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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM 10-K
________________
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 3, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from to
Commission file Number: 0-15175
ADOBE SYSTEMS INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 77-0019522
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
345 Park Avenue, San Jose, California 95110-2704
(Address of principal executive offices and zip code)
(408) 536-6000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock
Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 (the “Act”) during the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes [X] No [ ]
The aggregate market value of the registrant’s common stock, $0.0001 par value per share, held by non-affiliates of the
registrant on June 4, 2004, the last business day of the registrant’s most recently completed second fiscal quarter, was
$7,710,142,426 (based on the closing sales price of the registrant’s common stock on that date). Shares of the registrant’s
common stock held by each officer and director and each person who owns 5% or more of the outstanding common stock of the
registrant have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes. As of January 21, 2005, 244,200,497 shares of the registrant’s
common stock, $.0001 par value per share, were issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the 2005 Annual Meeting of Stockholders (the “Proxy Statement”), to be filed within 120
days of the end of the fiscal year ended December 3, 2004, are incorporated by reference in Part III hereof. Except with respect to
information specifically incorporated by reference in this Form 10-K, the Proxy Statement is not deemed to be filed as part
hereof.

Table of contents

  • Page 1
    ... of incorporation or organization) 77-0019522 (I.R.S. Employer Identification No.) 345 Park Avenue, San Jose, California 95110-2704 (Address of principal executive offices and zip code) (408) 536-6000 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12...

  • Page 2
    ...Principal Accounting Fees and Services ...59 60 60 60 60 Market for Registrant's Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities ...Selected Financial Data...Management's Discussion and Analysis of Financial Condition and Results of Operations ...Quantitative...

  • Page 3
    ...BUSINESS Founded in 1982, Adobe Systems Incorporated offers a line of software and services for consumers, creative professionals and enterprises, in both public and private sectors. Our products are digital imaging, design, and document technology platforms which enable customers to create, manage...

  • Page 4
    ...Suite incorporates several of our applications used by creative professionals into one product, and is a complete design solution that provides efficiency through improved product integration, a new innovative file management tool called Version Cue, and powerful Adobe Portable Document Format ("PDF...

  • Page 5
    ...for print and screen display. The suite combines Adobe Acrobat Professional, Adobe GoLive, Adobe Illustrator, Adobe InDesign, and Adobe Photoshop technologies with a file management and integration technology called Version Cue. Adobe Creative Suite Standard Edition - an integrated software solution...

  • Page 6
    ..., music and entertainment, corporate and marketing communications, product design, user interface design, sales training, printing, architecture, and fine arts. These customers rely on Adobe's digital imaging and digital video editing solutions to create and enhance many of the pictures and...

  • Page 7
    ... number of hobbyists desiring easy-to-use video editing solutions grows, we intend to enhance the video editing and DVD creation capabilities of our new Premiere Elements product for the sharing of digital video memories. Digital Imaging and Video Products Adobe After Effects - professional software...

  • Page 8
    ...; designed for consumers to manage their collections of digital photographs, easily share photos via e-mail and the Web, create digital slide shows and photo albums, and get their photographs printed via on-line photo finishing services. Adobe Photoshop Album Starter Edition - a limited-feature...

  • Page 9
    ... via batch processes. This can be done from desktop applications or dynamically from core systems. These products and solutions dynamically generate personalized, customer-facing documents from enterprise applications for enhanced customer communications. Document process management - products and...

  • Page 10
    ...management, and legacy systems with highly formatted document templates to generate personalized, reliable documents for print or secure electronic delivery. Adobe server-based document generation products include Adobe Acrobat Distiller Server Adobe Acrobat Elements Server Adobe Central Pro Output...

  • Page 11
    ... assembling documents from multiple sources, creating intelligent forms, and more securely collaborating on projects. Acrobat 7.0 Professional customers can now include virtually anyone in an electronic review of a PDF document by enabling access to commenting tools in the free Adobe Reader software...

