8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (date of earliest event reported): September 16, 2008

Adobe Systems Incorporated

(Exact name of Registrant as specified in its charter)

Delaware (State or other jurisdiction of
incorporation) 0-15175 (Commission File Number) 77-0019522 (I.R.S. Employer Identification No.)

345 Park Avenue
San Jose, California 95110-2704
(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code: (408) 536-6000

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Section 2 – Financial Information

Item 2.02. Results of Operations and Financial Condition.

On September 16, 2008, Adobe issued a press release announcing its financial results for its third fiscal quarter ended August 29, 2008. A copy of this press release is furnished and attached hereto as Exhibit 99.1 and is incorporated herein by reference.

The information in this report and the exhibit attached hereto are being furnished and shall not be deemed filed for purposes of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except as shall be expressly stated by specific reference in such filing.

The attached press release includes non-GAAP diluted earnings per share, non-GAAP net income, non-GAAP operating income, non-GAAP operating margin, non-GAAP operating expenses, non-GAAP effective tax rate and forecasted non-GAAP operating margin, non-GAAP non-operating income and non-GAAP earnings per share.

These non-GAAP measures are not in accordance with, or an alternative for, generally accepted accounting principles and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. We believe that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP measures.

For our internal budgeting and resource allocation process, we use non-GAAP financial measures that exclude: (A) the stock-based compensation impact of Statement of Financial Accounting Standards No. 123—revised 2004 (“SFAS 123R”), “Share-Based Payment” and related tax impact; (B) restructuring and other charges and related tax impact; (C) amortization of purchased intangibles, technology license arrangements and incomplete technology and related tax impact; (D) income tax effect of the resolution of an income tax audit, (E) investment gains and losses and related tax impact; and (F) the income tax effect of the non-GAAP pre-tax adjustments from the provision for income taxes.  We use these non-GAAP financial measures in making operating decisions because we believe the measures provide meaningful supplemental information regarding our operational performance and give us a better understanding of how we should invest in research and development and fund infrastructure and go-to-market strategies.  We use these measures to help us make budgeting decisions, for example, as between product development expenses and research and development, sales and marketing and general and administrative expenses. In addition, these non-GAAP financial measures facilitate our internal comparisons to our historical operating results and comparisons to competitors’ operating results.

As described above, we exclude the following items from one or more of our non-GAAP measures:

A.            Stock-based compensation impact of SFAS 123R and related tax impact.  These expenses consist of expenses for employee stock options, restricted stock units and performance shares and employee stock purchases under SFAS 123R including the amortization of stock-based compensation related to unvested options assumed in connection with our acquisition of Macromedia in December 2005. We exclude stock-based compensation expenses from our non-GAAP measures primarily because they are non-cash expenses. Prior to the adoption of SFAS 123R in fiscal 2006, we did not include stock-based compensation expenses directly in our financial statements, but elected, as permitted by SFAS 123, to disclose such expenses in the footnotes to our financial statements.  As we apply SFAS 123R, we believe that it is useful to investors to understand the impact of the application of SFAS 123R to our operational performance, liquidity and our ability to invest in research and development and fund acquisitions and capital expenditures.  While stock-based compensation expense calculated in accordance with SFAS 123R constitutes an ongoing and recurring expense, such expense is excluded from non-GAAP results because it is not an expense that typically requires or will require cash settlement by us and because such expense is not used by us to assess the core profitability of our business operations. We further believe these measures are useful to investors in that they allow for greater transparency to certain line items in our financial statements.  In addition, excluding this item from various non-GAAP measures facilitates comparisons to our competitors’ operating results.

B.            Restructuring and other charges and related tax impact.  We incurred Board of Director approved restructuring charges associated with realigning our business upon the acquisition of Macromedia in December 2005.  These actions were taken to eliminate certain duplicative activities, focus our resources on future growth opportunities and reduce our cost structure.  In connection with the worldwide restructuring plan, we recognized costs related to termination benefits for former Adobe employees whose positions were eliminated and for the closure of Adobe facilities.  We also recognized costs related to the cancellation of certain contracts held by us.  We exclude these items because these expenses are not reflective of ongoing operating results in the current period.

