Adobe Systems Reports Record Quarterly and Annual Revenue; Q4 Results Include 40 Percent Year-Over-Year Growth in ePaper Business.Business Editors/High-Tech Writers SAN JOSE San Jose, city, United States San Jose (sănəzā`, săn hōzā`), city (1990 pop. 782,248), seat of Santa Clara co., W central Calif.; founded 1777, inc. 1850. , Calif.--(BUSINESS WIRE)--Dec. 11, 2003 Adobe Systems Adobe Systems Incorporated (pronounced a-DOE-bee IPA: /əˈdoʊbiː/) (NASDAQ: ADBE) (LSE: ABS) is an American computer software company headquartered in San Jose, California, USA. Incorporated (Nasdaq: ADBE ADBE Adobe Systems, Inc. (stock symbol) ) today reported strong financial results for its fourth quarter and fiscal year ended November November: see month. 28, 2003. In the fourth quarter of fiscal 2003, Adobe adobe (ədō`bē): see rammed earth. adobe Handmade sun-dried bricks formed from a mixture of heavy clay and straw found in arid regions. achieved record revenue of $358.6 million, compared to $294.7 million reported for the fourth quarter of fiscal 2002 and $319.1 million reported in the third quarter of fiscal 2003. On a year-over-year basis, this represents 22 percent growth. Adobe's fourth quarter revenue target range was $330 to $350 million. "Adobe's record Q4 revenue is the result of outstanding performance, as well as Adobe's increasing relevance as a platform provider across our customer segments," said Bruce Bruce, Scottish royal family descended from an 11th-century Norman duke, Robert de Brus. He aided William I in his conquest of England (1066) and was given lands in England. R. Chizen, president and chief executive officer of Adobe. "During fiscal 2003, we expanded our commitment to the creative professional, extended our reach into the digital imaging and video markets, and clearly defined our vision for intelligent document solutions for our growing base of enterprise customers. Given the positive momentum we established during the year, we're we're Contraction of we are. we're we are optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op about our opportunities for continued growth in fiscal 2004 and we are reaffirming our annual financial targets." GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of for the fourth quarter of fiscal 2003 were $0.34. Pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma diluted earnings per share, which does not include a partial reversal reversal n. the decision of a court of appeal ruling that the judgment of a lower court was incorrect and is reversed. The result is that the lower court which tried the case is instructed to dismiss the original action, retry the case, or is ordered to change its of a prior restructuring charge restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. and an investment gain from the Company's venture program, also were $0.34. Adobe's GAAP and pro forma fourth quarter earnings target range was $0.30 to $0.32 per share. GAAP net income was $83.3 million for the fourth quarter of fiscal 2003, compared to $40.1 million reported in the fourth quarter of fiscal 2002, and $64.5 million in the third quarter of fiscal 2003. On a year-over-year basis, GAAP net income grew 108 percent. Pro forma net income, which does not, as applicable, include amortization and impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. of goodwill, restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). and other charges, and investment gains and losses, was $83.0 million for the fourth quarter of fiscal 2003, compared to $59.1 million in the fourth quarter of fiscal 2002, and $66.3 million in the third quarter of fiscal 2003. On a year-over-year basis, pro forma net income grew 41 percent. GAAP diluted earnings per share for the fourth quarter of fiscal 2003 were $0.34 based on 245.5 million weighted average shares. This compares with GAAP diluted earnings per share of $0.17 reported in the fourth quarter of fiscal 2002, based on 238.4 million weighted average shares, and GAAP diluted earnings per share of $0.27 reported in the third quarter of fiscal 2003, based on 240.5 million weighted average shares. Adobe's GAAP operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. was $115.3 million in the fourth quarter of fiscal 2003, compared to $62.9 million in the fourth quarter of fiscal 2002 and $92.2 million in the third quarter of fiscal 2003. As a percent of revenue, GAAP operating income in the fourth quarter of fiscal 2003 was 