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Adobe Reports Fourth Quarter and Fiscal 2009 Results

Fourth quarter fiscal 2009 results include the impact of the Company’s acquisition of Omniture, Inc.

Condensed Consolidated Statements of Income

(In thousands, except per share data; unaudited)

 
Three Months Ended Year Ended
November 27,

2009

  November 28,

2008

November 27,

2009

  November 28,

2008

 
Revenue:
Products $ 707,272 $ 864,466 $ 2,759,391 $ 3,396,542
Services and support   50,011     50,835     186,462     183,347  
Total revenue   757,283     915,301     2,945,853     3,579,889  
 
Cost of revenue:
Products 64,856 63,732 228,897 266,389
Services and support   17,468     22,706     67,835     96,241  
Total cost of revenue   82,324     86,438     296,732     362,630  
 
Gross profit 674,959 828,863 2,649,121 3,217,259
 
Operating expenses:
Research and development 137,852 153,148 565,141 662,057
Sales and marketing 257,883 275,942 981,903 1,089,341
General and administrative 74,287 80,128 298,749 337,291
Restructuring charges 25,394 29,428 41,260 32,053
Amortization of purchased intangibles and incomplete technology   25,901     17,024     71,555     68,246  
Total operating expenses   521,317     555,670     1,958,608     2,188,988  
 
Operating income 153,642 273,193 690,513 1,028,271
 
Non-operating income (expense):
Interest and other income, net 6,627 9,069 31,380 43,847
Interest expense (1,535 ) (1,992 ) (3,407 ) (10,019 )
Investment gains (losses), net   1,478     (3,926 )   (16,966 )   16,409  
Total non-operating income (expense), net   6,570     3,151     11,007     50,237  
Income before income taxes 160,212 276,344 701,520 1,078,508
Provision for income taxes   192,255     30,427     315,012     206,694  
Net (loss) income $ (32,043 ) $ 245,917   $ 386,508   $ 871,814  
Basic net (loss) income per share $ (0.06 ) $ 0.47   $ 0.74   $ 1.62  
Shares used in computing basic net (loss) income per share   523,530     528,803     524,470     539,373  
Diluted net (loss) income per share $ (0.06 ) $ 0.46   $ 0.73   $ 1.59  
Shares used in computing diluted net (loss) income per share   531,961     534,896     530,610     548,553  

 

Condensed Consolidated Balance Sheets

(In thousands, except per share data; unaudited)

 
November 27, November 28,
  2009     2008  
 
ASSETS
 
Current assets:
Cash and cash equivalents $ 999,487 $ 886,450
Short-term investments 904,986 1,132,752

Trade receivables, net of allowances for doubtful
accounts of $15,225 and $4,128, respectively


410,879

467,234
Deferred income taxes 77,417 110,713
Prepaid expenses and other current assets   80,855     137,954  
Total current assets 2,473,624 2,735,103
 
Property and equipment, net 388,132 313,037
Goodwill 3,468,171 2,134,730
Purchased and other intangibles, net 527,387 214,960
Investment in lease receivable 207,239 207,239
Other assets   191,266     216,529  
Total assets $ 7,255,819   $ 5,821,598  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
Current liabilities:
Trade payables $ 58,904 $ 55,840
Accrued expenses 419,646 399,969
Accrued restructuring 37,793 35,690
Income taxes payable 46,634 27,136
Deferred revenue   281,576     243,964  
Total current liabilities 844,553 762,599
 
Long-term liabilities:
Debt 1,000,000 350,000
Deferred revenue 36,717 31,356
Accrued restructuring 6,921 6,214
Income taxes payable 223,528 123,182
Deferred income taxes 252,486 117,328
Other liabilities   27,464     20,565  
Total liabilities 2,391,669 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 2,363,644 2,396,819
Retained earnings 5,299,913 4,913,406
Accumulated other comprehensive income 24,446 57,222

Treasury stock, at cost (78,177 and 74,723
shares, respectively), net of reissuances

