Adobe Systems Reports Third Quarter Fiscal 2002 Results; Company Meets Revised Revenue and Earnings Targets; Sees Growth in Fourth Quarter.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)--Sept. 12, 2002 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) ), the leader in network publishing, today reported that its financial results for the third quarter ended August 30, 2002 met its revised revenue and earnings target ranges. In the third quarter of fiscal 2002, 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 revenue of 284.9 million, compared to $292.1 million reported for the third quarter of fiscal 2001 and $317.4 million reported in the second quarter of fiscal 2002. Adobe's revised third quarter revenue target range was between $270 and $290 million. 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 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 third quarter of fiscal 2002, which does not include amortization of goodwill and purchased intangibles Property that is a "right" such as a patent, Copyright, or trademark, or one that is lacking physical existence, such as good will. , and investment gains and losses, were $0.22. Adobe's revised third quarter 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. target range was between $0.18 and $0.23 per share. "I am pleased that Adobe is reporting revenue and earnings at the high end of our revised third quarter targets," 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. "I am also encouraged that despite a challenging economic environment, we are planning for growth in Q4." GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). net income was $47.2 million for the third quarter of fiscal 2002, compared to $40.3 million reported in the third quarter of fiscal 2001, and $54.3 million in the second quarter of fiscal 2002. Pro forma net income, which does not include 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, acquired in-process research and development, amortization of goodwill and purchased intangibles, and investment gains and losses, was $52.5 million for the third quarter of fiscal 2002, compared to $69.1 million in the third quarter of fiscal 2001, and $67.4 million in the second quarter of fiscal 2002. GAAP diluted earnings per share for the third quarter of fiscal 2002 were $0.19, based on 243.4 million weighted average shares. This compares with diluted earnings per share of $0.16 reported in the third quarter of fiscal 2001, based on 248.6 million weighted average shares, and diluted earnings per share of $0.22 reported in the second quarter of fiscal 2002, based on 247.7 million weighted average shares. Adobe's pro forma operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. , which does not include restructuring and other charges, acquired in-process research and development, and amortization of goodwill and purchased intangibles, was $73 million in the third quarter of fiscal 2002, compared to $96.4 million in the third quarter of fiscal 2001 and $96.4 million in the second quarter of fiscal 2002. As a percent of revenue, pro forma operating profit for the third quarter was 25.6 percent, compared to 33 percent in the third quarter of fiscal 2001 and 30.4 percent in the second quarter of fiscal 2002. For the fourth quarter of fiscal 2002, the Company announced that it is updating its targeted revenue range to $285 to $300 million, with a gross margin of 91 percent, and a pro forma operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: range of 26 to 29 percent. As a percent of revenue, Adobe is targeting Q4 expenses as follows: Research & Development -- approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 21 to 22 percent Sales & Marketing -- approximately 32 to 34 percent General & Administrative -- approximately 9 percent In addition, Adobe is targeting its share count range to be between 240 and 242 million shares in the fourth quarter of fiscal 2002. The Company also is targeting other income to be approximately $2 million to $3 million, and a tax rate of 32 percent. These targets lead to a pro forma target range of $0.21 to $0.25 per share in the quarter. 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 October October: see month. 8, 2002 to stockholders of record as of September September: see month. 24, 2002. