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 15, 2009

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 15, 2009, Adobe issued a press release announcing its financial results for its third fiscal quarter ended August 28, 2009. 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 operating income, non-GAAP operating margin, non-GAAP net income, non-GAAP operating expenses, non-GAAP tax rate and non-GAAP diluted earnings per share, and forecasted non-GAAP operating margin, non-GAAP diluted earnings per share and non-GAAP tax rate.

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, net of the related tax impacts, which exclude: (A) stock-based and deferred compensation expenses; (B) restructuring charges; (C) amortization of purchased intangibles and technology license arrangements; (D) investment gains and losses; (E) the resolution of an income tax audit; 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 and deferred compensation expenses and related tax impact.  Stock-based compensation expense consists of charges for employee stock options, restricted stock units and performance shares and employee stock purchases under Statement of Financial Accounting Standards No. 123 – revised 2004 (“SFAS 123R”) including the amortization of stock-based compensation related to unvested options assumed in connection with our acquisition of Macromedia in December 2005. Prior to the adoption of SFAS 123R in fiscal 2006, we did not include stock-based compensation expense directly in our financial statements, but elected, as permitted by SFAS 123, to disclose such expense 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.  Although stock-based compensation expense is calculated in accordance with SFAS 123R and 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. Deferred compensation expense consists of charges associated with movements in our liability related to our deferred compensation plan. Although deferred compensation expense constitutes an ongoing and recurring expense, such expense is excluded from non-GAAP results because it is not an expense that typically requires current 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 these items from various non-GAAP measures facilitate comparisons to our competitors’ operating results.

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B.            Restructuring charges and related tax impact.  In November 2008, we initiated restructuring actions associated with realigning our business strategies based on current economic conditions. In connection with these restructuring actions, we recognized costs related to termination benefits for former Adobe employees whose positions were eliminated and the consolidation of leased facilities. We also incurred restructuring charges associated with realigning our business upon the acquisition of Macromedia in December 2005 (the “Macromedia Restructuring”). The actions in the Macromedia Restructuring were taken to eliminate certain duplicative activities, focus our resources on future growth opportunities and reduce our cost structure.  In connection with the Macromedia Restructuring, we recognized costs related to termination benefits for former Adobe employees whose positions were eliminated, the closure of Adobe facilities and the cancellation of certain contracts held by us.  We exclude these charges because these expenses are not reflective of ongoing operating results in the current period.

C.            Amortization of purchased intangibles and technology license arrangements 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 (i) developed technology and (ii) 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 on-going charges related to (i) amortization of purchased intangible assets 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.            Investment gains and losses and related tax impact.  We incur investment gains and losses principally from realized gains or losses from the sale and exchange of marketable equity investments, other-than-temporary declines in the value of marketable and non-marketable equity securities, unrealized holding gains and losses associated with our deferred compensation plan assets (classified as trading securities) and gains and losses on the sale of equity securities held 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.

E.             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.

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.

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Section 9 – Financial Statements and Exhibits

Item 9.01. Financial Statements and Exhibits.

(d)Exhibits

99.1    Press release issued on September 15, 2009 entitled “Adobe Reports Third Quarter Results.”

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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 15, 2009	By:	/s/ MARK GARRETT
		Mark Garrett
		Executive Vice President and Chief Financial Officer

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EXHIBIT INDEX

Exhibit No.	Description
99.1	Press release issued on September 15, 2009 entitled “Adobe Reports Third Quarter Results.”

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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 Third Quarter Results

SAN JOSE, Calif. — Sept. 15, 2009 — Adobe Systems Incorporated (Nasdaq:ADBE) today announced financial results for its third quarter ended August 28, 2009.

In the third quarter of fiscal 2009, Adobe achieved revenue of $697.5 million, compared to $887.3 million reported for the third quarter of fiscal 2008 and $704.7 million reported in the second quarter of fiscal 2009.

“We are pleased with the solid revenue and earnings results we were able to deliver in Q3,” said Shantanu Narayen, president and CEO of Adobe.  “Our focus remains on driving growth in our core businesses, as well as investing in promising new opportunities.”

