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): June 21, 2011
Adobe Systems Incorporated
(Exact name of Registrant as specified in its charter)
Delaware |
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0-15175 |
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77-0019522 |
(State or other jurisdiction of |
|
(Commission File Number) |
|
(I.R.S. Employer Identification No.) |
345 Park Avenue
San Jose, California 95110-2704
(Address of principal executive offices and zip code)
Registrants 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 June 21, 2011, Adobe issued a press release announcing its financial results for its second fiscal quarter ended June 3, 2011. 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 net income per share, and forecasted non-GAAP operating margin, non-GAAP tax rate and non-GAAP diluted net income 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; (D) investment gains and losses; (E) income tax adjustments; 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, 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 acquisitions. 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 facilitates comparisons to our competitors operating results.
B. Restructuring charges and related tax impact. During the past several years, we have initiated certain restructuring activities in order to align our costs in connection with both our operating plans and our business strategies based on then-current economic conditions. As a result, we recognized costs related to termination benefits for former Adobe employees whose positions were eliminated and the consolidation of leased facilities. Restructuring charges are excluded from non-GAAP results because such expense is not used by us to assess the core profitability of our business operations.
C. Amortization of purchased intangibles and related tax impact. We incur amortization of purchased intangibles in connection with our acquisitions. Purchased intangibles include (i) purchased technology, (ii) trademarks, (iii) customer contracts and relationships and (iv) other intangibles. 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 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 adjustments. Other income tax adjustments related to prior year items such as a one-time tax benefit due to the retroactive reinstatement of the Federal Research and Development tax credit which was retroactively extended to January 1, 2010 and a one-time tax benefit associated with certain portions of a favorable California state income tax ruling. We exclude these adjustments because these items are not used by us to assess the core profitability of our business operations.
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
99.1 Press release issued on June 21, 2011 entitled Adobe Reports Strong 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.
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ADOBE SYSTEMS INCORPORATED | |
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Date: June 21, 2011 |
By: |
/s/ MARK GARRETT |
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Mark Garrett |
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Executive Vice President and Chief Financial Officer |
Exhibit 99.1
Investor Relations Contact
Mike Saviage Adobe Systems Incorporated 408-536-4416
Public Relations Contact
Jodi Sorensen Adobe Systems Incorporated 408-536-2084 jsorensen@adobe.com |
|
FOR IMMEDIATE RELEASE
Adobe Reports Strong Financial Results
SAN JOSE, Calif. June 21, 2011 Adobe Systems Incorporated (Nasdaq:ADBE) today reported financial results for its second quarter fiscal year 2011 ended June 3, 2011.
Second Quarter Financial Highlights
· Revenue grew 9 percent year-over-year to $1.023 billion. The Companys targeted revenue range was $970 million to $1.020 billion.
· GAAP diluted earnings per share grew 61 percent year-over-year to $0.45. Non-GAAP diluted earnings per share grew 25 percent year-over-year to $0.55.
· GAAP operating income grew 22 percent year-over-year to $276.7 million. GAAP operating margin was 27.0 percent, compared to 24.1 percent in Q2 fiscal 2010. Non-GAAP operating income grew 13 percent year-over-year to $376.4 million. Non-GAAP operating margin was 36.8 percent, compared to 35.5 percent in Q2 fiscal 2010.
· GAAP net income grew 54 percent year-over-year to $229.4 million. Non-GAAP net income grew 20 percent to $279.9 million.
· Deferred revenue grew to $482.0 million, compared to $443.4 million as of the end of Q1 fiscal 2011.
· Cash flow from operations was $389.3 million.
· Adobe repurchased 13.7 million shares of stock during the quarter.
A reconciliation between GAAP and non-GAAP results is provided at the end of this press release.
Executive Quotes
Our strong Q2 performance demonstrates our strategy of enabling users to make, manage and measure great digital experiences is resonating with our customers, said Shantanu Narayen, president and CEO of Adobe.
Given our execution in Q2 against our large growth opportunities, we are reaffirming our 10 percent revenue growth objective in fiscal year 2011, said Mark Garrett, executive vice president and CFO of Adobe.
Second Quarter Fiscal 2011 Product Highlights
· In Content Authoring, Creative Suite 5.5 shipped during Q2, maintaining the strong revenue run-rate that Creative Suite 5 had established in the previous four quarters.
· In Digital Marketing Optimization, Omniture achieved record revenue, along with year-over-year bookings growth in excess of 20 percent.
· In Customer Experience Management, Enterprise segment revenue grew 34 percent year-over-year.
· Acrobat achieved 17 percent year-over-year growth.