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. This press release contains forward-looking statements, including those related to revenue, earnings per share, expenses, tax rate, margins, and profitability, that 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 conditions in any of the major countries in which the Company does business; delays in shipment of our new products and major new versions of existing products; corporate reductions in marketing expenditures which may result in lower demand; lack of market acceptance of new products and upgrades; delays or problems associated with the integration of acquisitions; introduction of new products by major 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. ; weakness in demand for application software and printers; lack of growth in worldwide personal computer and printer sales and downward sales price adjustments; changes with respect to intellectual property licensing; 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. ; consolidation in the OEM (Original Equipment Manufacturer) The rebranding of equipment and selling it. The term initially referred to the company that made the products (the "original" manufacturer), but eventually became widely used to refer to the organization that buys the products and printing business; industry transitions to new business and information delivery models; and market risk 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 2001 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 2002. The Company does not undertake an obligation to update forward-looking statements. About Adobe Systems Incorporated Founded in 1982, Adobe Systems Incorporated (www.adobe.com), the leader in network publishing, offers a comprehensive line of software for enterprise and creative professional customers. Its products enable customers to create, manage and deliver visually rich, compelling and reliable content. Based in San Jose, Calif., Adobe is one of the world's largest software companies The Forbes Global 2000 includes the following list of the world's largest software companies. Relative rank Global rank Name Country Sales ($bil) Profits ($bil) Assets ($bil) Market Value ($bil) 1 54 Microsoft United States . Note to Editors: Adobe 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 Nine Months Ended
August 30 August 31 August 30 August 31
2002 2001 2002 2001
Revenue:
Products $ 280,505 $ 292,118 $ 864,655 $ 965,180
Services and
support 4,374 -- 5,479 --
---------- ---------- ---------- ----------
Total revenue 284,879 292,118 870,134 965,180
Cost of revenue:
Products 28,471 20,041 73,303 62,416
Services and
support 3,165 -- 4,463 --
---------- ---------- ---------- ----------
Total cost of
revenue 31,636 20,041 77,766 62,416
---------- ---------- ---------- ----------
Gross profit 253,243 272,077 792,368 902,764
---------- ---------- ---------- ----------
Operating expenses:
Research and
development 59,746 54,189 181,901 169,473
Sales and
marketing 93,837 95,447 287,053 308,889
General and
administrative 26,649 26,030 81,314 87,475
Restructuring and
other charges -- -- 1,605 --
Acquired in-process
research and
development -- -- 5,769 --
Amortization of
goodwill and
purchased
intangibles 3,541 3,568 10,623 10,731
---------- ---------- ---------- ----------
Total operating
expenses 183,773 179,234 568,265 576,568
---------- ---------- ---------- ----------
Operating income 69,470 92,843 224,103 326,196
---------- ---------- ---------- ----------
Nonoperating loss,
net:
Investment loss (4,198) (39,447) (13,393) (87,516)
Interest and
other income 4,141 6,744 11,805 17,073
---------- ---------- ---------- ----------
Total nonoperating
loss, net (57) (32,703) (1,588) (70,443)
---------- ---------- ---------- ----------
Income before
income taxes 69,413 60,140 222,515 255,753
Provision for
income taxes 22,212 19,846 71,205 84,398
---------- ---------- ---------- ----------
Net income $ 47,201 $ 40,294 $ 151,310 $ 171,355
========== ========== ========== ==========
Basic net income
per share $ .20 $ .17 $ .64 $ .72
========== ========== ========== ==========
Shares used in
computing basic
net income per
share 238,010 238,051 237,812 239,110
========== ========== ========== ==========
Diluted net income
per share $ .19 $ .16 $ .62 $ .68
========== ========== ========== ==========
Shares used in
computing diluted
net income
per share 243,375 248,566 245,119 250,844
========== ========== ========== ==========
Condensed Consolidated Balance Sheets
(In thousands, except per share data)
(Unaudited) (Audited)
August 30 November 30
2002 2001
ASSETS
Current assets:
Cash and cash equivalents $ 141,354 $ 218,662
Short-term investments 494,877 362,951
Trade receivables 144,909 124,106
Other receivables 27,677 18,299
Deferred income taxes 31,655 22,726
Other current assets 23,197 20,620
----------- -----------
Total current assets 863,669 767,364
Property and equipment 69,360 80,993
Goodwill and other intangible
assets, net 109,343 36,402
Other assets 39,279 34,270
Deferred income taxes, long-term 23,212 11,594
----------- -----------
Total assets $1,104,863 $ 930,623