C.            Amortization of purchased intangibles, technology license arrangements and incomplete technology and related tax impact.  We incur amortization of purchased intangible assets primarily in connection with our acquisition of Macromedia in December 2005. Purchased intangibles include (a) developed technology and (b) core technology and patents. Developed technology relates primarily to Macromedia products across all of Macromedia product lines that had reached technological feasibility as of December 2005. Core technology and patents represent primarily a combination of Macromedia’s processes, patents and trade secrets developed through years of experience in design and development of its products. We expect to amortize for accounting purposes the fair value of the purchased intangibles based on the pattern in which the economic benefits of the intangible assets will be consumed as revenue is generated.  Although the intangible assets generate revenue for us, we exclude this item because this expense is non-cash in nature and because we believe the non-GAAP financial measures excluding this item provide meaningful supplemental information regarding our operational performance, liquidity and our ability to invest in research and development and fund acquisitions and capital expenditures.  In addition, excluding this item from various non-GAAP measures facilitates our internal comparisons to our historical operating results and comparisons to our competitors’ operating results. We also incurred charges related to (i) amortization of purchased intangible assets and incomplete technology in connection with certain small acquisitions and (ii) prior activity in connection with certain technology license arrangements. We exclude these items because these expenses are not reflective of ongoing operating results in the current period.

D.Income tax effect of the resolution of an income tax audit.  In the third quarter of 2008, we realized a one-time tax benefit as a result of the resolution of an income tax audit for fiscal years 2001 through 2004.  We have excluded this item because this tax benefit is unrelated to our ongoing business and operating results.

E.            Investment gains and losses and related tax impact.  We incur investment gains and losses on the sale and exchange of equity securities that are held directly and also indirectly through investment partnerships. We do not actively trade publicly-held securities nor do we rely on these securities positions for funding our ongoing operations.  We exclude gains and losses and the related tax impact on these equity securities because these items are unrelated to our ongoing business and operating results.

F.             Income tax effect of the non-GAAP pre-tax adjustments from the provision for income taxes. Excluding the income tax effect of the non-GAAP pre-tax adjustments from the provision for income taxes assists investors in understanding the tax provision associated with those adjustments and the effective tax rate related to our ongoing operations.

We believe that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with our financial results as determined in accordance with GAAP and that these measures should only be used to evaluate our financial results in conjunction with the corresponding GAAP measures and that is why we qualify the use of non-GAAP financial information in a statement when non-GAAP information is presented.

Section 9 – Financial Statements and Exhibits

Item 9.01. Financial Statements and Exhibits.

(d)Exhibits

99.1Press release issued on September 16, 2008 entitled “Adobe Reports Strong Q3 Financial Results.”

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	ADOBE SYSTEMS INCORPORATED
Date: September 16, 2008	By:	/s/  MARK GARRETT
		Mark Garrett
		Executive Vice President and Chief
		Financial Officer

EXHIBIT INDEX

Exhibit No.	Description
99.1	Press release issued on September 16, 2008 entitled “Adobe Reports Strong Q3 Financial Results.”

EX-99.1

Exhibit 99.1

	Investor Relations Contact
	Mike Saviage
	Adobe Systems Incorporated
	408-536-4416
	ir@adobe.com
	Public Relations Contact
	Holly Campbell
	Adobe Systems Incorporated
	408-536-6401
	campbell@adobe.com

FOR IMMEDIATE RELEASE

Adobe Reports Strong Q3 Financial Results

Revenue and Earnings Performance Driven by Record Acrobat and LiveCycle Revenue

SAN JOSE, Calif. – September 16, 2008 – Adobe Systems Incorporated (Nasdaq:ADBE) today reported financial results for its third quarter ended August 29, 2008.

In the third quarter of fiscal 2008, Adobe achieved revenue of $887.3 million, compared to $851.7 million reported for the third quarter of fiscal 2007 and $886.9 million reported in the second quarter of fiscal 2008.  Adobe’s third quarter revenue target range was $855 to $885 million.

