Adobe Systems Reports Record Quarterly and Annual Revenue and Net Income; Company Achieves 18 Percent Year-Over-Year Annual Revenue Growth and Provides Fiscal Year 2006 Financial Targets.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. -- 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 December December: see month. 2, 2005. In the fourth quarter of fiscal 2005, 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 $510.4 million, compared to $429.5 million reported for the fourth quarter of fiscal 2004 and $487.0 million reported in the third quarter of fiscal 2005. On a year-over-year basis, this represents 19 percent revenue growth. Adobe's fourth quarter revenue target range was $490 to $510 million. "2005 was another remarkable year for Adobe," 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, Adobe chief executive officer. "We grew our business 18 percent, generated record profits, and for the third consecutive year, achieved record revenue for the fourth quarter and year. At the same time, we completed our acquisition of Macromedia (Macromedia, Inc., San Francisco, CA, www.macromedia.com) A software company specializing in multimedia authoring tools that was acquired by Adobe Systems, Inc. in mid-2005. It was founded in 1992 by the merger of Authorware, Inc., which was founded in 1984, and MacroMind-Paracomp. , which positions us for future growth by accelerating our strategy to provide a powerful engagement platform. Going forward, we will meet a wider set of customer needs and have a significantly greater opportunity to expand into new markets, particularly in the mobile and enterprise segments." 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 2005 were $0.31. Non-GAAP diluted earnings per share, which excludes the net tax impact of the repatriation Repatriation The process of converting a foreign currency into the currency of one's own country. Notes: If you are American, converting British Pounds back to U.S. dollars is an example of repatriation. of certain foreign earnings and investment gains, were $0.30. GAAP net income was $156.3 million for the fourth quarter of fiscal 2005, compared to $113.5 million reported in the fourth quarter of fiscal 2004, and $144.9 million in the third quarter of fiscal 2005. Non-GAAP net income, which excludes, as applicable, the net tax impact of the repatriation of certain foreign earnings, and investment gains and losses, was $151.5 million for the fourth quarter of fiscal 2005, compared to $110.4 million in the fourth quarter of fiscal 2004, and $146.4 million in the third quarter of fiscal 2005. GAAP diluted earnings per share for the fourth quarter of fiscal 2005 were $0.31 based on 508.6 million weighted average shares. This compares with GAAP diluted earnings per share of $0.23 reported in the fourth quarter of fiscal 2004, based on 500.6 million weighted average shares, and GAAP diluted earnings per share of $0.29 reported in the third quarter of fiscal 2005, based on 507.8 million weighted average shares. Adobe's GAAP and non-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 $191.9 million in the fourth quarter of fiscal 2005, compared to $146.4 million in the fourth quarter of fiscal 2004 and $183.6 million in the third quarter of fiscal 2005. On a year-over-year basis, this represents 31 percent GAAP and non-GAAP operating income growth. As a percent of revenue, GAAP and non-GAAP operating income in the fourth quarter of fiscal 2005 was 37.6 percent, compared to 34.1 percent in the fourth quarter of fiscal 2004 and 37.7 percent in the third quarter of fiscal 2005. Adobe Reports Record Annual Revenue in Fiscal Year 2005 In fiscal year 2005, Adobe achieved record revenue of $1.966 billion, compared to $1.667 billion in fiscal 2004. On a year-over-year basis, annual revenue grew 18 percent. Adobe's annual GAAP net income was $602.8 million in fiscal 2005, compared to $450.4 million in fiscal 2004. On a year-over-year basis, annual GAAP net income grew 34 percent. Adobe's annual non-GAAP net income, which as applicable excludes the net tax impact of the repatriation of certain foreign earnings, and investment gains and losses, was $574.5 million in fiscal 2005, compared to $448.5 million in fiscal 2004. On a year-over-year basis, annual non-GAAP net income grew 28 percent. GAAP diluted earnings per share for fiscal 2005 were $1.19. Non-GAAP diluted earnings per share for fiscal 2005, which as applicable excludes the net tax impact of the repatriation of certain foreign earnings, and investment gains and losses, were $1.13. Adobe Provides First Quarter and Fiscal Year 2006 Financial Targets For the first quarter of fiscal 