Financial Outlook
For the third quarter of fiscal 2011, Adobe is targeting revenue of $1 billion to $1.050 billion.
The Companys operating margin is targeted to be 24.5 percent to 27.5 percent on a GAAP basis, and 34 percent to 36 percent on a non-GAAP basis. In addition, the Company is targeting its share count to be between 501 million and 503 million shares, and it is targeting non-operating expense between $17 million and $21 million. Adobes GAAP and non-GAAP tax rates are expected to be approximately 22 percent.
These targets lead to a third quarter diluted earnings per share target range of $0.35 to $0.42 on a GAAP basis, and an earnings per share target range of $0.50 to $0.56 on a non-GAAP basis.
Adobe also reaffirmed it is targeting approximately 10 percent revenue growth in fiscal year 2011, and expects its full year operating margin to be approximately 27.5 percent on a GAAP basis, and approximately 37 percent 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, continued uncertainty in economic conditions and the financial markets and other adverse changes in general political or economic conditions in any of the major countries in which Adobe does business, including the impact of the earthquakes and related events in Japan on Adobe, its customers, suppliers and partners, 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 Adobes intellectual property from third-party infringers, or unauthorized copying, use or disclosure, security 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 Adobes sales and distribution channels and third-party customer service and technical support providers effectively, disruption of Adobes 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 Adobes goodwill or amortizable intangible assets, changes in, or interpretations of, tax rules and regulations, Adobes inability to attract and retain key personnel, and impairment of Adobes investment portfolio due to deterioration of the capital markets. For further discussion of these and other risks and uncertainties, individuals should refer to Adobes 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 Adobes Quarterly Report on Form 10-Q for our quarter ended June 3, 2011, which Adobe expects to file later in June 2011. Adobe does not undertake an obligation to update forward-looking statements.
About Adobe Systems Incorporated
Adobe is changing the world through digital experiences. For more information, visit www.adobe.com.
###
© 2011 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.
Condensed Consolidated Statements of Income
(In thousands, except per share data; unaudited)
|
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Three Months Ended |
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Six Months Ended |
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June 3, |
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June 4, |
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June 3, |
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June 4, |
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| ||||
Revenue: |
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|
|
|
|
|
|
|
| ||||
Products |
|
$ |
830,281 |
|
$ |
795,260 |
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$ |
1,672,970 |
|
$ |
1,499,198 |
|
Subscription |
|
109,169 |
|
92,279 |
|
215,340 |
|
187,786 |
| ||||
Services and support |
|
83,729 |
|
55,496 |
|
162,575 |
|
114,751 |
| ||||
Total revenue |
|
1,023,179 |
|
943,035 |
|
2,050,885 |
|
1,801,735 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Cost of revenue: |
|
|
|
|
|
|
|
|
| ||||
Products |
|
34,666 |
|
39,645 |
|
65,383 |
|
63,155 |
| ||||
Subscription |
|
47,329 |
|
50,190 |
|
95,207 |
|
95,925 |
| ||||
Services and support |
|
27,206 |
|
17,998 |
|
56,250 |
|
38,121 |
| ||||
Total cost of revenue |
|
109,201 |
|
107,833 |
|
216,840 |
|
197,201 |
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|
|
|
|
|
|
|
|
|
| ||||
Gross profit |
|
913,978 |
|
835,202 |
|
1,834,045 |
|
1,604,534 |