“Our strong performance in Q3 was driven by record revenue for our Acrobat and LiveCycle products, as well as the overall diversity of our business,” said Shantanu Narayen, president and chief executive officer. “We continue to execute exceptionally well against our strategy, and we look forward to the launch of our flagship Creative Suite 4 product family next week.”

Third Quarter GAAP Results

Adobe’s GAAP diluted earnings per share for the third quarter of fiscal 2008 were $0.35, based on 541.3 million weighted average shares. This compares with GAAP diluted earnings per share of $0.34 reported in the third quarter of fiscal 2007 based on 597.3 million weighted average shares, and GAAP diluted earnings per share of $0.40 reported in the second quarter of fiscal 2008 based on 542.4 million weighted average shares. Adobe’s third quarter GAAP earnings per share target range was $0.34 to $0.36.

GAAP operating income was $219.5 million in the third quarter of fiscal 2008, compared to $255.0 million in the third quarter of fiscal 2007 and $260.2 million in the second quarter of fiscal 2008.  As a percent of revenue, GAAP operating income in the third quarter of fiscal 2008 was 24.7 percent, compared to 29.9 percent in the third quarter of fiscal 2007 and 29.3 percent in the second quarter of fiscal 2008.

GAAP net income was $191.6 million for the third quarter of fiscal 2008, compared to $205.2 million reported in the third quarter of fiscal 2007 and $214.9 million in the second quarter of fiscal 2008.

Third Quarter Non-GAAP Results

Non-GAAP diluted earnings per share for the third quarter of fiscal 2008 were $0.50.  This compares with non-GAAP diluted earnings per share of $0.45 reported in the third quarter of fiscal 2007 and non-GAAP diluted earnings per share of $0.50 reported in the second quarter of fiscal 2008.  Adobe’s third quarter non-GAAP earnings per share target range was $0.45 to $0.47.

Adobe’s non-GAAP operating income was $351.9 million in the third quarter of fiscal 2008, compared to $340.9 million in the third quarter of fiscal 2007 and $349.6 million in the second quarter of fiscal 2008.  As a percent of revenue, non-GAAP operating income in the third quarter of fiscal 2008 was 39.7 percent, compared to 40.0 percent in the third quarter of fiscal 2007 and 39.4 percent in the second quarter of fiscal 2008.

Non-GAAP net income was $269.1 million for the third quarter of fiscal 2008, compared to $269.4 million in the third quarter of fiscal 2007, and $272.7 million in the second quarter of fiscal 2008.

A reconciliation between GAAP and non-GAAP results is provided at the end of this press release.

Adobe Provides Fourth Quarter Financial Targets

For the fourth quarter of fiscal 2008, Adobe announced it is targeting revenue of $925 million to $955 million.  The Company also stated it is targeting an operating margin of approximately 30.5 percent on a GAAP basis, and an operating margin of approximately 39.5 percent on a non-GAAP basis.

In addition, Adobe is targeting its share count to be between 544 million and 548 million shares in the fourth quarter.  The Company also is targeting GAAP and non-GAAP non-operating income to be between

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$6 million and $7 million.  Adobe’s GAAP and non-GAAP tax rates are expected to be approximately 25 percent.

These targets lead to a fourth quarter diluted earnings per share target range of $0.39 to $0.41 on a GAAP basis, and an earnings per share target range of $0.51 to $0.53 on a non-GAAP basis.

A reconciliation between these GAAP and non-GAAP financial targets is provided at the end of this press release.