  • Page 12
    ... core enterprise applications. As a result, Adobe LiveCycle Barcoded Forms can dramatically reduce the costs, errors, and time associated with manual data entry or OCR-based forms processing solutions. In fiscal 2005, we intend to continue to market the capabilities of our LiveCycle server products...

  • Page 13
    ...; allows users to preview their documents on-screen, crop or rotate pages, and add electronic annotations. Adobe Acrobat Standard - creates secure, reliable, and compact Adobe PDF files from desktop authoring applications such as Microsoft Office software, graphics applications, and more. Supports...

  • Page 14
    ...or CRM applications; merges data with an electronic document template using a powerful processing engine to dynamically generate electronic documents such as purchase orders, invoices, statements, and checks for delivery via Adobe PDF, the Web, e-mail, fax, or print; works with Adobe Output Designer...

  • Page 15
    ... Extensions Server (below), as well as the Adobe Acrobat product family (product descriptions for which are listed under Desktop Document Generation). Adobe Reader ― free software for reliably reviewing and printing Adobe PDF files on a variety of hardware and operating system platforms; when used...

  • Page 16
    Adobe LiveCycle Document Security Server - a server-based software application that helps organizations automate the processing of electronic documents by providing batch-based capabilities to digitally sign and certify PDF files, validate digital signatures, and encrypt/decrypt PDF documents; ...

  • Page 17
    ... layout software to users in markets they dominate, including users of Microsoft Office, Microsoft Windows operating system, and the Microsoft Internet Explorer Web browser. In technical authoring and publishing, our Adobe FrameMaker product faces competition from large-scale electronic publishing...

  • Page 18
    ... PDF file creation markets - Adobe Acrobat and our server solutions such as Adobe Acrobat Elements Server, Adobe Acrobat Distiller Server, and Adobe Document Server face competition from many Acrobat clone products marketed by companies such as AdLib, Active PDF, Ansyr Technology, eHelp Corporation...

  • Page 19
    ... higher end of the market, Acrobat Professional allows us to provide similar value as, and compete more directly against, other creative professional PDF tool providers, such as Enfocus, Dalim, TeamPDF, and Zinio. For document collaboration and document process management solutions, where electronic...

  • Page 20
    ... market and license our products directly using our sales force and through our own Web site at www.adobe.com. We support our worldwide distribution network and end-user customers with international offices around the world, including locations in Australia, Belgium, Brazil, Canada, China, Denmark...

  • Page 21
    ..., high quality technical expertise on Intelligent Documents products and solutions to meet the growing needs of our customers. Our support revenue also includes support for our desktop products. We offer a range of support programs, from fee-based incidents to annual support contracts. Additionally...

  • Page 22
    ...Link"), a privately held company, which provided Java-based workflow technology that will be integrated with our Intelligent Documents platform to enable customers to integrate document process management with core applications. In May 2003, we purchased the technology assets of Syntrillium Software...

  • Page 23
    ... products are generally licensed to end users on a "right to use" basis pursuant to a license that restricts the use of the products to a designated number of printers or computers. We also rely on copyright laws and on "shrink wrap" and electronic licenses that are not physically signed by the end...

  • Page 24
    ... was promoted to President and Chief Operating Officer of Adobe. Prior to joining Adobe, Mr. Narayen co-founded Pictra Inc., a digital photo sharing software company, in 1996. He was Director of Desktop and Collaboration products at Silicon Graphics Inc. and held various senior manager positions at...

  • Page 25
    ...Video Business Unit. Prior to joining Adobe, Mr. Lamkin held various product management positions at Software Publishing Corporation from 1986 to 1992. Mr. Stephens joined Adobe in February 1990 and held various senior management positions in sales and marketing for Adobe's Printing Systems Division...