Third Quarter Fiscal 2009 GAAP Results

Adobe’s GAAP diluted earnings per share for the third quarter of fiscal 2009 were $0.26, based on 531.8 million weighted average shares. This compares with GAAP diluted earnings per share of $0.35 reported in the third quarter of fiscal 2008 based on 541.3 million weighted average shares, and GAAP diluted earnings per share of $0.24 reported in the second quarter of fiscal 2009 based on 528.0 million weighted average shares.

GAAP operating income was $167.6 million in the third quarter of fiscal 2009, compared to $219.5 million in the third quarter of fiscal 2008 and $161.4 million in the second quarter of fiscal 2009.  As a percent of revenue, GAAP operating income in the third quarter of fiscal 2009 was 24.0 percent, compared to 24.7 percent in the third quarter of fiscal 2008 and 22.9 percent in the second quarter of fiscal 2009.

GAAP net income was $136.0 million for the third quarter of fiscal 2009, compared to $191.6 million reported in the third quarter of fiscal 2008 and $126.1 million in the second quarter of fiscal 2009.

Third Quarter Fiscal 2009 Non-GAAP Results

Non-GAAP diluted earnings per share for the third quarter of fiscal 2009 were $0.35.  This compares with non-GAAP diluted earnings per share of $0.50 reported in the third quarter of fiscal 2008 and non-GAAP diluted earnings per share of $0.35 reported in the second quarter of fiscal 2009.

Adobe’s non-GAAP operating income was $237.1 million in the third quarter of fiscal 2009, compared to $351.9 million in the third quarter of fiscal 2008 and $237.7 million in the second quarter of fiscal 2009.  As a percent of revenue, non-GAAP operating income in the third quarter of fiscal 2009 was 34.0 percent, compared to 39.7 percent in the third quarter of fiscal 2008 and 33.7 percent in the second quarter of fiscal 2009.

Non-GAAP net income was $186.1 million for the third quarter of fiscal 2009, compared to $269.1 million in the third quarter of fiscal 2008 and $185.0 million in the second quarter of fiscal 2009.

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

Fourth Quarter Fiscal 2009 Financial Targets

For the fourth quarter of fiscal 2009, Adobe is targeting revenue of $690 million to $740 million, an operating margin of 23 percent to 27 percent on a GAAP basis, and 33 percent to 36 percent on a non-GAAP basis.

In addition, Adobe is targeting its share count to be between 530 million and 532 million.  The Company also is targeting non-operating income to be between $1 million and $3 million.  Adobe’s GAAP tax rate is expected to be approximately 23 percent and the non-GAAP tax rate is expected to be approximately 23.5 percent.

These targets lead to a fourth quarter diluted earnings per share target range of $0.23 to $0.29 on a GAAP basis, and an earnings per share target range of $0.33 to $0.39 on a non-GAAP basis.

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

The fourth quarter financial targets do not include the impact of Adobe’s acquisition of Omniture, Inc. announced today, which is expected to close in the fourth quarter of Adobe’s 2009 fiscal year.

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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: adverse changes in general economic or political conditions in any of the major countries in which Adobe does business, failure to develop, market and distribute new products or upgrades to existing products that meet customer requirements, introduction of new products and business models by existing and new competitors, failure to successfully manage transitions to new business models and markets, 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, or unauthorized 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, 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 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.

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 our quarter ended August 28, 2009, which the Company expects to file in October 2009. 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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© 2009 Adobe Systems Incorporated. All rights reserved. Adobe 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 28,2009			August 29,2008			August 28,2009			August 29, 2008
Revenue:
Products	$	649,865		$	838,813		$	2,052,119		$	2,532,076
Services and support	47,642			48,444			136,451			132,512
Total revenue	697,507			887,257			2,188,570			2,664,588
Cost of revenue:
Products	49,365			84,623			164,041			202,657
Services and support	15,682			26,228			50,367			73,535
Total cost of revenue	65,047			110,851			214,408			276,192
Gross profit	632,460			776,406			1,974,162			2,388,396
Operating expenses:
Research and development	138,902			170,124			427,289			508,909
Sales and marketing	231,320			271,439			724,020			813,399
General and administrative	79,593			97,156			224,462			257,163
Restructuring charges	65			1,194			15,866			2,625
Amortization of purchased intangibles	14,978			17,024			45,654			51,222
Total operating expenses	464,858			556,937			1,437,291			1,633,318
Operating income	167,602			219,469			536,871			755,078
Non-operating income (expense):
Interest and other income, net	6,667			9,338			24,753			34,778
Interest expense	(460		)	(2,390		)	(1,872		)	(8,027		)
Investment gains (losses), net	607			2,097			(18,444		)	20,335
Total non-operating income, net	6,814			9,045			4,437			47,086
Income before income taxes	174,416			228,514			541,308			802,164
Provision for income taxes	38,371			36,906			122,757			176,267
Net income	$	136,045		$	191,608		$	418,551		$	625,897
Basic net income per share	$	0.26		$	0.36		$	0.79		$	1.15
Shares used in computing basic net income per share	525,911			531,060			528,015			542,624
Diluted net income per share	$	0.26		$	0.35		$	0.79		$	1.13
Shares used in computing diluted net income per share	531,809			541,311			532,846			552,739