2006, Adobe announced it is targeting revenue of $630 million to $660 million. The Company also is targeting a GAAP operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 15 to 19 percent in the first quarter. On a non-GAAP basis, which excludes purchase accounting and restructuring charges 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. related to the acquisition of Macromedia, and the stock-based compensation impact of SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System 123R, the Company is targeting a first quarter operating margin of approximately 35 to 36 percent. In addition, Adobe is targeting its share count to be between 617 million and 619 million shares in the first quarter of fiscal 2006. The Company also is targeting other income in its first quarter to be approximately $11 million to $12 million, and a tax rate of 25 percent. These targets lead to a first quarter GAAP earnings per share target range of approximately $0.13 to $0.16. On a non-GAAP basis, which excludes purchase accounting and restructuring charges related to the acquisition of Macromedia, and the stock-based compensation impact of SFAS 123R, the Company is targeting earnings per share of approximately $0.28 to $0.30. For fiscal year 2006, Adobe announced it is targeting revenue of approximately $2.7 billion. The Company also is targeting a GAAP operating margin of approximately 20 to 23 percent, and a non-GAAP operating margin -- which excludes purchase accounting and restructuring charges, and the cost of stock-based compensation under SFAS 123R -- of approximately 36 to 37 percent. Adobe stated it expects its tax rate for fiscal year 2006 to be approximately 25 percent. Based on the Company's financial targets, it expects its GAAP earnings per share for the year to be approximately $0.74 to $0.82. On a non-GAAP basis, it expects earnings per share to be approximately $1.26 to $1.30. Forward Looking Statements Disclosure This press release contains forward looking statements, including those related to revenue, operating margin, other income, tax rate, share count, earnings per share, and future growth and market opportunities, which involve risks and uncertainties that could cause actual results to differ materially. Factors that might cause or contribute to such differences include, but are not limited to: adverse changes in general economic or political conditions in any of the major countries in which Adobe does business, delays in development or shipment of the Company's new products or major new versions of existing products, 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. , failure to successfully manage transitions to new business models or markets, failure to anticipate and develop new products in response to changes in demand for application software, computers and printers, 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. , failure to realize the anticipated benefits of past or future acquisitions and difficulty in integrating such acquisitions, changes to the Company's distribution channel, the impact of malicious Involving malice; characterized by wicked or mischievous motives or intentions. An act done maliciously is one that is wrongful and performed willfully or intentionally, and without legal justification. DESERTION, MALICIOUS. code, such as worms Worms (vôrms), city (1994 pop. 79,155), Rhineland-Palatinate, SW Germany, on the Rhine River. It is an industrial city and a leading wine trade center. and viruses, on the Company's computer network and applications, interruptions or terminations in the Company's relationships with turnkey See turnkey system. assemblers This is a list of assemblers. Hundreds of assemblers have been written; some notable examples are:
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 2005. The Company 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. (C) 2005 Adobe Systems Incorporated. All rights reserved. Adobe, Adobe Creative Suite Adobe Creative Suite is a collection of graphic design, video editing, and web development applications made by Adobe Systems. The latest version, Adobe Creative Suite 3 (CS3), was announced on March 27, 2007; it introduced Universal binaries for all programs for the Apple , Adobe Acrobat Document exchange software from Adobe that allows documents to be displayed and printed the same on every computer. The Acrobat system created the Portable Document Format (PDF), which is widely used in commercial printing and on the Web. See PDF. , and the Adobe logo are either registered trademarks or 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. All other trademarks are the property of their respective owners.
