income....................... 5,625 942 -- 6,567 ----------- ----------- ----------- ----------- Income before income taxes.... 86,146 8,654 -- 94,800 Income tax provision.......... 31,686 704 $ 2,325 (5) 34,715 ----------- ----------- ----------- ----------- Net income.................... $ 54,460 $ 7,950 $ (2,325) $ 60,085 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Net income per share.......... $ 0.88 $ 0.47 $ 0.85 ----------- ----------- ----------- ----------- ----------- ----------- Shares used in computing net income per share............. 61,874 16,851 70,637 ----------- ----------- ----------- ----------- ----------- ----------- - ------------------------------ (a) In connection with the merger with Aldus, Adobe discontinued marketing two products, FreeHand and PhotoStyler, which generated aggregate revenue and gross margin of $44.7 million and $29.2 million, respectively, during the nine months ended August 26, 1994.
SEE ACCOMPANYING NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS. 8 PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
ADOBE FRAME SYSTEMS TECHNOLOGY PRO FORMA INCORPORATED CORPORATION COMBINED NINE MONTHS NINE MONTHS NINE MONTHS ENDED ENDED ENDED SEPTEMBER 1, SEPTEMBER 30, PRO FORMA SEPTEMBER 1, 1995 1995 ADJUSTMENTS 1995 ----------- ----------- ----------- ----------- Revenue: Licensing................... $136,486 -- -- $136,486 Application products........ 356,752 $ 74,357 -- 431,109 ----------- ----------- ----------- ----------- Total revenue........... 493,238 74,357 -- 567,595 Direct costs.................. 89,267 9,998 -- 99,265 ----------- ----------- ----------- ----------- Gross margin.................. 403,971 64,359 -- 468,330 ----------- ----------- ----------- ----------- Operating expenses: Software development costs: Research and development.............. 82,017 13,983 -- 96,000 Amortization of capitalized software development costs........ 7,084 1,549 -- 8,633 Sales, marketing and customer support........... 144,970 29,171 -- 174,141 General and administrative............. 35,062 5,465 -- 40,527 ----------- ----------- ----------- ----------- Total operating expenses................ 269,133 50,168 -- 319,301 ----------- ----------- ----------- ----------- Operating income.............. 134,838 14,191 -- 149,029 Interest, investment and other income....................... 19,028 1,623 -- 20,651 ----------- ----------- ----------- ----------- Income before income taxes.... 153,866 15,814 -- 169,680 Income tax provision.......... 56,161 1,581 $ 3,954(5) 61,696 ----------- ----------- ----------- ----------- Net income.................... $ 97,705 $ 14,233 $ (3,954) $107,984 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Net income per share.......... $ 1.48 $ 0.79 $ 1.43 ----------- ----------- ----------- ----------- ----------- ----------- Shares used in computing net income per share............. 66,032 17,909 75,345 ----------- ----------- ----------- ----------- ----------- -----------
SEE ACCOMPANYING NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS. 9 NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS NOTE 1. PERIODS COMBINED The Adobe statements of income for each of the years in the three-year period ended November 25, 1994 and the nine months ended August 26, 1994 and September 1, 1995 have been combined with the Frame statements of operations for each of the years in the three-year period ended December 31, 1994 and the nine months ended September 30, 1994 and September 30, 1995. The Adobe balance sheet as of September 1, 1995 has been combined with the Frame balance sheet as of September 30, 1995. On July 28, 1995, Frame acquired Mastersoft, a developer of file conversion, viewing and document comparison software for original equipment manufacturers and end users through a pooling of interests. Accordingly, Frame's historical consolidated financial statements have been restated to include the results of operations, financial position and cash flows of Mastersoft. NOTE 2. PRO FORMA EARNINGS PER SHARE The pro forma combined condensed statements of income for Adobe and Frame have been prepared as if the Merger was completed at the beginning of the periods presented. The pro forma combined net income per share is based on the combined weighted average number of common and common equivalent shares of Adobe Common Stock and Frame Common Stock for each period, based on the exchange ratio of 0.52 shares of Adobe Common Stock for each share of Frame Common Stock. NOTE 3. BASIS OF PRESENTATION PRO FORMA BASIS OF PRESENTATION The pro forma combined condensed financial statements reflect the issuance of 8,489,087 shares of Adobe Common Stock in exchange for an aggregate of 16,325,167 shares of Frame Common Stock (outstanding as of September 30, 1995) in connection with the Merger based on the exchange ratio of 0.52 shares of Adobe Common Stock for every share of Frame Common Stock. The following table provides the pro forma share issuances in connection with the merger: Frame Common Stock outstanding at September 30, 1995........... 16,325,167 Exchange Ratio................................................. 0.52:1.00 ---------- Number of shares of Adobe Common Stock exchanged............... 8,489,087 Number of shares of Adobe Common Stock outstanding at September 1, 1995.............................................. 63,819,199 ---------- Number of shares of Adobe Common Stock outstanding after completion of the Merger...................................... 72,308,286 ---------- ----------
The actual number of shares of Adobe Common Stock issued at the Effective Time, October 28, 1995, was 8,499,506, based on the number of shares of Frame Common Stock outstanding at such time. MERGER TRANSACTION AND RESTRUCTURING COSTS Adobe and Frame estimate they will incur direct transaction costs of approximately $11.5 million associated with the Merger, consisting of transaction fees for investment bankers, attorneys, accountants, financial printing and other related charges. These nonrecurring costs will be charged to operations in the fiscal quarter in which the Merger is consummated. In addition, it is expected that as a result of the Merger, the combined company will incur restructuring costs currently estimated to be between $15.0 million and $25.0 million. The restructuring costs will include severance and outplacement, and elimination of duplicate facilities, including cancellation of leases. 10 NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS (CONTINUED) NOTE 3. BASIS OF PRESENTATION (CONTINUED) The pro forma combined condensed balance sheet gives effect to such expenses as if they had been incurred as of September 1, 1995, but the effects of these costs have not been reflected in the pro forma combined condensed statements of income. The income tax effect of the merger transaction and restructuring costs has also been reflected as a pro forma adjustment. NOTE 4. CONFORMING ADJUSTMENTS There have been no adjustments required to conform the accounting policies of the combined company. Certain amounts for Frame have been reclassified to conform with Adobe's financial statement presentation. There have been no significant intercompany transactions. NOTE 5. PROVISION FOR INCOME TAXES Since Adobe plans to file consolidated tax returns which will include Frame's operations subsequent to the Effective Time, pro forma adjustments were made to reduce the valuation allowances previously provided by Frame in connection with Frame's loss carryforward generated in 1993. Adobe has determined that estimated combined future taxable income is sufficient to conclude that it is more likely than not that the tax benefit of the loss carryforwards will be realized. Mastersoft was subject to Subchapter S of the Internal Revenue Code and, accordingly, was not subject to income tax. Any additional pro forma income tax provisions assuming that Mastersoft was not subject to Subchapter S would be insignificant to the pro forma combined condensed statements of income. 11 SIGNATURES 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 hereunto duly authorized. ADOBE SYSTEMS INCORPORATED Dated: November 24, 1995 By /s/ M. Bruce Nakao ------------------------- M. Bruce Nakao Senior Vice President, Finance and Administration, Chief Financial Officer, Treasurer and Assistant Secretary -----END PRIVACY-ENHANCED MESSAGE-----