Adobe 2001 Annual Report Download - page 87

ADOBE SYSTEMS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except share and per share data)
Note 10. Employee Stock Plans (Continued)
Stock Appreciation Rights
In fiscal 2000 and 1999, we granted Stock Appreciation Rights (‘‘SARs’’), a form of phantom stock, to
designated key employees based on their performance. Additionally, we grant SARs to employees in
certain countries outside of the U.S. in lieu of stock options, generally with similar vesting schedules to our
option-vesting schedule; these SARs generally expire eight years after the grant date. The performance-
based SARs generally vest four years from the date of grant but contain an acceleration feature that allows
for a two-year vesting period based on Adobe achieving predetermined performance goals. These
performance-based SARs expire five years from the date of grant. Under our SAR plan, designated
employees are awarded rights that are equal to one share of Adobe’s common stock for each right awarded
with an exercise price based on the fair market value on the grant date. When the award vests, employees
generally have the right to exercise the award and receive the then-current value in cash of the
appreciation from the exercise price of the exercised number of rights of our common stock. We did not
award any stock appreciation rights in fiscal 2001. We awarded 800 rights in fiscal 2000 with an exercise
price of $50.19 and 28,200 rights in fiscal 1999 with an exercise price of $35.69. We charged $0.5 million,
$23.2 million, and $9.8 million to expense in fiscal 2001, 2000 and 1999, respectively. We currently do not
intend to grant stock appreciation rights in the future, except to certain employees outside of the U.S in
lieu of stock options.
Pro Forma Fair Value Disclosures
We account for our employee stock plans, consisting of fixed stock option plans, an employee stock
purchase plan, and a performance and restricted stock plan, using the intrinsic value method. The
following table sets forth the pro forma amounts of net income and net income per share that would have
resulted if we accounted for our employee stock plans under the fair value recognition provisions of
SFAS 123, ‘‘Accounting for Stock-Based Compensation.’’
Years Ended
November 30, December 1, December 3,
2001 2000 1999
Net income:
As reported ..................................... $205,644 $287,808 $237,751
Pro forma ...................................... $ 30,225 $196,153 $198,787
Net income per share:
As reported:
Basic ........................................ $ 0.86 $ 1.21 $ 0.98
Diluted ....................................... $ 0.83 $ 1.13 $ 0.92
Pro forma:
Basic ........................................ $ 0.13 $ 0.82 $ 0.82
Diluted ....................................... $ 0.12 $ 0.77 $ 0.78
For purposes of computing pro forma net income, we estimate the fair value of each option grant,
restricted stock grant, and Employee Stock Purchase Plan purchase right on the date of grant using the
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