-----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, QqD91MxTSlvd048zzn+6HC4jKvTbZNFOS6cm9UBYzG/qBkvYr+jkEUAH3lSYgx3i mkD+D9YdfA0Zmb/WDcDkaQ== 0001104659-10-015874.txt : 20100323 0001104659-10-015874.hdr.sgml : 20100323 20100323161655 ACCESSION NUMBER: 0001104659-10-015874 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20100323 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20100323 DATE AS OF CHANGE: 20100323 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: DE FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-15175 FILM NUMBER: 10699505 BUSINESS ADDRESS: STREET 1: 345 PARK AVE CITY: SAN JOSE STATE: CA ZIP: 95110-2704 BUSINESS PHONE: 4085366000 MAIL ADDRESS: STREET 1: 345 PARK AVENUE CITY: SAN JOSE STATE: CA ZIP: 95110-2704 8-K 1 a10-6801_18k.htm 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): March 23, 2010

 

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 March 23, 2010, Adobe issued a press release announcing its financial results for its first fiscal quarter ended March 5, 2010. 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 and non-GAAP diluted 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, net of the related tax impacts, which exclude: (A) stock-based and deferred compensation expenses; (B) restructuring charges; (C) amortization of purchased intangibles and incomplete technology; (D) investment gains and losses; and (E) 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, performance shares and employee stock purchases in accordance with current GAAP related to stock-based compensation including expense associated with stock-based compensation related to unvested options and restricted stock units assumed in connection with our acquisition of Macromedia in December 2005 and our acquisition of Omniture in October 2009. As we apply current stock-based compensation standards, we believe that it is useful to investors to understand the impact of the application of these standards 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 current GAAP 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.

 

2



 

B.            Restructuring charges and related tax impact.  In November 2009, we initiated restructuring activities to align our costs in connection with our fiscal 2010 operating plan. As a result, we recognized costs related to termination benefits for former Adobe employees whose positions were eliminated and the consolidation of leased facilities. In November 2008, we initiated restructuring actions associated with realigning our business strategies based on then-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 incomplete technology and related tax impact.  We incur amortization of purchased intangible assets primarily in connection with our acquisition of Macromedia in December 2005 and our acquisition of Omniture in October 2009. Purchased intangibles include (i) developed technology and (ii) core technology and patents. Developed technology relates primarily to Macromedia and Omniture products across all of Macromedia and Omniture product lines that had reached technological feasibility as of December 2005 and October 2009, respectively. Core technology and patents represent primarily a combination of Macromedia’s and Omniture’s processes, patents and trade secrets developed through years of experience in design and development of their 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. Further, we incurred charges related to in-process research and development in connection with certain of our acquisitions. We expense this upon acquisition as it represents incomplete research and development projects that had not reached technological feasibility and had no alternative future use as of the date of the acquisition. We also incurred on-going charges related to amortization of purchased intangible assets in connection with certain small acquisitions. 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 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.  For the fourth quarter ended November 27, 2009, we also excluded a one-time tax charge related to our acquisition of Omniture.  The charge was the tax cost of inter-company transactions necessary to license certain Omniture assets so that Omniture services can be offered to customers from Adobe companies going forward.

 

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.

 

3



 

Section 9 – Financial Statements and Exhibits

 

Item 9.01. Financial Statements and Exhibits.

 

(d)         Exhibits

 

99.1     Press release issued on March 23, 2010 entitled “Adobe Delivers Strong Q1 Financial Results”

 

4



 

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: March 23, 2010

By:

/s/ MARK GARRETT

 

 

Mark Garrett

 

 

Executive Vice President and Chief Financial Officer

 

5



 

EXHIBIT INDEX

 

Exhibit
No.

 

Description

99.1

 

Press release issued on March 23, 2010 entitled “Adobe Delivers Strong Q1 Financial Results”

 

6


EX-99.1 2 a10-6801_1ex99d1.htm 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 Delivers Strong Q1 Financial Results

 

 

New Product Launches Expected to Fuel Company’s Revenue and Earnings Growth

 

SAN JOSE, Calif. — Mar. 23, 2010 Adobe Systems Incorporated (Nasdaq:ADBE) today reported financial results for its first quarter fiscal year 2010 ended March 5, 2010.