Condensed Consolidated Statements of Income
(In thousands, except per share data)
(Unaudited)
Three Months Ended Year Ended
------------------- -----------------------
December December December December
2, 3, 2 3,
2005 2004 2005 2004
--------- --------- ----------- -----------
Revenue:
Products $498,457 $420,204 $1,923,278 $1,633,959
Services and support 11,914 9,298 43,043 32,622
--------- --------- ----------- -----------
Total revenue 510,371 429,502 1,966,321 1,666,581
--------- --------- ----------- -----------
Total cost of revenue:
Products 24,720 23,887 89,942 86,572
Services and support 5,975 5,485 22,636 17,806
--------- --------- ----------- -----------
Total cost of revenue 30,695 29,372 112,578 104,378
--------- --------- ----------- -----------
Gross profit 479,676 400,130 1,853,743 1,562,203
Operating Expenses:
Research and development 94,647 80,100 365,328 311,296
Sales and marketing 147,229 140,289 593,323 521,143
General and
administrative 45,870 33,362 166,658 137,970
--------- --------- ----------- -----------
Total operating
expenses 287,746 253,751 1,125,309 970,409
--------- --------- ----------- -----------
Operating income 191,930 146,379 728,434 591,794
Non-operating income:
Investment income (loss),
net 4,998 4,158 (1,301) 2,506
Interest and other income 10,291 2,843 38,643 14,345
--------- --------- ----------- -----------
Total non-operating
income 15,289 7,001 37,342 16,851
--------- --------- ----------- -----------
Income before income taxes 207,219 153,380 765,776 608,645
Provision for income taxes 50,968 39,879 162,937 158,247
--------- --------- ----------- -----------
Net income $156,251 $113,501 $ 602,839 $ 450,398
========= ========= =========== ===========
Basic net income per share $ 0.32 $ 0.24 $ 1.23 $ 0.94
========= ========= =========== ===========
Shares used in computing
basic net income per
share 492,517 479,740 489,921 477,658
========= ========= =========== ===========
Diluted net income per
share $ 0.31 $ 0.23 $ 1.19 $ 0.91
========= ========= =========== ===========
Shares used in computing
diluted net income per
share 508,562 500,620 508,070 495,626
========= ========= =========== ===========
Cash dividends declared
per share $ -- $0.00625 $ 0.00625 $ 0.025
========= ========= =========== ===========
Condensed Consolidated Balance Sheets
(In thousands, except per share data)
(Unaudited)
December 2, December 3,
2005 2004
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 420,818 $ 259,061
Short-term investments 1,280,016 1,054,160
Trade receivables, net 173,245 141,945
Other receivables 31,504 25,495
Deferred income taxes 58,710 51,751
Prepaid expenses and current assets 44,285 18,617
------------ ------------
Total current assets 2,008,578 1,551,029
------------ ------------
Property and equipment, net 103,549 99,675
Goodwill 118,683 110,287
Purchased and other intangibles, net 16,477 15,513
Investment in lease receivable 126,800 126,800
Other assets 66,228 55,328
------------ ------------
Total assets $ 2,440,315 $ 1,958,632
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade and other payables $ 41,042 $ 43,192
Accrued expenses 226,985 202,762
Income taxes payable 154,529 145,913
Deferred revenue 57,839 52,020
------------ ------------
Total current liabilities 480,395 443,887
------------ ------------
Long-term liabilities:
Deferred revenue 9,731 7,521
Deferred income taxes 78,800 78,909
Other liabilities 7,063 4,838
------------ ------------
Total liabilities 575,989 535,155
------------ ------------
Stockholders' equity:
Common stock, $0.0001 par value 29,600 29,576
Additional paid-in-capital 1,321,146 1,164,643
Retained earnings 2,838,566 2,238,807
Accumulated other comprehensive loss (914) (2,289)
Treasury stock at cost, net of re-
issuances (2,324,072) (2,007,260)
------------ ------------
Total stockholders' equity 1,864,326 1,423,477
------------ ------------
Total liabilities and stockholders' equity $ 2,440,315 $ 1,958,632
============ ============
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three Months Ended
---------------------
December December
2, 3,
2005 2004
---------- ----------
Cash flows from operating activities:
Net income $ 156,251 $ 113,501
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 16,453 17,802
Stock compensation expense 101 46
Deferred income taxes 33,226 (2,172)
Provision for (recovery of) losses on
receivables 369 (58)
Tax benefit from employee stock option plans 19,050 67,822
Net gains on sales and impairments of
investments (4,995) (4,158)
Changes in operating assets and liabilities:
Receivables (7,993) (30,291)
Other current assets (4,075) 6,424
Trade and other payables 3,614 6,531
Accrued expenses 22,478 32,971
Income taxes payable (19,764) (30,778)
Deferred revenue 7,560 12,393
---------- ----------
Net cash provided by operating activities 222,275 190,033
---------- ----------
Cash flows from investing activities:
Purchases of short-term investments (280,294) (389,976)
Maturities of short-term investments 91,347 47,539
Sales of short-term investments 345,359 279,728
Acquisitions of property and equipment (10,791) (21,070)
Purchases of long-term investments and other
assets (7,858) (16,262)
Proceeds from sale of equity securities and
other assets 97 2,788
---------- ----------
Net cash provided by (used for) investing
activities 137,860 (97,253)
---------- ----------
Cash flows from financing activities:
Purchases of treasury stock (500,007) (200,015)
Proceeds from issuance of treasury stock 106,882 221,145
Payment of dividends -- (2,982)
---------- ----------
Net cash provided by (used for) financing
activities (393,125) 18,148
---------- ----------
Effect of foreign currency exchange rates on
cash and cash equivalents (360) 3,732
---------- ----------
Net increase (decrease) in cash and cash
equivalents (33,350) 114,660
Cash and cash equivalents at beginning of period 454,168 144,401
---------- ----------
Cash and cash equivalents at end of period $ 420,818 $ 259,061
========== ==========
Non-GAAP Results
(In thousands, except per share data)
The following table shows Adobe's non-GAAP results reconciled to GAAP
results included in this release.