32.1 percent, compared to 21.4 percent in the fourth quarter of fiscal 2002 and 28.9 percent in the third quarter of fiscal 2003. Adobe's pro forma operating income, which does not, as applicable, include the amortization and impairment of goodwill, and restructuring and other charges, was $115.2 million in the fourth quarter of fiscal 2003, compared to $83.8 million in the fourth quarter of fiscal 2002 and $91.8 million in the third quarter of fiscal 2003. As a percent of revenue, pro forma operating income for the fourth quarter was 32.1 percent, compared to 28.4 percent in the fourth quarter of fiscal 2002 and 28.8 percent in the third quarter of fiscal 2003. Adobe Reports Record Annual Revenue in Fiscal Year 2003 In fiscal 2003, Adobe achieved record revenue of $1.295 billion, compared to $1.165 billion in fiscal 2002. On a year-over-year basis, annual revenue grew 11 percent. The Company's annual GAAP net income was $266.3 million in fiscal 2003, compared to $191.4 million in fiscal 2002. On a year-over-year basis, annual GAAP net income grew 39 percent. The Company's annual pro forma net income, which does not, as applicable, include restructuring and other charges, acquired in-process research and development, amortization and impairment of goodwill, and investment gains and losses, was $275.0 million in fiscal 2003, compared to $231.7 million in fiscal 2002. On a year-over-year basis, annual pro forma net income grew 19 percent. GAAP diluted earnings per share for fiscal 2003 were $1.10. Pro forma diluted earnings per share, which does not include a partial reversal of prior restructuring charges, and investment gains and losses from the Company's venture program, were $1.14 in fiscal 2003. Adobe achieved $444.1 million in revenue in its ePaper business in fiscal 2003. This represents 42 percent year-over-year growth for this business, and accounts for more than one third of the Company's overall revenue. In its fourth quarter of fiscal 2003, Adobe achieved $118.1 million in revenue in its ePaper business, representing 40 percent year-over-year growth. Company Provides First Quarter Targets and Reaffirms Fiscal 2004 Targets For the first quarter of fiscal 2004, the Company announced that it is targeting revenue of $360 to $380 million, a gross margin of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 93 percent, and GAAP and pro forma operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: ranges of 31 to 32 percent. As a percent of revenue, Adobe is targeting first quarter expenses as follows:
Research & Development - approximately 21 percent
Sales & Marketing - approximately 31 to 32 percent
General & Administrative - approximately 9 percent
In addition, Adobe is targeting its Q1 share count range to be between 249 and 251 million shares in the first quarter of fiscal 2004. The Company also is targeting other income in its first quarter to be approximately $3 to $4 million, and a tax rate of 28 percent. These targets lead to first quarter GAAP and pro forma earnings pro forma earnings Income not necessarily calculated in accordance with generally accepted accounting principles. For example, a company might report pro forma earnings that exclude depreciation expense and nonrecurring expenses such as restructuring costs. per share target ranges of $0.33 to $0.36 in the quarter. The Company currently believes targeted pro forma earnings per share and pro forma operating margin results will not differ materially from targeted GAAP results in the quarter. For fiscal 2004, the Company reaffirmed its full year target of $1.425 billion in revenue, and an operating margin of approximately 30 percent. The Adobe Board of Directors declared de·clare v. de·clared, de·clar·ing, de·clares v.tr. 1. To make known formally or officially. See Synonyms at announce. 2. To state emphatically or authoritatively; affirm. 3. this quarter's cash dividend of $0.0125 per share, payable on January January: see month. 