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Condensed Consolidated Balance Sheets

(In thousands, except per share data; unaudited)

	August 28,			November 28,
	2009			2008
ASSETS
Current assets:
Cash and cash equivalents	$	1,132,144		$	886,450
Short-term investments	1,424,317			1,132,752
Trade receivables, net of allowances for doubtful accounts of $6,153 and $4,128, respectively	281,807			467,234
Deferred income taxes	72,163			110,713
Prepaid expenses and other current assets	80,503			137,954
Total current assets	2,990,934			2,735,103
Property and equipment, net	335,752			313,037
Goodwill	2,125,946			2,134,730
Purchased and other intangibles, net	117,384			214,960
Investment in lease receivable	207,239			207,239
Other assets	184,705			216,529
Total assets	$	5,961,960		$	5,821,598
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Trade payables	$	48,416		$	55,840
Accrued expenses	349,077			399,969
Accrued restructuring	8,230			35,690
Income taxes payable	20,332			27,136
Deferred revenue	188,328			243,964
Total current liabilities	614,383			762,599
Long-term liabilities:
Deferred revenue	29,866			31,356
Debt	350,000			350,000
Income taxes payable	137,296			123,182
Deferred income taxes	105,597			117,328
Accrued restructuring	4,967			6,214
Other liabilities	25,293			20,565
Total liabilities	1,267,402			1,411,244
Stockholders’ equity:
Preferred stock, $0.0001 par value; 2,000 shares authorized	—			—
Common stock, $0.0001 par value	61			61
Additional paid-in-capital	2,303,342			2,396,819
Retained earnings	5,331,957			4,913,406
Accumulated other comprehensive income	21,728			57,222
Treasury stock, at cost (76,169 and 74,723 shares, respectively), net of reissuances	(2,962,530		)	(2,957,154		)
Total stockholders’ equity	4,694,558			4,410,354
Total liabilities and stockholders’ equity	$	5,961,960		$	5,821,598

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Condensed Consolidated Statements of Cash Flows

(In thousands; unaudited)

	Three Months Ended
	August 28,2009			August 29,2008
Cash flows from operating activities:
Net income	$	136,045		$	191,608
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion	63,921			64,983
Stock-based compensation expense, net of tax	39,654			106,297
Net investment gains	(3,190		)	(1,111		)
Changes in deferred revenue	4,879			16,018
Changes in operating assets and liabilities	(4,628		)	(166,453		)
Net cash provided by operating activities	236,681			211,342
Cash flows from investing activities:
Purchases of short-term investments, net of sales and maturities	7,572			(168,586		)
Purchases of property and equipment	(58,431		)	(39,810		)
Purchases of long-term investments and other assets, net of sales	(5,035		)	(56,363		)
Net cash used for investing activities	(55,894		)	(264,759		)
Cash flows from financing activities:
Purchases of treasury stock	(350,000		)	(122,552		)
Reissuances of treasury stock	73,400			138,987
Excess tax benefits from stock-based compensation	—			14,306
Net cash (used for) provided by financing activities	(276,600		)	30,741
Effect of exchange rate changes on cash and cash equivalents	1,177			(5,514		)
Net decrease in cash and cash equivalents	(94,636		)	(28,190		)
Cash and cash equivalents at beginning of period	1,226,780			1,162,453
Cash and cash equivalents at end of period	$	1,132,144		$	1,134,263

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Third Quarter Fiscal Year 2009 Non-GAAP Results

(In thousands, except per share data)

The following tables show Adobe’s non-GAAP results reconciled to GAAP results included in this release.

