Adobe 1998 Annual Report Download - page 28

The Company has paid cash dividends on its common stock each quarter since the second quarter of
1988. The Board of Directors of the Company declared a cash dividend on the Company’s common stock
of $.05 per common share for each quarter of fiscal 1998. Also, on December 1, 1997, the Company
dividended one share of Siebel Systems, Incorporated (‘‘Siebel’’) common stock for each 300 shares of
Adobe common stock held by stockholders of record on October 31, 1997. An equivalent cash dividend
was paid for holdings of less than 7,500 Adobe shares and for odd-lot and fractional Siebel shares. The
declaration of future dividends, whether in cash or in-kind, is within the discretion of the Company’s Board
of Directors and will depend upon business conditions, the Company’s results of operations and financial
condition, and other factors.
To facilitate the Company’s stock repurchase program, the Company sold put warrants in a series of
private placements in fiscal 1998 and 1997. Each put warrant entitles the holder to sell one share of
Adobe’s common stock to the Company at a specified price. Approximately 4.0 million and 4.6 million put
warrants were written in fiscal 1998 and 1997, respectively. At November 27, 1998, approximately 836,000
put warrants were outstanding that expire on various dates through February 1999 that have exercise prices
ranging from $27.00 to $32.38 per share, with an average exercise price of $30.30 per share.
In addition, in fiscal 1998 and 1997, the Company purchased call options that entitle the Company to
buy 1.6 million and 2.3 million shares, respectively, of its common stock. At November 27, 1998,
approximately 583,000 call options were outstanding that expire on various dates through February 1999
and have exercise prices ranging from $29.36 to $35.00 per share, with an average exercise price of $32.24
per share. Under these arrangements, the Company, at its option, can settle with physical delivery or net
shares equal to the difference between the exercise price and the value of the option as determined by the
contract.
The Company believes that existing cash, cash equivalents, and short-term investments, together with
cash generated from operations, will provide sufficient funds for the Company to meet its operating cash
requirements in the foreseeable future.
Commitments
The Company’s principal commitments as of November 27, 1998 consisted of obligations under
operating leases, real estate development agreements, and various service agreements with a previously
related party.
During 1994, the Company entered into a real estate development agreement and an operating lease
agreement in connection with the construction of a headquarters office facility. In August 1996, the
construction was completed and the operating lease commenced. The Company will have the option to
purchase the facility at the end of the lease term in October 2001. In the event the Company chooses not to
exercise this option, the Company is obligated to arrange for the sale of the facility to an unrelated party
and is required to pay the lessor any difference between the net sales proceeds and the lessor’s net
investment in the facility, in an amount not to exceed that which would preclude classification of the lease
as an operating lease, approximately $57.3 million. Pursuant to the agreement, the Company was required
to pledge certain interest-bearing instruments to the lessor as collateral to secure the performance of its
obligations under the lease. As of November 27, 1998, the Company’s collateral under this agreement
totaled $66.0 million in money market mutual funds. These deposits are included in ‘‘Other assets’’ on the
Consolidated Balance Sheet.
In 1996, the Company exercised its option under the development agreement to begin a second phase
of development for an additional office facility. In August 1996, the Company entered into a construction
agreement and an operating lease agreement for this facility. The construction was completed and the
operating lease commenced in August 1998. The Company will have the option to purchase the facility at
the end of the lease term in August 2003. In the event the Company chooses not to exercise this option, the
Company is obligated to arrange for the sale of the facility to an unrelated party and is required to pay the
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