  • Page 26
    ... Square Footage Location North America: 345 Park Avenue San Jose, California, USA 321 Park Avenue San Jose, California, USA 151 Almaden Boulevard San Jose, California, USA 801 N. 34th Street-Waterfront Seattle, WA 98103-88 560 Rochester St. Ottawa, Ontario Canada K1S 5K2 India: Adobe Towers, 1 - 1A...

  • Page 27
    ... B. Dufresne filed suit against Adobe, Microsoft Corporation, Macromedia, Inc. and Trellix Corporation in the U.S. District Court, District of Massachusetts, alleging infringement of U.S. Patent No. 5,835,712, entitled "Client-Server System Using Embedded Hypertext Tags for Application and Database...

  • Page 28
    ... our consolidated financial position, cash flows or results of operations could be affected by the resolution of one or more of these contingencies. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the quarter ended December...

  • Page 29
    ... 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 2004 and 2003. Under the terms of our lease agreements for our San Jose headquarters, we are...

  • Page 30
    ... for the quarter ended December 3, 2004 (in thousands, except average price per share). See Note 12 of our Notes to Consolidated Financial Statements for information regarding our stock repurchase programs. Average Price Per Share Maximum Number of Shares that May Yet be Purchased Plan/Period Stock...

  • Page 31
    ...(*) ...Net income per share(*) Basic...1.89 Diluted...1.82 0.05 Cash dividends declared per common share ...Financial position: Cash, cash equivalents and short-term investments ...Working capital...Total assets...Stockholders' equity ...Additional data: Worldwide employees...(*) 2003 2001 2000...

  • Page 32
    ...looking statements or reflect events or circumstances after the date of this document. OVERVIEW Founded in 1982, Adobe offers a line of software and services for consumers, creative professionals and enterprises, in both private and public sectors. Our products enable customers to create, manage and...

  • Page 33
    ... measurement of all employee share-based payments to employees, including grants of employee stock options, using a fair-value-based method and the recording of such expense in our consolidated statements of income. The accounting provisions of SFAS 123R are effective for reporting periods beginning...

  • Page 34
    ... and Acrobat Professional as part of its Adobe Creative Suite products. The Intelligent Documents segment provides electronic document distribution software that allows users to create, enhance, annotate and securely send Adobe PDF files that can be shared, viewed, navigated and printed exactly...

  • Page 35
    ... digital imaging software products, which was mainly attributable to product lifecycle timing. With the introduction of Adobe Creative Suite, which includes Photoshop, we experienced a shift in revenue from Photoshop to the Adobe Creative Suite which is reported in the Creative Professional segment...

  • Page 36
    ... the long term due to our targeting of business users with our Intelligent Documents desktop products, where the majority of users run the Windows operating system. Inventory Information At the end of fiscal 2004 our channel inventory position was within our global inventory policy which allows up...

  • Page 37
    ... new version of Acrobat and related products. Our backlog of unfulfilled orders at the end of fiscal 2004, other than those associated with new product releases, those pending credit review and those due to the application of our global channel inventory policy, was approximately 4% of reported...

  • Page 38
    .... We will continue to focus on long-term opportunities available in our end markets and make significant investments in the development of our desktop application and server-based software products. Sales and Marketing Fiscal 2004 % Change 2004 to 2003 Fiscal 2003 % Change 2003 to 2002 Fiscal 2002...

  • Page 39
    ... for our future business plans. This restructuring plan was completed during the fourth quarter of fiscal 2003. In the second quarter of fiscal 2002, we implemented a restructuring plan to eliminate 39 redundant sales and marketing positions, held by Adobe employees worldwide, as a result of...

  • Page 40
    ... date of the acquisition due to the state of the development of certain products and the uncertainty of the technology. In December 2001, we acquired Fotiva, a development stage software company that created solutions to help consumers manage, store, enrich, and share digital photographs and other...

  • Page 41
    ...-downs due to other-than-temporary declines in value of $4.0 million related to our short-term investments. During fiscal 2002, investment losses consisted of net investment losses related to investments in Adobe Ventures and our cost method investments totaling $13.1 million. We also recorded $11...