Three Months Ended Year Ended
-------------------------------------------------
December December September December December
2, 3, 2, 2, 3,
2005 2004 2005 2005 2004
--------- --------- --------- --------- ---------
GAAP net income $156,251 $113,501 $144,916 $602,839 $450,398
Investment
(gain)/loss, net of
tax (3,734) (3,077) 1,527 975 (1,854)
Net tax impact on
foreign earnings
repatriation (1,043) - - (29,271) -
--------- --------- --------- --------- ---------
Non-GAAP net income $151,474 $110,424 $146,443 $574,543 $448,544
========= ========= ========= ========= =========
Diluted net income
per share:
GAAP net income $ 0.31 $ 0.23 $ 0.29 $ 1.19 $ 0.91
Investment
gain/(loss), net of
tax (0.01) (0.01) 0.00 0.00 0.00
Net tax impact on
foreign earnings
repatriation 0.00 - - (0.06) -
--------- --------- --------- --------- ---------
Non-GAAP net income $ 0.30 $ 0.22 $ 0.29 $ 1.13 $ 0.91
========= ========= ========= ========= =========
Shares used in
computing diluted
net income per
share 508,562 500,620 507,821 508,070 495,626
========= ========= ========= ========= =========
First Quarter and Fiscal Year 2006 Non-GAAP Financial Targets
The following table shows Adobe's non-GAAP financial targets
reconciled to GAAP financial targets included in this release.
First Quarter Fiscal Year
Fiscal 2006 2006
--------------- ---------------
Low High Low High
------- ------- ------- -------
GAAP operating margin 15% 19% 20% 23%
Purchase accounting adjustments:
Amortization of purchased technology 6 5 6 5
Amortization of other intangibles and
deferred compensation 5 4 4 4
Restructuring charges 4 3 1 1
Stock-based compensation impact of
SFAS 123R 5 5 5 4
------- ------- ------- -------
Non-GAAP operating margin 35% 36% 36% 37%
======= ======= ======= =======
Diluted net income per share:
GAAP earnings per share $ 0.13 $ 0.16 $ 0.74 $ 0.82
Purchase accounting adjustments:
Amortization of purchased technology 0.05 0.04 0.18 0.18
Amortization of other intangibles and
deferred compensation 0.03 0.03 0.14 0.13
Restructuring charges 0.03 0.03 0.03 0.02
Stock-based compensation impact of
SFAS 123R 0.04 0.04 0.17 0.15
------- ------- ------- -------
Non-GAAP earnings per share $ 0.28 $ 0.30 $ 1.26 $ 1.30
======= ======= ======= =======
Shares used in computing diluted net
income per share 618.0 618.0 615.0 615.0
======= ======= ======= =======
Adobe continues to provide all information required in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. 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 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 Business operations are those activities involved in the running of a business for the purpose of producing value for the stakeholders. Compare business processes. The outcome of business operations is the harvesting of value from assets . Adobe's management believes it is useful for itself and investors to review both GAAP information that includes the investment gains and losses, the net tax impact of the repatriation of certain foreign earnings, purchase accounting adjustments related to business combinations, restructuring charges and stock-based compensation impact of SFAS 123R discussed below, 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. 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 non-GAAP financial information. Also, in accordance with GAAP, Adobe included the net tax impact of the repatriation of certain foreign earnings. This tax impact is not indicative indicative: see mood. of Adobe's ongoing business operations and thus is excluded from its non-GAAP financial information. For the first quarter and fiscal year 2006, Adobe's GAAP financial targets include purchase accounting adjustments related to business combinations, restructuring charges and the stock-based compensation impact of SFAS 123R. These charges are otherwise unrelated to Adobe's ongoing business operations and are excluded from its non-GAAP financial targets. |
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