23, 2004 to stockholders of record as of January 9, 2004. Forward Looking Statements Disclosure This press release contains forward looking statements, including those related to revenue, gross margin, operating margin, earnings per share, and product releases, 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: general economic or political conditions in any of the major countries in which we do business, introduction of new products by existing and new competitors COMPETITORS, French law. Persons who compete or aspire to the same office, rank or employment. As an English word in common use, it has a much wider application. Ferriere, Dict. de Dr. h.t. , delays in development or shipment of our new products or major new versions of existing products, difficulties in implementing strategic alliances, difficulties in transitions to new business models or markets, including the enterprise, government, consumer and creative professional markets, changes to our distribution channel, inability to attract and retain key personnel, lack of market acceptance of new products, upgrades and services, changes in demand for application software, computers and printers, sales price adjustments, intellectual property disputes and litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. , industry transitions to new business models, renegotiation or termination The point where a line, channel or circuit ends. See SCSI termination and hybrid. of royalty Compensation for the use of property, usually copyrighted works, patented inventions, or natural resources, expressed as a percentage of receipts from using the property or as a payment for each unit produced. or intellectual property licensing arrangements, changes in accounting rules, and market risks associated with our equity investments. For further discussion of these and other risks and uncertainties, individuals should refer to the Company's SEC filings, including the 2002 annual report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. and quarterly reports on Form 10-Q Form 10-Q See 10-Q. filed in 2003. The Company does not undertake an obligation to update forward looking statements. About Adobe Systems Incorporated Adobe helps people and businesses communicate better through its world-leading digital imaging, design and document technology platforms for consumers, creative professionals and enterprises. Adobe's revenue in the last fiscal year exceeded $1 billion. For more information about Adobe, visit www.adobe.com. Adobe and the Adobe logo are registered trademarks of Adobe Systems Incorporated in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and/or and/or conj. Used to indicate that either or both of the items connected by it are involved. Usage Note: And/or is widely used in legal and business writing. other countries.
Condensed Consolidated Statements of Income
(In thousands, except per share data)
Three Months Ended Twelve Months Ended
(Unaudited) (Audited)
--------------------- -----------------------
November November November November
28, 2003 29, 2002 28, 2003 29, 2002
---------- ---------- ----------- -----------
Revenue:
Products $351,466 $288,514 $1,269,004 $1,153,169
Services and support 7,120 6,140 25,745 11,619
---------- ---------- ----------- -----------
Total revenue 358,586 294,654 1,294,749 1,164,788
---------- ---------- ----------- -----------
Total cost of revenue:
Products 21,476 23,550 79,902 96,853
Services and support 3,751 2,972 13,120 7,435
---------- ---------- ----------- -----------
Total cost of revenue 25,227 26,522 93,022 104,288
---------- ---------- ----------- -----------
Gross profit 333,359 268,132 1,201,727 1,060,500
Operating Expenses:
Research and development 73,088 64,181 276,980 246,082
Sales and marketing 113,543 93,314 423,417 380,367
General and
administrative 31,570 26,820 122,427 108,134
Restructuring and other
charges (105) 10,543 (544) 12,148
Acquired in-process
research and
development - - - 5,769
Amortization and
impairment of goodwill - 10,350 - 20,973
---------- ---------- ----------- -----------
Total operating
expenses 218,096 205,208 822,280 773,473
---------- ---------- ----------- -----------
Operating income 115,263 62,924 379,447 287,027
Non-operating income:
Investment gain (loss) 379 (3,792) (12,875) (17,185)
Interest and other
income 3,428 3,042 13,920 14,847
---------- ---------- ----------- -----------
Total non-operating
income (loss) 3,807 (750) 1,045 (2,338)
---------- ---------- ----------- -----------
Income before income
taxes 119,070 62,174 380,492 284,689
Provision for income
taxes 35,721 22,085 114,148 93,290
---------- ---------- ----------- -----------
Net income $83,349 $40,089 $266,344 $191,399
========== ========== =========== ===========
Basic net income per
share $0.35 $0.17 $1.14 $0.81
========== ========== =========== ===========
Shares used in computing
basic net income per
share 235,899 233,838 234,246 236,834
========== ========== =========== ===========