  • Page 42
    ... harm our competitive position and results of operations. The end markets for our software products are intensely and increasingly competitive, and are significantly affected by product introductions and market activities of industry competitors. Microsoft has an electronic form tool called InfoPath...

  • Page 43
    ... makes it difficult to predict the revenue effect of the Adobe Creative Suite product cycle and the individual products integrated within these products. If we fail to anticipate and develop new products in response to changes in demand for application software, computers and printers our business...

  • Page 44
    ... to operate as designed our operations will be disrupted and our business may be harmed. We rely on our network infrastructure and enterprise applications, internal technology systems and our website for our development, marketing, operational, support and sales activities. The hardware and software...

  • Page 45
    ... affect previously reported transactions. Our accounting policies that recently have been or may be affected by changes in the accounting rules are as follows software revenue recognition accounting for share-based payments accounting for income taxes accounting for business combinations and...

  • Page 46
    ... Company and the Executive Compensation Committee, regarding the use of stock options for executive officers. In May 2003, a stock option exchange program was initiated that allowed eligible employees to exchange options granted with an option price greater than $40.00 per share for a lesser number...

  • Page 47
    ... our employee stock option plan activity, and pro forma earnings presentation as if we had accounted for our grant of employee stock options using the fair value method of accounting under Statement of Financial Accounting Standards No. 123 ("SFAS No. 123"), "Accounting for Stock-Based Compensation...

  • Page 48
    ..., of the number of shares subject to our options whose exercise prices were at or below the closing price of our common stock on December 3, 2004 ("Inthe-Money" options) to the number of shares subject to options whose exercise prices were greater than the closing price of our common stock on such...

  • Page 49
    .... Also reported are the values for "In-the-Money" options. The dollar amounts shown in the "In-the-Money" column represent the positive spread between the exercise price of any such existing stock options and closing price as of December 3, 2004 of our common stock. Number of Shares Acquired Upon...

  • Page 50
    ..., and benefits), general operating expenses (marketing, travel, 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...

  • Page 51
    ..., 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...

  • Page 52
    cash flow requirements as determined by our Board of Directors from time to time. Refer to Part II, Item 5(c) in this filing for share repurchases during the quarter ended December 3, 2004. During fiscal 2004, we entered into several stock purchase agreements with large financial institutions. Under...

  • Page 53
    ... 10,614 $ $ 293,241 The repurchases from employees represent shares canceled when surrendered in lieu of cash payments for the option exercise price or withholding taxes due. These are exercises of outstanding put and call options. These are stock repurchase agreements executed with large financial...

  • Page 54
    ...in our consolidated financial statements. In connection with certain acquisitions and purchases of technology assets during fiscal 2003 and 2004, we entered into employee retention agreements and are required to make payments upon satisfaction of certain conditions in the agreements. These costs are...

  • Page 55
    ... into these foreign exchange contracts to hedge forecasted product licensing revenue in the normal course of business, and accordingly, they are not speculative in nature. We record changes in the intrinsic value of these cash flow hedges in accumulated other comprehensive income (loss), until the...

  • Page 56
    ...has experienced an other-than-temporary decline in fair value. Our policy includes, but is not limited to, reviewing each company's cash position, earnings/revenue outlook, stock price performance over the past six months, liquidity and management/ownership. If we believe that an other-thantemporary...

  • Page 57
    ... and economic viability of these companies. This policy includes, but is not limited to, reviewing each of the companies' cash position, financing needs, earnings/revenue outlook, operational performance, management/ownership changes and competition. The evaluation process is based on information...

  • Page 58
    ... a listing of financial statements provided in the section titled "Financial Statements." SUPPLEMENTARY DATA The following tables (presented in thousands, except per share amounts) set forth supplementary data for each of the quarters in the two-year period ended December 3, 2004. 2004 Quarter Ended...

