Adobe 2003 Annual Report Download - page 49

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office rent) and cost of product revenue. Another source of cash is proceeds from the exercise of employee options
and another use of cash is our stock repurchase program, which is detailed below.
Cash provided by operating activities for fiscal 2003 of $433.1 million primarily comprised net income, net
non-cash related expenses of $140.1 million, and increases in accrued expenses, income taxes payable and deferred
revenue. Accrued expenses increased primarily due to incentive compensation related costs, sales and marketing
programs, legal fees and accruals for major product releases. Income taxes payable increased due to an increase in
taxable income. Deferred revenue increased primarily due to increased maintenance obligations. These increases
were partially offset by an increase in receivables at the end of the year and a decrease in accrued restructuring
charges. The increase in receivables was primarily due to the increase in revenues during the year. The decrease in
accrued restructuring is primarily due to the payments of severance and facility costs.
During fiscal 2002, cash provided by operating activities of $329.3 million was primarily due to net income, net
non-cash related expenses of $118.9 million, an increase in income taxes payable and deferred revenue and a
decrease in accounts receivable. Income taxes payable increased due to an increase in taxable income. Deferred
revenue increased primarily due to increased maintenance obligations. The decrease in trade receivables was
primarily due to our improved collections during fiscal 2002. These increases in cash were partially offset by a
decrease in accrued restructuring charges and accrued expenses. Accrued restructuring charges decreased primarily
due to the payment of severance and related charges. Accrued expenses decreased primarily due to incentive
compensation related costs.
Cash provided by operating activities for fiscal 2001 of $418.7 million was primarily due to net income, net
non-cash related expenses of $197.1 million, and a net increase in operating assets and liabilities of $16.0 million.
Net cash used in investing activities in fiscal 2003 of $548.4 million increased from cash used in fiscal 2002 of
$142.3 million, primarily due to purchases of short-term investments, net of maturities and sales. The increase in
purchases of short-term investments is attributable to an increase in cash from operations and proceeds from the re-
issuance of treasury stock during fiscal 2003. Net cash used in investing activities for fiscal 2002 increased from
cash used in fiscal 2001 of $26.4 million primarily due to increased purchases of short-term investments because of
lower treasury stock purchases.
Cash provided by financing activities in fiscal 2003 of $117.0 million increased from cash used in fiscal 2002 of
$223.3 million. During fiscal 2003, more employees exercised their stock options due to higher stock prices. In
fiscal 2003, the net result of exercised options and stock repurchases was an inflow of $128.6 million due to the rise
in stock price and lower stock repurchases as we were targeting higher cash levels. Cash used for financing activities
for fiscal 2002 decreased from cash used in fiscal 2001 of $409.6 million primarily due to stock repurchase
activities. Cash used for stock repurchases in fiscal 2002 decreased due to a lower average per share cost.
We have paid cash dividends on our common stock each quarter since the second quarter of 1988. Adobe’s
Board of Directors declared a cash dividend on our common stock of $0.0125 per common share for each of the four
quarters in fiscal 2003 and 2002. Under the terms of our lease agreements for our San Jose headquarters, we are not
prohibited from paying cash dividends unless an event of default occurs. The declaration of future dividends,
whether in cash or in-kind, is within the discretion of Adobe’s Board of Directors and will depend on business
conditions, our results of operations and financial condition, and other factors.
We expect to continue our investing activities, including investments in short-term and long-term investments
and purchases of computer systems for research and development, sales and marketing, product support, and
administrative staff. Furthermore, cash reserves may be used to repurchase stock under our stock repurchase
programs and strategically acquire software companies, products or technologies that are complementary to our
business.
Adobe uses highly regarded investment management firms to manage most of our invested cash. The total
return on invested balances in fiscal 2003 was 3.45%, exceeding the industry standard benchmarks established for
our investment management firms. External investment firms actively managed 88% of Adobe’s invested balances
during the year. The fixed income portfolio is primarily invested in municipal bonds within the U.S. and in highly
rated corporate and sovereign obligations outside of the U.S. The balance of the fixed income portfolio is managed