Diluted net income per
share $0.34 $0.17 $1.10 $0.79
========== ========== =========== ===========
Shares used in computing
diluted net income per
share 245,512 238,407 241,450 243,119
========== ========== =========== ===========
Condensed Consolidated Balance Sheets
(In thousands, except per share data; audited)
November 28, November 29,
2003 2002
------------- -------------
ASSETS
Current assets:
Cash and cash equivalents $189,917 $183,684
Short-term investments 906,616 434,053
Trade receivables 146,311 116,506
Other receivables 27,731 30,367
Deferred income taxes 35,875 31,530
Other current assets 22,578 18,032
------------- -------------
Total current assets 1,329,028 814,172
------------- -------------
Property and equipment, net 77,007 71,090
Goodwill and other intangibles, net 111,289 98,813
Other assets 37,721 43,085
Deferred income taxes, long-term - 24,450
------------- -------------
Total assets $1,555,045 $1,051,610
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade and other payables $37,437 $37,765
Accrued expenses 160,009 135,028
Income taxes payable 193,484 173,311
Deferred revenue 45,600 31,185
------------- -------------
Total current liabilities 436,530 377,289
------------- -------------
Deferred income taxes, long-term 17,715 -
Stockholders' equity:
Common stock, $0.0001 par value 29,576 29,576
Additional paid-in-capital 874,126 710,273
Retained earnings 1,800,398 1,545,776
Accumulated other comprehensive loss (999) (3,950)
Treasury stock, at cost, net of re-
issuances (1,602,301) (1,607,354)
------------- -------------
Total stockholders' equity 1,100,800 674,321
------------- -------------
Total liabilities and stockholders'
equity $1,555,045 $1,051,610
============= =============
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three Months Ended
--------------------------
November 28, November 29,
2003 2002
------------ ------------
Cash flows from operating activities:
Net income $83,349 $40,089
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 12,774 17,115
Stock compensation expense 368 997
Deferred income taxes 19,136 (1,001)
Provision for losses on receivables 738 1,101
Tax benefit from employee stock option
plans 25,087 2,246
Loss on impairment - 7,630
Loss on equity and cost method
investments 1,979 2,725
Gains on sale of equity securities (2,358) -
Loss on other-than-temporary declines of
equity securities - 1,067
Non-cash restructuring and other charges (105) -
Changes in operating assets and
liabilities:
Receivables (33,725) 24,611
Other current assets 10,191 5,575
Trade and other payables 5,367 4,897
Accrued expenses 10,237 5,996
Accrued restructuring charges (873) 1,642
Income taxes payable (7,541) 17,359
Deferred revenue 3,991 3,870
------------ ------------
Net cash provided by operating
activities 128,615 135,919
------------ ------------
Cash flows from investing activities:
Purchases of short-term investments (423,963) (129,272)
Maturities and sales of short-term
investments 222,063 188,724
Acquisitions of property and equipment (12,590) (11,310)
Purchases of long-term investments (1,423) (5,511)
Additions to other assets (3,417) (3,197)
Proceeds from sale of equity securities 4,742 -
------------ ------------
Net cash provided by (used for)
investing activities (214,588) 39,434
------------ ------------
Cash flows from financing activities:
Purchase of treasury stock (240) (134,938)
Proceeds from issuance of treasury stock 132,321 4,772
Payment of dividends (2,925) (2,954)
------------ ------------
Net cash provided by (used for)
financing activities 129,156 (133,120)
------------ ------------
Effect of foreign currency exchange rates
on cash and cash equivalents 2,273 97
------------ ------------
Net increase (decrease) in cash and cash
equivalents 45,456 42,330
Cash and cash equivalents at beginning of
period 144,461 141,354
------------ ------------
Cash and cash equivalents at end of period $189,917 $183,684
============ ============
Pro Forma Results
(In thousands, except per share data)
The following table shows the Company's pro forma results
reconciled to the Generally Accepted Accounting Principles ("GAAP")
Condensed Consolidated Statements of Income table included on page 5
of this release. The Company's pro forma results do not, as
applicable, include restructuring and other charges, acquired
in-process research and development, amortization and impairment of
goodwill, or investment gains and losses.