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|
|
|
|
|
|
|
|
|
| ||||
Operating expenses: |
|
|
|
|
|
|
|
|
| ||||
Research and development |
|
183,211 |
|
167,318 |
|
361,611 |
|
341,658 |
| ||||
Sales and marketing |
|
348,690 |
|
320,976 |
|
676,768 |
|
618,270 |
| ||||
General and administrative |
|
95,547 |
|
89,953 |
|
196,526 |
|
180,999 |
| ||||
Restructuring charges |
|
(586 |
) |
11,541 |
|
(545 |
) |
23,163 |
| ||||
Amortization of purchased intangibles |
|
10,392 |
|
18,129 |
|
20,627 |
|
36,326 |
| ||||
Total operating expenses |
|
637,254 |
|
607,917 |
|
1,254,987 |
|
1,200,416 |
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|
|
|
|
|
|
|
|
|
| ||||
Operating income |
|
276,724 |
|
227,285 |
|
579,058 |
|
404,118 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Non-operating income (expense): |
|
|
|
|
|
|
|
|
| ||||
Interest and other income (expense), net |
|
(839 |
) |
(6,313 |
) |
(1,656 |
) |
(5,702 |
) | ||||
Interest expense |
|
(16,727 |
) |
(16,076 |
) |
(33,747 |
) |
(23,771 |
) | ||||
Investment gains (losses), net |
|
86 |
|
(10,723 |
) |
1,676 |
|
(14,257 |
) | ||||
Total non-operating income (expense), net |
|
(17,480 |
) |
(33,112 |
) |
(33,727 |
) |
(43,730 |
) | ||||
Income before income taxes |
|
259,244 |
|
194,173 |
|
545,331 |
|
360,388 |
| ||||
Provision for income taxes |
|
29,808 |
|
45,562 |
|
81,304 |
|
84,623 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net income |
|
$ |
229,436 |
|
$ |
148,611 |
|
$ |
464,027 |
|
$ |
275,765 |
|
|
|
|
|
|
|
|
|
|
| ||||
Basic net income per share |
|
$ |
0.46 |
|
$ |
0.28 |
|
$ |
0.92 |
|
$ |
0.53 |
|
|
|
|
|
|
|
|
|
|
| ||||
Shares used to compute basic net income per share |
|
499,686 |
|
526,148 |
|
501,910 |
|
525,124 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Diluted net income per share |
|
$ |
0.45 |
|
$ |
0.28 |
|
$ |
0.91 |
|
$ |
0.52 |
|
|
|
|
|
|
|
|
|
|
| ||||
Shares used to compute diluted net income per share |
|
506,280 |
|
533,259 |
|
509,572 |
|
533,305 |
|
Condensed Consolidated Balance Sheets
(In thousands, except par value; unaudited)
|
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June 3, |
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December 3, |
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2011 |
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2010 |
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ASSETS |
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|
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Current assets: |
|
|
|
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Cash and cash equivalents |
|
$ |
827,475 |
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$ |
749,891 |
|
Short-term investments |
|
1,798,045 |
|
1,718,124 |
| ||
Trade receivables, net of allowances for doubtful accounts of $14,603 and $15,233 respectively |
|
568,570 |
|
554,328 |
| ||
Deferred income taxes |
|
68,017 |
|
83,247 |
| ||
Prepaid expenses and other current assets |
|
127,211 |
|
110,460 |
| ||
Total current assets |
|
3,389,318 |
|
3,216,050 |
| ||
|
|
|
|
|
| ||
Property and equipment, net |
|
463,415 |
|
448,881 |
| ||
Goodwill |
|
3,693,505 |
|
3,641,844 |
| ||
Purchased and other intangibles, net |
|
424,199 |
|
457,263 |
| ||
Investment in lease receivable |
|
207,239 |
|
207,239 |
| ||
Other assets |
|
162,040 |
|
169,871 |
| ||
Total assets |
|
$ |
8,339,716 |
|
$ |
8,141,148 |
|
|
|
|
|
|
| ||
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
| ||
|
|
|
|
|
| ||
Current liabilities: |
|
|
|
|
| ||
Trade payables |
|
$ |
60,533 |
|
$ |
52,432 |
|
Accrued expenses |
|
496,535 |
|
564,275 |
| ||
Capital lease obligations |
|
9,003 |
|
8,799 |
| ||
Accrued restructuring |
|
5,260 |
|
8,119 |
| ||
Income taxes payable |
|
40,970 |
|
53,715 |
| ||
Deferred revenue |
|
438,078 |
|
380,748 |
| ||
Total current liabilities |
|
1,050,379 |
|
1,068,088 |
| ||
|
|
|
|
|
| ||
Long-term liabilities: |
|
|
|
|
| ||
Debt and capital lease obligations |
|
1,509,428 |
|
1,513,662 |
| ||