Forward-Looking Statements Disclosure

This press release contains forward-looking statements, including those related to revenue, operating margin, non-operating income, tax rate, share count, earnings per share, and business momentum which involve risks and uncertainties that could cause actual results to differ materially. Factors that might cause or contribute to such differences include, but are not limited to: delays in development or shipment of Adobe’s new products or major new versions of existing products, introduction of new products and business models by existing and new competitors, failure to successfully manage transitions to new business models and markets, failure to anticipate and develop new products and services in response to changes in demand for application software and software delivery, computers, printers, or other non PC-devices, adverse changes in general economic or political conditions in any of the major countries in which Adobe does business, difficulty in predicting revenue from new businesses, costs related to intellectual property acquisitions, disputes and litigation, inability to protect Adobe’s intellectual property from third-party infringers, use, disclosure or malicious attack, failure to realize the anticipated benefits of past or future acquisitions and difficulty in integrating such acquisitions, failure to manage Adobe’s sales and distribution channels effectively, disruption of Adobe’s business due to catastrophic events, risks associated with international operations, fluctuations in foreign currency exchange rates, changes in, or interpretations of, accounting principles, impairment of Adobe’s goodwill or intangible assets, unanticipated changes in, or interpretations of, tax rules and regulations, Adobe’s inability to attract and retain key personnel, impairment of Adobe’s investment portfolio due to further deterioration of the capital markets, market risks associated with Adobe’s equity investments, and interruptions or terminations in Adobe’s relationships with turnkey assemblers. For further discussion of these and other risks and uncertainties, individuals should refer to Adobe’s SEC filings.

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The financial information set forth in this press release reflects estimates based on information available at this time.  These amounts could differ from actual reported amounts stated in Adobe’s Quarterly Report on Form 10-Q for the third quarter ended August 29, 2008, which the Company expects to file in October 2008.  Adobe does not undertake an obligation to update forward-looking statements.

About Adobe Systems Incorporated

Adobe revolutionizes how the world engages with ideas and information – anytime, anywhere and through any medium. For more information, visit www.adobe.com.

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© 2008 Adobe Systems Incorporated. All rights reserved. Adobe, Acrobat, Creative Suite, LiveCycle,  and the Adobe logo are either registered trademarks or trademarks of Adobe Systems Incorporated in the United States and/or other countries. All other trademarks are the property of their respective owners.

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Condensed Consolidated Statements of Income

(In thousands, except per share data; unaudited)

	Three Months Ended						Nine Months Ended
	August 29, 2008			August 31, 2007			August 29, 2008			August 31, 2007
Revenue:
Products	$	838,813		$	813,382		$	2,532,076		$	2,147,149
Services and support	48,444			38,304			132,512			99,521
Total revenue	887,257			851,686			2,664,588			2,246,670
Total cost of revenue:
Products	84,623			69,002			202,657			193,532
Services and support	26,228			23,619			73,535			62,566
Total cost of revenue	110,851			92,621			276,192			256,098
Gross profit	776,406			759,065			2,388,396			1,990,572
Operating expenses:
Research and development	170,124			163,217			508,909			450,395
Sales and marketing	271,439			251,243			813,399			702,323
General and administrative	97,156			71,132			257,163			201,004
Restructuring and other charges	1,194			555			2,625			555
Amortization of purchased intangibles and incomplete technology	17,024			17,893			51,222			54,542
Total operating expenses	556,937			504,040			1,633,318			1,408,819
Operating income	219,469			255,025			755,078			581,753
Non-operating income (expense):
Interest and other income, net	9,338			22,733			34,778			65,866
Interest expense	(2,390		)	(69		)	(8,027		)	(175		)
Investment gains (loss)	2,097			(694		)	20,335			9,069
Total non-operating income, net	9,045			21,970			47,086			74,760
Income before income taxes	228,514			276,995			802,164			656,513
Provision for income taxes	36,906			71,752			176,267			154,914
Net income	$	191,608		$	205,243		$	625,897		$	501,599
Basic net income per share	$	0.36		$	0.35		$	1.15		$	0.85
Shares used in computing basic net income per share	531,060			583,670			542,624			587,141
Diluted net income per share	$	0.35		$	0.34		$	1.13		$	0.83
Shares used in computing diluted net income per share	541,311			597,334			552,739			602,263

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Condensed Consolidated Balance Sheets

(In thousands, except per share data; unaudited)