	Three Months Ended
	August 28,2009			August 29,2008			May 29, 2009
Operating income:
GAAP operating income	$	167,602		$	219,469		$	161,353
Stock-based and deferred compensation expense	40,526			48,260			43,284
Restructuring charges	65			1,194			3,531
Amortization of purchased intangibles and technology license arrangements	28,896			82,996			29,528
Non-GAAP operating income	$	237,089		$	351,919		$	237,696
Net income:
GAAP net income	$	136,045		$	191,608		$	126,071
Stock-based and deferred compensation expense	40,526			48,260			43,284
Restructuring charges	65			1,194			3,531
Amortization of purchased intangibles and technology license arrangements	28,896			82,996			29,528
Resolution of an income tax audit	—			(20,712		)	—
Investment (gains) losses	(607		)	(2,097		)	1,805
Income tax adjustments	(18,804		)	(32,199		)	(19,182		)
Non-GAAP net income	$	186,121		$	269,050		$	185,037
Diluted net income per share:
GAAP diluted net income per share	$	0.26		$	0.35		$	0.24
Stock-based and deferred compensation expense	0.08			0.09			0.08
Restructuring charges	—			—			0.01
Amortization of purchased intangibles and technology license arrangements	0.05			0.15			0.06
Resolution of an income tax audit	—			(0.04		)	—
Income tax adjustments	(0.04		)	(0.05		)	(0.04		)
Non-GAAP diluted net income per share	$	0.35		$	0.50		$	0.35
Shares used in computing diluted net income per share	531,809			541,311			528,013

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Third Quarter Fiscal Year 2009 Non-GAAP Results (continued)

	Three Months Ended
	August 28,2009			August 29,2008			May 29, 2009
Operating expenses:
GAAP operating expenses	$	464,858		$	556,937		$	471,312
Stock-based and deferred compensation expense	(39,899		)	(46,841		)	(41,892		)
Restructuring charges	(65		)	(1,194		)	(3,531		)
Amortization of purchased intangibles and technology license arrangements	(14,978		)	(33,802		)	(15,284		)
Non-GAAP operating expenses	$	409,916		$	475,100		$	410,605

	Three Months Ended
	August 28,2009		August 29,2008		May 29, 2009
Operating margin:
GAAP operating margin	24.0	%	24.7	%	22.9	%
Stock-based and deferred compensation expense	5.8		5.4		6.1
Restructuring charges	—		0.1		0.5
Amortization of purchased intangibles and technology license arrangements	4.2		9.5		4.2
Non-GAAP operating margin	34.0	%	39.7	%	33.7	%

	Three Months Ended
	August 28, 2009
Effective income tax rate:
GAAP effective income tax rate	22.0	%
Stock-based and deferred compensation expense	0.9
Amortization of purchased intangibles	0.6
Non-GAAP effective income tax rate	23.5	%

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Fourth Quarter Fiscal Year 2009 Non-GAAP Financial Targets

(In millions, except per share data)

The following tables show the Company’s fourth quarter fiscal year 2009 non-GAAP financial targets reconciled to GAAP financial targets included in this release.

	Fourth QuarterFiscal 2009
	Low		High
Operating margin:
GAAP operating margin	23.0	%	27.0	%
Stock-based and deferred compensation expense	5.8		5.2
Amortization of purchased intangibles	4.2		3.8
Non-GAAP operating margin	33.0	%	36.0	%

	Fourth QuarterFiscal 2009
	Low			High
Diluted net income per share:
GAAP diluted net income per share	$	0.23		$	0.29
Stock-based and deferred compensation expense	0.08			0.08
Amortization of purchased intangibles	0.05			0.05
Income tax adjustments	(0.03		)	(0.03		)
Non-GAAP diluted net income per share	$	0.33		$	0.39
Shares used in computing diluted net income per share	532.0			530.0

	Fourth QuarterFiscal 2009
GAAP effective income tax rate	23.0	%
Stock-based and deferred compensation expense	0.3
Amortization of purchased intangibles	0.2
Non-GAAP effective income tax rate	23.5	%

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 and deferred compensation impact, restructuring charges, amortization of purchased intangibles and technology license arrangements, the resolution of an income tax audit, investment gains and losses, and the related tax impact of all of these items, 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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