Three Months Ended Twelve Months Ended
------------------------------ -------------------
November November August November November
28, 2003 29, 2002 29, 2003 28, 2003 29, 2002
--------- ---------- --------- --------- ---------
Income before income
taxes $119,070 $62,174 $92,177 $380,492 $284,689
Restructuring and
other charges (105) 10,543 (439) (544) 12,148
Acquired in-process
research and
development - - - - 5,769
Amortization and
impairment of
goodwill - 10,350 - - 20,973
Investment (gain)
loss (379) 3,792 2,996 12,875 17,185
--------- ---------- --------- --------- ---------
Pro forma income
before taxes 118,586 86,859 94,734 392,823 340,764
Provision for income
taxes 35,576 27,795 28,420 117,847 109,044
--------- ---------- --------- --------- ---------
Pro forma net income $83,010 $59,064 $66,314 $274,976 $231,720
========= ========== ========= ========= =========
Basic net income per
share $0.35 $0.25 $0.28 $1.17 $0.98
========= ========== ========= ========= =========
Shares used in
computing basic net
income per share 235,899 233,838 233,364 234,246 236,834
========= ========== ========= ========= =========
Diluted net income
per share $0.34 $0.25 $0.28 $1.14 $0.95
========= ========== ========= ========= =========
Shares used in
computing diluted
net income per
share 245,512 238,407 240,495 241,450 243,119
========= ========== ========= ========= =========
Adobe continues to provide all information required in accordance with
GAAP, but it believes that 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, referred to in this press release as "pro forma," 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 pro forma financial
measures in isolation from, or as a substitute for, financial
information prepared in accordance with GAAP. Adobe presents such pro
forma 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 both GAAP information that includes
the expenses, charges and investment gains and losses discussed below
and the pro forma measures that exclude such expenses, charges and
investment gains and losses in order to assess the performance of
Adobe's business and for planning and forecasting in subsequent
periods.
Adobe's pro forma operating income excludes, as applicable,
restructuring and other charges, the amortization and impairment of
goodwill, and acquired in-process research and development. Pro forma
net income and pro forma diluted earnings per share exclude, as
applicable, restructuring and other charges, the amortization and
impairment of goodwill, acquired in-process research and development,
and investment gains and losses. Management believes that the
inclusion of these pro forma financial measures provide consistency
and comparability with past reports of financial results and has
historically provided comparability to similar companies in Adobe's
industry, many of which present the same or similar pro forma
financial measures to investors. Whenever Adobe uses such a pro forma
financial measure, it provides a reconciliation of the pro forma
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 pro forma financial measures
to their most directly comparable GAAP financial measure as detailed
above.
Adobe excludes restructuring and other charges, including (i) employee
severance and other termination benefits, (ii) lease termination costs
and other expenses associated with exiting facilities, and (iii) other
costs associated with terminating contracts, from its pro forma
financial measure of operating income and net income. Adobe's
management does not consider these restructuring costs as a normal
component of its expenses related to ongoing operations as such
charges have occurred only periodically and have not been directly
linked to the level of Adobe's business activities in the quarter in
which such charges occur. As a result, Adobe's management believes it
is useful for itself and investors to review both GAAP information
that includes such charges and pro forma measures of operating income
and net income that exclude these charges to have a better
understanding of the overall performance of Adobe's ongoing business
operations and its performance in the periods presented.
Beginning in the first quarter of fiscal 2003, in accordance with
GAAP, goodwill is no longer amortized but is reviewed periodically for
impairment. Upon our periodic review, we may deem goodwill to be
impaired and therefore record an impairment charge. Both the
impairment of goodwill and the amortization of goodwill in prior years
result in no ongoing cash expenditures and otherwise have no material
impact on Adobe's ongoing business operations. Similarly, from time to
time, Adobe also undertakes strategic acquisitions and investments.
The expenses related to such acquisitions and investments, such as
acquired in-process research and development, are not directly related
to Adobe's ongoing business activities in such periods. Consequently,
Adobe excludes the acquired in-process research and development
expenses from its pro forma financial measures.
In accordance with GAAP, Adobe incurs investment gains and losses from
its venture program. These charges are otherwise unrelated to Adobe's
ongoing business operations and are excluded from its pro forma
financial information.
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