 

In the first quarter of fiscal 2010, Adobe achieved revenue of $858.7 million, compared to $786.4 million reported for the first quarter of fiscal 2009 and $757.3 million reported in the fourth quarter of fiscal 2009.  This represents 9 percent year-over-year revenue growth.  Adobe’s first quarter revenue target range was $800 to $850 million.

 

“Stability in our creative business, combined with strength in our Acrobat and Omniture solutions, helped drive strong financial performance in Q1,” said Shantanu Narayen, president and CEO of Adobe.  “The market trends enabling our diverse business remain strong and we are bullish about the upcoming launches of Flash Player and Creative Suite.”

 

First Quarter Fiscal 2010 GAAP Results

 

Adobe’s GAAP diluted earnings per share for the first quarter of fiscal 2010 were $0.24, based on 532.6 million weighted average shares. This compares with GAAP diluted earnings per share of $0.30 reported in the first quarter of fiscal 2009 based on 527.8 million weighted average shares, and GAAP diluted loss per share of $0.06 reported in the fourth quarter of fiscal 2009 based on 532.0 million weighted average shares.

 

GAAP operating income was $176.8 million in the first quarter of fiscal 2010, compared to $207.9 million in the first quarter of fiscal 2009 and $153.6 million in the fourth quarter of fiscal 2009.  As a percent of revenue, GAAP operating income in the first quarter of fiscal 2010 was 20.6 percent, compared to 26.4 percent in the first quarter of fiscal 2009 and 20.3 percent in the fourth quarter of fiscal 2009.

 

GAAP net income was $127.2 million for the first quarter of fiscal 2010, compared to GAAP net income of $156.4 million reported in the first quarter of fiscal 2009 and GAAP net loss of $32.0 million in the fourth quarter of fiscal 2009.

 



 

First Quarter Fiscal 2010 Non-GAAP Results

 

Adobe’s non-GAAP diluted earnings per share for the first quarter of fiscal 2010 were $0.40.  This compares with non-GAAP diluted earnings per share of $0.45 reported in the first quarter of fiscal 2009 and non-GAAP diluted earnings per share of $0.39 reported in the fourth quarter of fiscal 2009.

 

Adobe’s non-GAAP operating income was $289.3 million in the first quarter of fiscal 2010, compared to $295.0 million in the first quarter of fiscal 2009 and $265.2 million in the fourth quarter of fiscal 2009.  As a percent of revenue, non-GAAP operating income in the first quarter of fiscal 2010 was 33.7 percent, compared to 37.5 percent in the first quarter of fiscal 2009 and 35.0 percent in the fourth quarter of fiscal 2009.

 

Non-GAAP net income was $211.7 million for the first quarter of fiscal 2010, compared to $236.8 million in the first quarter of fiscal 2009 and $206.8 million in the fourth quarter of fiscal 2009.

 

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

 

Second Quarter Fiscal 2010 Financial Targets

 

For the second quarter of fiscal 2010, Adobe is targeting revenue of $875 million to $925 million.  The Company’s operating margin is targeted to be 21.0 percent to 24.5 percent on a GAAP basis, and 33.5 percent to 35.5 percent on a non-GAAP basis.  In addition, the Company is targeting its share count to be between 531 million and 535 million shares, and it is targeting non-operating expense between $16 million and $18 million.  Adobe’s GAAP and non-GAAP tax rate is expected to be approximately 25 percent.

 

These targets lead to a second quarter diluted earnings per share target range of $0.23 to $0.30 on a GAAP basis, and an earnings per share target range of $0.39 to $0.44 on a non-GAAP basis.