 

(2,823,914

)

 

(2,957,154

)

Total stockholders’ equity   4,864,150     4,410,354  
Total liabilities and stockholders’ equity $ 7,255,819   $ 5,821,598  

 

Condensed Consolidated Statements of Cash Flows

(In thousands; unaudited)

 

 

Three Months Ended
November 27,

2009

  November 28,

2008

Cash flows from operating activities:
Net (loss) income $ (32,043 ) $ 245,917

Adjustments to reconcile net (loss) income to net cash provided
by operating activities:

 

 

Depreciation, amortization and accretion 85,037 69,732
Stock-based compensation expense, net of tax 71,124 33,133
Net investment (gains) losses (1,685 ) (7,687 )
Changes in deferred revenue 11,984 42,716
Changes in operating assets and liabilities   119,402     (45,991 )
 
Net cash provided by operating activities   253,819     337,820  
 
Cash flows from investing activities:
Purchases of short-term investments, net of sales and maturities 517,679 (262,489 )
Purchases of property and equipment (34,933 ) (23,311 )
Purchases of long-term investments and other assets, net of sales 8,035 (9,293 )
Acquisitions, net of cash acquired   (1,582,669 )   (4,069 )
 
Net cash used for investing activities   (1,091,888 )   (299,162 )
 
Cash flows from financing activities:
Purchases of treasury stock (299,980 )
Reissuances of treasury stock 57,347 17,711
Proceeds from borrowings under line of credit 650,000 350,000
Repayment of borrowings under line of credit (350,000 )
Repayment of acquired debt (13,875 )
Excess tax benefits from stock-based compensation   11,896     8,348  
 
Net cash provided by (used for) financing activities   705,368     (273,921 )
 
Effect of exchange rate changes on cash and cash equivalents   44     (12,550 )
Net decrease in cash and cash equivalents (132,657 ) (247,813 )
Cash and cash equivalents at beginning of period   1,132,144     1,134,263  
Cash and cash equivalents at end of period $ 999,487   $ 886,450  

 

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 Year Ended

November 27,

2009

 

November 28,

2008

 

August 28,
2009

November 27,
2009

 

November 28,
2008

 
Operating income:
 
GAAP operating income $ 153,642 $ 273,193 $ 167,602 $ 690,513 $ 1,028,271
Stock-based and deferred compensation expense 41,689 33,246 40,526 170,506 172,928
Restructuring charges 25,394 29,428 65 41,260 32,053
Amortization of purchased intangibles, incomplete technology and technology license arrangements   44,461     38,996     28,896     132,667   202,134  
Non-GAAP operating income $ 265,186   $ 374,863   $ 237,089   $ 1,034,946 $ 1,435,386  
 
Net (loss) income:
 
GAAP net (loss) income $ (32,043 ) $ 245,917 $ 136,045 $ 386,508 $ 871,814
Stock-based and deferred compensation expense 41,689 33,246 40,526 170,506 172,928
Restructuring charges 25,394 29,428 65 41,260 32,053
Amortization of purchased intangibles, incomplete technology and technology license arrangements 44,461 38,996 28,896 132,667 202,134
Resolution of an income tax audit

-

-

-

-

(20,712 )
Investment (gains) losses (1,478 ) 3,926 (607 ) 16,966 (16,409 )
Income tax adjustments   128,740     (30,607 )   (18,804 )   66,764   (106,094 )

Non-GAAP net income

$ 206,763   $ 320,906   $ 186,121   $ 814,671 $ 1,135,714  
 
Diluted net (loss) income per share:
 
GAAP diluted net (loss) income per share $ (0.06 ) $ 0.46 $ 0.26 $ 0.73 $ 1.59
Stock-based and deferred compensation expense 0.08 0.06 0.08 0.32 0.32
Restructuring charges 0.05 0.06

-

0.08 0.06
Amortization of purchased intangibles, incomplete technology and technology license arrangements 0.08 0.07 0.05 0.25 0.37
Resolution of an income tax audit