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade and other payables $ 32,868 $ 30,891
Accrued expenses 127,979 128,831
Income taxes payable 156,546 132,228
Deferred revenue 27,315 21,701
----------- -----------
Total current liabilities 344,708 313,651
----------- -----------
Stockholders' equity:
Common stock, $0.0001 par value, and
additional paid-in capital 736,531 625,386
Retained earnings 1,508,589 1,366,205
Accumulated other comprehensive
income (loss) (7,852) 3,918
Treasury stock at cost, net of
reissuances (1,477,113) (1,378,537)
----------- -----------
Total stockholders' equity 760,155 616,972
----------- -----------
Total liabilities and
stockholders' equity $1,104,863 $ 930,623
=========== ===========
Condensed Consolidated Statements Of Cash Flows
(In thousands)
(Unaudited)
Three Months Ended
August 30, August 31,
2002 2001
Cash flows from operating activities:
Net income $ 47,201 $ 40,294
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 20,986 13,787
Stock compensation expense 1,216 1,038
Deferred income taxes (10,796) (17,745)
Provision for losses on receivables (573) (473)
Tax benefit from employee stock plans 995 23,883
Loss on impairment 5,545 --
Gains on sale of equity securities (70) 38,223
Loss (gain) on equity and cost method
investments 2,989 (7,855)
Loss (gain) on other-than-temporary
declines of equity securities 1,279 9,080
Changes in operating assets
and liabilities:
Receivables (9,277) (1,289)
Other current assets (9,868) (495)
Trade and other payables (844) (576)
Accrued expenses (16,500) (29,285)
Accrued restructuring (6,199) --
Income taxes payable 23,121 12,124
Deferred revenue 1,519 1,759
--------- ---------
Net cash provided by operating activities 50,724 82,470
--------- ---------
Cash flows from investing activities:
Purchases of short-term investments (186,371) (75,564)
Maturities and sales of short-term
investments 159,240 152,121
Acquisitions of property and equipment (11,423) (12,809)
Purchases of long-term investments (3,713) (4,326)
Additions to other assets (3,172) (1,998)
Proceeds from the sale of
equity securities 671 13,734
--------- ---------
Net cash (used for) provided by
investing activities (44,768) 71,158
--------- ---------
Cash flows from financing activities:
Purchase of treasury stock (111,080) (113,965)
Proceeds from exercise of stock options
and sale of stock 17,570 45,634
Payment of dividends (2,994) (2,990)
--------- ---------
Net cash used for financing activities (96,504) (71,321)
--------- ---------
Effect of foreign currency exchange rates
on cash and cash equivalents 650 778
--------- ---------
Net (decrease) increase in cash and
cash equivalents (89,898) 83,085
Cash and cash equivalents at
beginning of period 231,252 209,734
--------- ---------
Cash and cash equivalents
at end of period $141,354 $292,819
========= =========
Pro Forma Results
(In thousands, except per share data)
(Unaudited)
The following table shows the Company's pro forma results
reconciled to the Generally Accepted Accounting Principles ("GAAP")
Consolidated Statements of Income table included on page 3 of this
release. The Company's pro forma results do not include unusual or
non-recurring events or transactions, restructuring and other charges,
acquired in-process research and development, amortization of goodwill
and purchased intangibles, or gains and losses on investments in
equity securities.
Three Months Ended Nine Months Ended
August 30 August 31 August 30 August 31
2002 2001 2002 2001
Income before
income taxes $ 69,413 $ 60,140 $ 222,515 $ 255,753
Restructuring
and other
charges -- -- 1,605 --
Acquired
in-process
research
and
development -- -- 5,769 --
Amortization of
goodwill and
purchased
intangibles 3,541 3,568 10,623 10,731
Investment loss 4,198 39,447 13,393 87,516
---------- ---------- ---------- ----------
Pro forma income
before income
taxes 77,152 103,155 253,905 354,000
Income tax provision 24,689 34,041 81,250 116,820
---------- ---------- ---------- ----------
Pro forma net income 52,463 69,114 172,655 237,180
---------- ---------- ---------- ----------
Basic pro forma net
income per share $ .22 $ .29 $ .73 $ .99
========== ========== ========== ==========
Shares used in
computing basic net
income per share 238,010 238,051 237,812 239,110
========== ========== ========== ==========
Diluted pro forma
net income
per share $ .22 $ .28 $ .70 $ .95
========== ========== ========== ==========
Shares used in
computing diluted
net income
per share 243,375 248,566 245,119 250,844
========== ========== ========== ==========
The above results do not reflect GAAP, but are supplied to provide
an alternative measure of our operating results.
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