	August 29,			November 30,
	2008			2007
ASSETS
Current assets:
Cash and cash equivalents	$	1,134,263		$	946,422
Short-term investments	866,641			1,047,432
Trade receivables, net of allowances for doubtful accounts of $6,264 and $4,398, respectively	327,970			318,145
Other receivables	33,687			44,666
Deferred income taxes	94,500			171,472
Prepaid expenses and other assets	60,059			44,714
Total current assets	2,517,120			2,572,851
Property and equipment, net	317,071			289,758
Goodwill	2,134,032			2,148,102
Purchased and other intangibles, net	246,401			367,644
Investment in lease receivable	207,239			207,239
Other assets	216,887			128,085
	$	5,638,750		$	5,713,679
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Trade and other payables	$	56,254		$	66,867
Accrued expenses	356,408			383,436
Accrued restructuring	6,862			3,731
Income taxes payable	37,546			215,058
Deferred revenue	204,593			183,318
Total current liabilities	661,663			852,410
Long-term liabilities:
Debt	350,000			—
Deferred revenue	27,838			25,950
Accrued restructuring	8,096			13,987
Income taxes payable	99,636			—
Deferred income taxes	96,827			148,943
Other liabilities	23,248			22,407
Total liabilities	1,267,308			1,063,697
Stockholders’ equity:
Preferred stock, $0.0001 par value; 2,000 shares authorized	—			—
Common stock, $0.0001 par value	61			61
Additional paid-in-capital	2,369,689			2,340,969
Retained earnings	4,667,489			4,041,592
Accumulated other comprehensive income	23,439			27,948
Treasury stock, at cost (69,359 and 29,425 shares, respectively), net of reissuances	(2,689,236		)	(1,760,588		)
Total stockholders’ equity	4,371,442			4,649,982
	$	5,638,750		$	5,713,679

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Condensed Consolidated Statements of Cash Flows

(In thousands; unaudited)

	Three Months Ended
	August 29, 2008			August 31, 2007
Cash flows from operating activities:
Net income	$	191,608		$	205,243
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion	62,679			81,727
Stock-based compensation expense, net of tax	106,297			45,490
Net investment gains	(1,111		)	(911		)
Changes in deferred revenue	16,018			(16,834		)
Changes in operating assets and liabilities	(163,720		)	109,959
Net cash provided by operating activities	211,771			424,674
Cash flows from investing activities:
Purchases of short-term investments, net of sales and maturities	(168,586		)	29,356
Purchases of property and equipment	(39,810		)	(32,160		)
Purchases of long term investments and other assets, net of sales	(56,792		)	(52,738		)
Cash received from acquisitions	—			639
Net cash used for investing activities	(265,188		)	(54,903		)
Cash flows from financing activities:
Purchases of treasury stock	(122,552		)	(850,044		)
Reissuances of treasury stock	138,987			122,713
Excess tax benefits from stock-based compensation	14,306			16,974
Net cash provided by (used for) financing activities	30,741			(710,357		)
Effect of exchange rate changes on cash and cash equivalents	(5,514		)	(1,748		)
Net decrease in cash and cash equivalents	(28,190		)	(342,334		)
Cash and cash equivalents at beginning of period	1,162,453			901,617
Cash and cash equivalents at end of period	$	1,134,263		$	559,283

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Non-GAAP Results

(In thousands, except per share data)

The following tables show the Company’s non-GAAP results reconciled to GAAP results included in this release for the quarters ended August 29, 2008, August 31, 2007 and May 30, 2008.