-

-

-

-

(0.04 )
Investment (gain) loss

-

0.01

-

0.03 (0.03 )
Income tax adjustments   0.24     (0.06 )   (0.04 )   0.13   (0.20 )
Non-GAAP diluted net income per share

$

0.39

 

$

0.60

 

$

0.35

 

$

1.54

$

2.07

 
 
Shares used in computing diluted net (loss) income per share 531,961 534,896 531,809 530,610 548,553

 

Non-GAAP Results (continued)

(In thousands)

 
Three Months Ended Year Ended

November 27,
2009

 

 

November 28,
2008

 

 

August 28,
2009

November 27,
2009

 

 

November 28,
2008

 

 
Operating expenses:
 
GAAP operating expenses $ 521,317 $ 555,670 $ 464,858 $ 1,958,608 $ 2,188,988

Stock-based and deferred compensation expense

(41,266 ) (32,400 ) (39,899 ) (167,961 ) (168,631 )
Restructuring charges (25,394 ) (29,428 ) (65 ) (41,260 ) (32,053 )

Amortization of purchased intangibles, incomplete technology and technology license arrangements

  (25,901 )   (17,024 )   (14,978 )   (71,555 )   (85,024 )
Non-GAAP operating expenses $ 428,756   $ 476,818   $ 409,916   $ 1,677,832   $ 1,903,280  

 

Three Months Ended Year Ended
November 27,

2009

November 28,

2008

  August 28,
2009
  November 27,

2009

November 28,

2008

 
GAAP operating margin 20.3 % 29.8 % 24.0 % 23.4 % 28.7 %
Stock-based and deferred compensation expense 5.5 3.6 5.8 5.8 4.8
Restructuring charges 3.4 3.2

-

1.4 0.9

Amortization of purchased intangibles, incomplete

technology and technology license arrangements

 

  5.8     4.4     4.2     4.5     5.7  
Non-GAAP operating margin   35.0 %   41.0 %   34.0 %   35.1 %   40.1 %
    Three Months Ended
November 27,
2009
Effective income tax rate:
 
GAAP effective income tax rate 120.0 %
Stock-based and deferred compensation expense

(36.6

)

Restructuring charges (22.3 )
Investment (gains)/losses 1.3
Amortization of purchased intangibles and incomplete technology (38.9 )
Non-GAAP effective income tax rate 23.5 %

 

First Quarter and Fiscal Year 2010 Non-GAAP Financial Targets

(In millions, except per share data)

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

First Quarter

Fiscal 2010

Low High
Operating margin:
 
GAAP operating margin 19.0 % 21.0 %
Stock-based and deferred compensation expense 7.0 7.3
Restructuring Charges 1.6 1.6
Amortization of purchased intangibles 2.4   2.1  
Non-GAAP operating margin 30.0 % 32.0 %
    First Quarter

Fiscal 2010

Low High
Diluted net income per share:
 
GAAP diluted net income per share $ 0.21 $ 0.25
Stock-based and deferred compensation expense 0.11 0.12
Restructuring Charges 0.02 0.03
Amortization of purchased intangibles 0.04 0.03
Income tax adjustments   (0.04 )   (0.04 )
Non-GAAP diluted net income per share $ 0.34   $ 0.39  
 
Shares used in computing diluted net income per share   532.0     530.0  
    Fiscal 2010
Operating margin:
 
GAAP operating margin 24.0 %
Stock-based and deferred compensation expense 7.0
Restructuring Charges 0.9
Amortization of purchased intangibles 2.1  
Non-GAAP operating margin 34.0 %

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, incomplete technology 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.

More Stories By Salvatore Genovese

Salvatore Genovese is a Cloud Computing consultant and an i-technology blogger based in Rome, Italy. He occasionally blogs about SOA, start-ups, mergers and acquisitions, open source and bleeding-edge technologies, companies, and personalities. Sal can be reached at hamilton(at)sys-con.com.

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