  • Page 59
    ... sufficiently effective to ensure that the information required to be disclosed by us in this Annual Report on Form 10-K was recorded, processed, summarized and reported within the time periods specified in the SEC's rules and instructions for Form 10-K. Management's Report on Internal Control over...

  • Page 60
    ... by reference. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES You will find this information in the section captioned "Principal Accounting Fees and Services," which will appear in the Proxy Statement we will deliver to our stockholders in connection with our Annual Meeting of Stockholders to be...

  • Page 61
    ...and Financial Statement Schedule Page (a) Documents filed as part of this report 1. Financial statements • • Reports of Independent Registered Public Accounting Firm Consolidated Balance Sheets December 3, 2004 and November 28, 2003 Consolidated Statements of Income Years Ended December 3, 2004...

  • Page 62
    .... We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in...

  • Page 63
    ... Statements, Adobe Systems Incorporated changed its method of accounting for goodwill in 2003. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the internal control over financial reporting of Adobe Systems...

  • Page 64
    ADOBE SYSTEMS INCORPORATED CONSOLIDATED BALANCE SHEETS (In thousands, except per share data) December 3, 2004 ASSETS Current assets: Cash and cash equivalents ...Short-term investments...Trade receivables, net of allowances for doubtful accounts of $6,191 and $7,903, respectively ...Other ...

  • Page 65
    ADOBE SYSTEMS INCORPORATED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data) Years Ended November 28, 2003 December 3, 2004 Revenue: Products...Services and support...Total revenue ...Costs of revenue: Products...Services and support...Total cost of revenue...Gross profit ......

  • Page 66
    ...income, net of taxes ...Tax benefit from employee stock option plans...Issuance of compensatory stock...Dividends declared...Purchase of treasury stock...Re-issuance of treasury stock under employee stock purchase and stock option plans...Stock issued for acquisition ...Balances at November 29, 2002...

  • Page 67
    ... net cash provided by operating activities: Depreciation and amortization...Stock compensation expense ...Deferred income taxes ...Provision for (recovery of) losses on receivables ...Tax benefit from employee stock option plans ...Retirements of property and equipment...Acquired in-process research...

  • Page 68
    ... Accounting Policies Operations Founded in 1982, Adobe offers a line of software and services for consumers, creative professionals and enterprises, in both public and private sectors. Our products are market-leading digital imaging, design, and document technology platforms which enable customers...

  • Page 69
    ... or lease terms (five to ten years for leasehold improvements) of the respective assets. Additionally, it is our policy to capitalize certain costs for internal-use software incurred during the application development stage, in accordance with Statement of Position 98-1, "Accounting for the Costs of...

  • Page 70
    ... carry their investments in equity securities at estimated fair market value and unrealized gains and losses are included in investment gain (loss) on our consolidated statements of income. The stock of a number of technology investments held by Adobe Ventures at December 3, 2004 and November...

  • Page 71
    ... in our Creative Professional segment. Stock-Based Incentive Compensation We account for our fixed stock option plans and our employee stock purchase plan, under APB 25, using the intrinsic value method. The following table sets forth the pro forma amounts of net income and net income per share that...

  • Page 72
    ... free upgrade expires. Services and support revenue Our services and support revenue is composed of professional services (such as consulting services and training) and maintenance and support, primarily related to the licensing of our Intelligent Documents server solution products. Our support...

  • Page 73
    ... measurement of all employee share-based payments to employees, including grants of employee stock options, using a fair-value-based method and the recording of such expense in our consolidated statements of income. The accounting provisions of SFAS 123R are effective for reporting periods beginning...

  • Page 74
    ...FIN 46R, we began consolidating our Adobe Ventures partnerships in the first quarter of fiscal 2004. This consolidation did not have a material impact on our consolidated financial position, results of operations or cash flows. In December 2003, the SEC issued Staff Accounting Bulletin No. 104 ("SAB...