 

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 expense, 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: failure to develop, market and distribute new products and services or upgrades or enhancements to existing products and services that meet customer requirements, introduction of new products, services and business models by existing and new competitors, failure to successfully manage transitions to new business models and markets, the economic downturn and continued uncertainty in the financial markets and other 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, failure to realize the anticipated benefits of past or future acquisitions, and difficulty in integrating such acquisitions, costs related to intellectual property acquisitions, disputes and litigation, inability to protect Adobe’s intellectual property from third-party infringers, or unauthorized copying, use or disclosure, security

 

2



 

vulnerabilities in our products and systems, interruptions or delays in our service or service from third-party service providers that host or deliver services, security or privacy breaches, or failure in data collection, failure to manage Adobe’s sales and distribution channels and third-party customer service and technical support providers effectively, disruption of Adobe’s business due to catastrophic events, risks associated with global operations, currency fluctuations, risks associated with our debt service obligations, changes in, or interpretations of, accounting principles, impairment of Adobe’s goodwill or amortizable 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, and market risks associated with Adobe’s equity investments. 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 first quarter ended March 5, 2010, which the Company expects to file in April 2010. 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.

 

###

 

© 2010 Adobe Systems Incorporated. All rights reserved.  Adobe, Adobe Acrobat, Adobe Creative Suite, Adobe Flash, Omniture 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.

 

3



 

Condensed Consolidated Statements of Income
(In thousands, except per share data; unaudited)

 

 

 

Three Months Ended

 

 

 

March 5,
2010

 

February 27,
2009

 

 

 

 

 

 

 

Revenue:

 

 

 

 

 

Products

 

$

799,445

 

$

742,199

 

Services and support

 

59,255

 

44,191

 

Total revenue

 

858,700

 

786,390

 

 

 

 

 

 

 

Cost of revenue:

 

 

 

 

 

Products

 

69,782

 

58,918

 

Services and support

 

19,586

 

18,435

 

Total cost of revenue

 

89,368

 

77,353

 

 

 

 

 

 

 

Gross profit

 

769,332

 

709,037

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

Research and development

 

174,340

 

149,917

 

Sales and marketing

 

297,294

 

249,491

 

General and administrative

 

91,046

 

74,051

 

Restructuring charges

 

11,622

 

12,270

 

Amortization of purchased intangibles

 

18,197

 

15,392

 

Total operating expenses

 

592,499

 

501,121

 

 

 

 

 

 

 

Operating income

 

176,833

 

207,916

 

 

 

 

 

 

 

Non-operating income (expense):

 

 

 

 

 

Interest and other income, net

 

611

 

13,284

 

Interest expense

 

(7,695

)

(792

)

Investment gains (losses), net

 

(3,534

)

(17,246

)

Total non-operating income (expense), net

 

(10,618

)

(4,754

)

 

 

 

 

 

 

Income before income taxes

 

166,215

 

203,162

 

Provision for income taxes

 

39,061

 

46,727

 

 

 

 

 

 

 

Net income

 

$

127,154

 

$

156,435

 

 

 

 

 

 

 

Basic net income per share

 

$

0.24

 

$

0.30

 

 

 

 

 

 

 

Shares used in computing basic net income per share

 

524,173

 

524,268

 

 

 

 

 

 

 

Diluted net income per share

 

$

0.24

 

$

0.30

 

 

 

 

 

 

 

Shares used in computing diluted net income per share

 

532,645

 

527,830

 

 

4



 

Condensed Consolidated Balance Sheets

(In thousands, except par value; unaudited)

 

 

 

March 5,

 

November 27,

 

 

 

2010

 

2009

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

1,589,442

 

$

999,487

 

Short-term investments

 

1,082,942

 

904,986

 

Trade receivables, net of allowances for doubtful accounts of $14,602 and $15,225, respectively

 

350,577

 

410,879

 

Deferred income taxes

 

67,265

 

77,417

 

Prepaid expenses and other current assets

 

86,993

 

80,855

 

Total current assets

 

3,177,219

 

2,473,624

 

 

 

 

 

 

 

Property and equipment, net

 

386,205

 

388,132

 

Goodwill

 

3,494,073

 

3,494,589

 

Purchased and other intangibles, net

 

487,605

 

527,388

 

Investment in lease receivable

 

207,239

 

207,239

 

Other assets

 

192,728

 

191,265

 

Total assets

 

$

7,945,069

 

$

7,282,237

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Trade payables

 

$

44,188

 

$

58,904

 

Accrued expenses

 

364,437

 

419,646

 

Accrued restructuring

 

19,773

 

37,793

 

Income taxes payable

 

151,841

 

46,634

 

Deferred revenue

 

320,535

 

281,576

 