	Three Months Ended
	August 29, 2008			August 31, 2007		May 30, 2008
Operating income:
GAAP operating income	$	219,469		$	255,025	$	260,178
Stock-based compensation	48,260			38,707		48,388
Restructuring and other charges	1,194			555		—
Amortization of purchased intangibles, technology license arrangements and incomplete technology	82,996			46,570		41,071
Non-GAAP operating income	$	351,919		$	340,857	$	349,637
Net income:
GAAP net income	$	191,608		$	205,243	$	214,910
Stock-based compensation, net of tax	36,339			28,680		34,998
Restructuring and other charges, net of tax	899			411		—
Amortization of purchased intangibles, technology license arrangements and incomplete technology, net of tax	61,829			34,521		29,705
Resolution of an income tax audit	(20,712		)	—		—
Investment (gain) loss, net of tax	(913		)	514		(6,875		)
Non-GAAP net income	$	269,050		$	269,369	$	272,738
Diluted net income per share:
GAAP net income	$	0.35		$	0.34	$	0.40
Stock-based compensation, net of tax	0.08			0.05		0.07
Restructuring and other charges, net of tax	—			—		—
Amortization of purchased intangibles, technology license arrangements and incomplete technology, net of tax	0.11			0.06		0.05
Resolution of an income tax audit	(0.04		)	—		—
Investment gain, net of tax	—			—		(0.02		)
Non-GAAP net income	$	0.50		$	0.45	$	0.50
Shares used computing diluted net income per share	541,311			597,334		542,376

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	Three Months
	August 29, 2008			May 30, 2008
Operating expenses:
GAAP operating expenses	$	556,937		$	543,842
Stock-based compensation	(46,841		)	(47,200		)
Restructuring and other charges	(1,194		)	—
Amortization of purchased intangibles, technology license arrangements and incomplete technology	(33,802		)	(17,099		)
Non-GAAP operating expenses	$	475,100		$	479,543

	Three Months
	August 29, 2008		August 31, 2007		May 30, 2008
Operating margin:
GAAP operating margin	24.7	%	29.9	%	29.3	%
Stock-based compensation	5.4		4.6		5.5
Restructuring and other charges	0.1		0.1		—
Amortization of purchased intangibles, technology license arrangements and incomplete technology	9.5		5.4		4.6
Non-GAAP operating margin	39.7	%	40.0	%	39.4	%

	Three Months
	August 29, 2008
Effective income tax rate:
GAAP effective income tax rate	16.2	%
Stock-based compensation	0.1
Amortization of purchased intangibles, technology license arrangements and incomplete technology	0.1
Resolution of an income tax audit	8.6
Non-GAAP effective income tax rate	25.0	%

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Fourth Quarter Fiscal Year 2008 Non-GAAP Financial Targets

(In millions, except per share data)

The following tables show the Company’s fourth quarter fiscal year 2008 non-GAAP financial targets reconciled to GAAP financial targets included in this release.

	Fourth Quarter Fiscal 2008
Operating margin:
GAAP operating margin	30.5	%
Stock-based compensation	4.7
Amortization of purchased intangibles and incomplete technology	4.3
Non-GAAP operating margin	39.5	%

	Fourth Quarter Fiscal 2008
	Low		High
Diluted net income per share:
GAAP net income per share	$	0.39	$	0.41
Stock-based compensation, net of tax	0.07		0.07
Amortization of purchased intangibles and incomplete technology, net of tax	0.05		0.05
Non-GAAP net income per share	$	0.51	$	0.53
Shares used in computing diluted net income per share	548.0		544.0

Adobe continues to provide all information required in accordance with GAAP, but believes evaluating its ongoing operating results may not be as useful if an investor is limited to reviewing only GAAP financial measures.  Accordingly, Adobe uses non-GAAP financial information to evaluate its ongoing operations and for internal planning and forecasting purposes.  Adobe’s management does not itself, nor does it suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.  Adobe presents such non-GAAP financial measures in reporting its financial results to provide investors with an additional tool to evaluate Adobe’s operating results in a manner that focuses on what Adobe believes to be its ongoing business operations.  Adobe’s management believes it is useful for itself and investors to review, as applicable,  both GAAP information that includes the stock-based compensation impact of SFAS 123R, restructuring and other charges, amortization of purchased intangibles, technology license arrangements and incomplete technology, investment gains and losses and the related tax impact

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of these items, the resolution of an income tax audit, the income tax effect of the non-GAAP pre-tax adjustments from the provision for income taxes, and the non-GAAP measures that exclude such information in order to assess the performance of Adobe’s business and for planning and forecasting in subsequent periods.  Whenever Adobe uses such a non-GAAP financial measure, it provides a reconciliation of the non-GAAP financial measure to the most closely applicable GAAP financial measure.  Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measure as detailed above.

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