Deferred revenue |
|
43,949 |
|
48,929 |
| ||
Accrued restructuring |
|
7,203 |
|
8,254 |
| ||
Income taxes payable |
|
173,023 |
|
164,713 |
| ||
Deferred income taxes |
|
121,996 |
|
103,098 |
| ||
Other liabilities |
|
44,323 |
|
42,017 |
| ||
Total liabilities |
|
2,950,301 |
|
2,948,761 |
| ||
|
|
|
|
|
| ||
Stockholders equity: |
|
|
|
|
| ||
Common stock, $0.0001 par value |
|
61 |
|
61 |
| ||
Additional paid-in-capital |
|
2,611,997 |
|
2,458,278 |
| ||
Retained earnings |
|
6,228,574 |
|
5,980,914 |
| ||
Accumulated other comprehensive income |
|
54,342 |
|
17,428 |
| ||
Treasury stock, at cost (107,071 and 98,937 shares, respectively), net of re-issuances |
|
(3,505,559 |
) |
(3,264,294 |
) | ||
Total stockholders equity |
|
5,389,415 |
|
5,192,387 |
| ||
Total liabilities and stockholders equity |
|
$ |
8,339,716 |
|
$ |
8,141,148 |
|
Condensed Consolidated Statements of Cash Flows
(In thousands; unaudited)
|
|
Three Months Ended |
| ||||
|
|
June 3, |
|
June 4, |
| ||
Cash flows from operating activities: |
|
|
|
|
| ||
Net income |
|
$ |
229,436 |
|
$ |
148,611 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
| ||
Depreciation, amortization and accretion |
|
66,620 |
|
74,906 |
| ||
Stock-based compensation expense |
|
73,403 |
|
61,804 |
| ||
Unrealized investment (gains) losses |
|
763 |
|
9,891 |
| ||
Changes in deferred revenue |
|
38,629 |
|
44,600 |
| ||
Changes in operating assets and liabilities |
|
(19,520 |
) |
(88,722 |
) | ||
|
|
|
|
|
| ||
Net cash provided by operating activities |
|
389,331 |
|
251,090 |
| ||
|
|
|
|
|
| ||
Cash flows from investing activities: |
|
|
|
|
| ||
Purchases of short-term investments, net of sales and maturities |
|
(61,166 |
) |
(417,860 |
) | ||
Purchases of property and equipment |
|
(37,501 |
) |
(49,628 |
) | ||
Purchases of long-term investments and other assets, net of sales |
|
(3,808 |
) |
(13,415 |
) | ||
|
|
|
|
|
| ||
Net cash used for investing activities |
|
(102,475 |
) |
(480,903 |
) | ||
|
|
|
|
|
| ||
Cash flows from financing activities: |
|
|
|
|
| ||
Purchases of treasury stock |
|
(420,015 |
) |
(250,000 |
) | ||
Re-issuance of treasury stock |
|
46,732 |
|
34,236 |
| ||
Repayment of debt |
|
(1,455 |
) |
|
| ||
Payment of debt issuance costs |
|
|
|
(520 |
) | ||
Excess tax benefits from stock-based compensation |
|
8,778 |
|
1,427 |
| ||
|
|
|
|
|
| ||
Net cash used for financing activities |
|
(365,960 |
) |
(214,857 |
) | ||
|
|
|
|
|
| ||
Effect of exchange rate changes on cash and cash equivalents |
|
6,423 |
|
(7,166 |
) | ||
Net decrease in cash and cash equivalents |
|
(72,681 |
) |
(451,836 |
) | ||
Cash and cash equivalents at beginning of period |
|
900,156 |
|
1,589,442 |
| ||
Cash and cash equivalents at end of period |
|
$ |
827,475 |
|
$ |
1,137,606 |
|
Non-GAAP Results
(In thousands, except per share data)
The following tables show Adobes GAAP results reconciled to non-GAAP results included in this release.
|
|
Three Months Ended |
| |||||||
|
|
June 3, |
|
June 4, |
|
March 4, |
| |||
|
|
|
|
|
|
|
| |||
Operating income: |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
GAAP operating income |
|
$ |
276,724 |
|
$ |
227,285 |
|
$ |
302,334 |
|
Stock-based and deferred compensation expense |
|
74,869 |
|
59,631 |
|
71,614 |
| |||
Restructuring charges |
|
(586 |
) |
11,541 |
|
41 |
| |||
Amortization of purchased intangibles |
|
25,372 |
|
36,009 |
|
26,086 |
| |||
Non-GAAP operating income |
|
$ |
376,379 |
|
$ |
334,466 |
|
$ |
400,075 |
|
|
|
|
|
|
|
|
| |||
Net income: |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
GAAP net income |
|
$ |
229,436 |
|
$ |
148,611 |
|
$ |
234,591 |
|
Stock-based and deferred compensation expense |
|
74,869 |
|
59,631 |
|
71,614 |
| |||
Restructuring charges |
|
(586 |
) |
11,541 |
|
41 |
| |||
Amortization of purchased intangibles |
|
25,372 |
|
36,009 |
|
26,086 |
| |||
Investment (gains) losses |
|
(86 |
) |
10,723 |
|
(1,590 |
) | |||
Income tax adjustments |
|
(49,131 |
) |
(32,337 |
) |
(32,596 |