Total current liabilities

 

900,774

 

844,553

 

 

 

 

 

 

 

Long-term liabilities:

 

 

 

 

 

Debt

 

1,493,546

 

1,000,000

 

Deferred revenue

 

39,208

 

36,717

 

Accrued restructuring

 

6,104

 

6,921

 

Income taxes payable

 

224,273

 

223,528

 

Deferred income taxes

 

79,670

 

252,486

 

Other liabilities

 

30,074

 

27,464

 

Total liabilities

 

2,773,649

 

2,391,669

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Preferred stock, $0.0001 par value; 2,000 shares authorized

 

 

 

Common stock, $0.0001 par value

 

61

 

61

 

Additional paid-in-capital

 

2,339,965

 

2,390,061

 

Retained earnings

 

5,427,068

 

5,299,914

 

Accumulated other comprehensive income

 

29,109

 

24,446

 

Treasury stock, at cost (75,052 and 78,177 shares, respectively), net of reissuances

 

(2,624,783

)

(2,823,914

)

Total stockholders’ equity

 

5,171,420

 

4,890,568

 

Total liabilities and stockholders’ equity

 

$

7,945,069

 

$

7,282,237

 

 

5



 

Condensed Consolidated Statements of Cash Flows

(In thousands; unaudited)

 

 

 

Three Months Ended

 

 

 

March 5,
2010

 

February 27,
2009

 

Cash flows from operating activities:

 

 

 

 

 

Net income

 

$

127,154

 

$

156,435

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation, amortization and accretion

 

68,581

 

68,740

 

Stock-based compensation expense, net of tax

 

93,031

 

48,245

 

Unrealized investment losses

 

2,331

 

15,784

 

Changes in deferred revenue

 

42,586

 

(50,034

)

Changes in operating assets and liabilities

 

(73,880

)

126,573

 

 

 

 

 

 

 

Net cash provided by operating activities

 

259,803

 

365,743

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Purchases of short-term investments, net of sales and maturities

 

(180,485

)

(107,839

)

Purchases of property and equipment

 

(25,547

)

(15,916

)

Purchases of long-term investments and other assets, net of sales

 

(2,687

)

(7,807

)

 

 

 

 

 

 

Net cash used for investing activities

 

(208,719

)

(131,562

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Purchases of treasury stock

 

(20

)

(13

)

Reissuance of treasury stock

 

49,824

 

28,604

 

Proceeds from debt, net

 

1,493,439

 

 

Repayment of debt

 

(1,000,000

)

 

Debt issuance costs

 

(10,142

)

 

Excess tax benefits from stock-based compensation

 

7,058

 

84

 

 

 

 

 

 

 

Net cash provided by financing activities

 

540,159

 

28,675

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

(1,288

)

(381

)

Net increase in cash and cash equivalents

 

589,955

 

262,475

 

Cash and cash equivalents at beginning of period

 

999,487

 

886,450

 

Cash and cash equivalents at end of period

 

$

1,589,442

 

$

1,148,925

 

 

6



 

Non-GAAP Results

(In thousands, except per share data)

 

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

 

 

 

Three Months Ended

 

 

 

March 5,
2010

 

February 27,
2009

 

November 27,
2009

 

 

 

 

 

 

 

 

 

Operating income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP operating income

 

$

176,833

 

$

207,916

 

$

153,642

 

Stock-based and deferred compensation expense

 

64,886

 

45,007

 

41,689

 

Restructuring charges

 

11,622

 

12,270

 

25,394

 

Amortization of purchased intangibles and incomplete technology

 

35,993

 

29,782

 

44,461

 

Non-GAAP operating income

 

$

289,334

 

$

294,975

 

$

265,186

 

 

 

 

 

 

 

 

 

Net income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net income

 

$

127,154

 

$

156,435

 

$

(32,043

)

Stock-based and deferred compensation expense

 

64,886

 

45,007

 

41,689

 

Restructuring charges

 

11,622

 

12,270

 

25,394

 

Amortization of purchased intangibles and incomplete technology

 

35,993

 

29,782

 

44,461

 

Investment losses (gains)

 

3,534

 

17,246

 

(1,478

)

Income tax adjustments

 

(31,502

)

(23,990

)

128,740

 

Non-GAAP net income

 

$

211,687

 

$

236,750

 

$

206,763

 

 

 

 

 

 

 

 

 

Diluted net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP diluted net income (loss) per share

 

$

0.24

 

$

0.30

 

$

(0.06

)

Stock-based and deferred compensation expense

 

0.12

 

0.09

 

0.08

 

Restructuring charges

 

0.02

 

0.02

 

0.05

 

Amortization of purchased intangibles and incomplete technology

 

0.07

 

0.06

 

0.08

 

Investment losses

 

0.01

 

0.03

 

 

Income tax adjustments

 

(0.06

)

(0.05

)

0.24

 

Non-GAAP diluted net income per share

 

$

0.40

 

$

0.45

 

$

0.39

 

 

 

 

 

 

 

 

 

Shares used in computing diluted net income per share

 

532,645

 

527,830

 

531,961

 

 

7



 

Non-GAAP Results (continued)

(In thousands)

 

 

 

Three Months Ended

 

 

 

March 5,
2010

 

February 27,
2009

 

November 27,
2009

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP operating expenses

 

$

592,499

 

$

501,121

 

$

521,317

 

Stock-based and deferred compensation expense

 

(63,938

)

(44,904

)

(41,266

)

Restructuring charges

 

(11,622

)

(12,270

)

(25,394

)

Amortization of purchased intangibles and incomplete technology

 

(18,197

)

(15,392

)

(25,901

)

Non-GAAP operating expenses

 

$

498,742

 

$

428,555

 

$

428,756

 

 

 

 

Three Months Ended

 

 

 

March 5,
2010

 

February 27,
2009

 

November 27,
2009

 

 

 

 

 

 

 

 

 

Operating margin:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP operating margin

 

20.6

%

26.4

%

20.3

%

Stock-based and deferred compensation expense

 

7.6

 

5.7

 

5.5

 

Restructuring charges

 

1.4

 

1.6

 

3.4

 

Amortization of purchased intangibles and incomplete technology

 

4.1

 

3.8

 

5.8

 

Non-GAAP operating margin

 

33.7

%

37.5

%

35.0

%

 

 

 

Three Months
Ended

 

 

 

March 5,
2010

 

Effective income tax rate:

 

 

 

 

 

 

 

GAAP effective income tax rate

 

23.5

%

Stock-based and deferred compensation expense

 

0.8

 

Restructuring charges

 

0.2

 

Amortization of purchased intangibles

 

0.5

 

Non-GAAP effective income tax rate

 

25.0

%

 

8



 

Second Quarter Non-GAAP Financial Targets

(In millions, except per share data)

 

The following tables show the Company’s second quarter fiscal year 2010 GAAP financial targets reconciled to non-GAAP financial targets included in this release.

 

 

 

Second Quarter
Fiscal 2010

 

 

 

Low

 

High

 

Operating margin:

 

 

 

 

 

 

 

 

 

 

 

GAAP operating margin

 

21.0

%

24.5

%

Stock-based and deferred compensation expense

 

7.3

 

6.6

 

Restructuring charges

 

0.8

 

0.5

 

Amortization of purchased intangibles

 

4.4

 

3.9

 

Non-GAAP operating margin

 

33.5

%

35.5

%

 

 

 

Second Quarter
Fiscal 2010

 

 

 

Low

 

High

 

Diluted net income per share:

 

 

 

 

 

 

 

 

 

 

 

GAAP diluted net income per share

 

$

0.23

 

$

0.30

 

Stock-based and deferred compensation expense

 

0.12

 

0.11

 

Restructuring charges

 

0.02

 

0.01

 

Amortization of purchased intangibles

 

0.07

 

0.07

 

Income tax adjustments

 

(0.05

)

(0.05

)

Non-GAAP diluted net income per share

 

$

0.39

 

$

0.44

 

 

 

 

 

 

 

Shares used in computing diluted net income per share

 

535.0

 

531.0

 

 

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 and deferred compensation impact, restructuring charges, amortization of purchased intangibles and incomplete technology, 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 a one-time tax charge related to our acquisition of Omniture in the fourth quarter of 2009, 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.

 

9


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