) | |||
Non-GAAP net income |
|
$ |
279,874 |
|
$ |
234,178 |
|
$ |
298,146 |
|
|
|
|
|
|
|
|
| |||
Diluted net income per share: |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
GAAP diluted net income per share |
|
$ |
0.45 |
|
$ |
0.28 |
|
$ |
0.46 |
|
Stock-based and deferred compensation expense |
|
0.15 |
|
0.11 |
|
0.14 |
| |||
Restructuring charges |
|
|
|
0.02 |
|
|
| |||
Amortization of purchased intangibles |
|
0.05 |
|
0.07 |
|
0.05 |
| |||
Investment (gains) losses |
|
|
|
0.02 |
|
|
| |||
Income tax adjustments |
|
(0.10 |
) |
(0.06 |
) |
(0.07 |
) | |||
Non-GAAP diluted net income per share |
|
$ |
0.55 |
|
$ |
0.44 |
|
$ |
0.58 |
|
|
|
|
|
|
|
|
| |||
Shares used in computing diluted net income per share |
|
506,280 |
|
533,259 |
|
511,345 |
|
Non-GAAP Results (continued)
(In thousands, except percentages)
|
|
Three Months Ended |
| |||||||
|
|
June 3, |
|
June 4, |
|
March 4, |
| |||
|
|
|
|
|
|
|
| |||
Operating expenses: |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
GAAP operating expenses |
|
$ |
637,254 |
|
$ |
607,917 |
|
$ |
617,733 |
|
Stock-based and deferred compensation expense |
|
(70,707 |
) |
(58,012 |
) |
(67,931 |
) | |||
Restructuring charges |
|
586 |
|
(11,541 |
) |
(41 |
) | |||
Amortization of purchased intangibles |
|
(10,392 |
) |
(18,129 |
) |
(10,235 |
) | |||
Non-GAAP operating expenses |
|
$ |
556,741 |
|
$ |
520,235 |
|
$ |
539,526 |
|
|
|
Three Months Ended |
| ||||
|
|
June 3, |
|
June 4, |
|
March 4, |
|
|
|
|
|
|
|
|
|
Operating margin: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP operating margin |
|
27.0 |
% |
24.1 |
% |
29.4 |
% |
Stock-based and deferred compensation expense |
|
7.3 |
|
6.3 |
|
7.0 |
|
Restructuring charges |
|
(0.1 |
) |
1.2 |
|
|
|
Amortization of purchased intangibles |
|
2.6 |
|
3.9 |
|
2.5 |
|
Non-GAAP operating margin |
|
36.8 |
% |
35.5 |
% |
38.9 |
% |
|
|
Three Months Ended |
|
|
|
June 3, |
|
Effective income tax rate: |
|
|
|
|
|
|
|
GAAP effective income tax rate |
|
11.5 |
% |
Impact of state income tax ruling |
|
10.5 |
|
Non-GAAP effective income tax rate |
|
22.0 |
% |
Third Quarter Non-GAAP Financial Targets
(In millions, except per share data and percentages)
The following tables show Adobes third quarter fiscal year 2011 GAAP financial targets reconciled to non-GAAP financial targets included in this release.
|
|
Third Quarter |
|
Fiscal |
| ||
|
|
Low |
|
High |
|
2011 |
|
Operating margin: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP operating margin |
|
24.5 |
% |
27.5 |
% |
27.5 |
% |
Stock-based and deferred compensation expense |
|
6.9 |
|
6.2 |
|
7.1 |
|
Amortization of purchased intangibles |
|
2.6 |
|
2.3 |
|
2.4 |
|
Non-GAAP operating margin |
|
34.0 |
% |
36.0 |
% |
37.0 |
% |
|
|
Third Quarter |
|
|
| ||||
|
|
Low |
|
High |
|
|
| ||
Diluted net income per share: |
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
| ||
GAAP diluted net income per share |
|
$ |
0.35 |
|
$ |
0.42 |
|
|
|
Stock-based and deferred compensation expense |
|
0.14 |
|
0.13 |
|
|
| ||
Amortization of purchased intangibles |
|
0.05 |
|
0.05 |
|
|
| ||
Income tax adjustments |
|
(0.04 |
) |
(0.04 |
) |
|
| ||
Non-GAAP diluted net income per share |
|
$ |
0.50 |
|
$ |
0.56 |
|
|
|
|
|
|
|
|
|
|
| ||
Shares used to compute diluted net income per share |
|
503.0 |
|
501.0 |
|
|
|
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. Adobes 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 Adobes operating results in a manner that focuses on what Adobe believes to be its ongoing business operations. Adobes management believes it is useful for itself and investors to review, as applicable, both GAAP information that includes the stock-based and deferred compensation expenses, restructuring charges, amortization of purchased intangibles, investment gains and losses and the related tax impact of all of these items, income tax adjustments, 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 Adobes 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.