  • Page 75
    ... in acquisition-related legal and accounting fees. Goodwill has been allocated to our Digital Imaging and Video segment. Purchased technology is being amortized to cost of product revenue over its estimated useful life of three years. The consolidated financial statements include the operating...

  • Page 76
    ... declines in the fair value of these securities. Cash, cash equivalents and short-term investments consisted of the following as of November 28, 2003: Carrying Value Classified as current assets: Cash...$ Cash equivalents: Money market mutual funds ...Bank time deposits...State and municipal...

  • Page 77
    ... method. See Note 6 for net realized gains from the sale of our short-term investments and losses related to other-than-temporary declines in the fair value of our marketable equity securities. The following table summarizes the cost and estimated fair value of current debt securities and money...

  • Page 78
    ...") and Inscriber Technology Corporation. As required by SFAS 142, we have allocated goodwill to our reportable segments. Below is our goodwill reported by segment as of December 3, 2004 and November 28, 2003: 2004 Digital Imaging and Video Creative Professional Intelligent Documents Total goodwill...

  • Page 79
    ...2002. 2004 Net losses related to our investments in Adobe Ventures and cost method investments...$ (81) Write-downs due to other-than-temporary declines in value of our marketable equity securities ...- Gains from sale of short-term investments ...2,493 Gains on stock warrants ...94 Total investment...

  • Page 80
    ...expected" tax expense ...State tax expense, net of federal benefit ...Non-deductible goodwill ...Tax-exempt income ...Tax credits ...Differences between statutory rate and foreign effective tax rate...Change in deferred tax asset valuation allowance ...Other, net...$ 213,026 6,826 ― (4,284) (9,500...

  • Page 81
    ... 401(k) of the Internal Revenue Code, which is a pretax savings plan covering substantially all of our United States employees. Under the plan, eligible employees may contribute up to 18% of their pretax salary, subject to the Internal Revenue Service annual contribution limits. In fiscal 2004...

  • Page 82
    ... the Board of Directors. All members of the Executive Compensation Committee are independent directors, as defined in the current and proposed rules applicable to issuers traded on the Nasdaq Stock Market. In May 2003, a stock option exchange program was initiated that allowed eligible employees to...

  • Page 83
    ...as follows: 2004 Restricted stock granted ...2003 2002 6,893 Average fair value of shares...$ 42.87 3,277 $ 32.37 9,321 $ 27.88 Performance awards issued under the Restricted Stock Plan entitle the recipient to receive, at our discretion, shares or cash upon completion of the performance period...

  • Page 84
    ... which all of the shares available for issuance under the plan have been issued. Cash Incentive Awards Historically, we granted Cash Incentive Awards ("CIAs"), a form of phantom stock, to designated key employees to reward them based on their contributions to a project. The cash value of the CIA is...

  • Page 85
    ... Stock, par value $0.0001 per share, at a price of $700 per unit. As adjusted for our 2000 stock split in the form of a dividend, each share of common stock now entitles the holder to one-half of such a purchase right. Each whole right still entitles the registered holder to purchase from Adobe...

  • Page 86
    ...outstanding for the period plus dilutive common equivalent shares, including unvested restricted common stock, stock options and put warrants using the treasury stock method. The following table sets forth the computation of basic and diluted net income per share for fiscal 2004, 2003 and 2002. 2004...

  • Page 87
    ...2003 and 2002, respectively. We occupy three office buildings in San Jose, California where our corporate headquarters are located. We reference these office buildings as the "Almaden tower" and the "East and West towers." In December 2003, upon completion of construction, we began a five year lease...

  • Page 88
    ...in our consolidated financial statements. In connection with certain acquisitions and purchases of technology assets during fiscal 2003 and 2004, we entered into employee retention agreements and are required to make payments upon satisfaction of certain conditions in the agreements. These costs are...

  • Page 89
    ... B. Dufresne filed suit against Adobe, Microsoft Corporation, Macromedia, Inc. and Trellix Corporation in the U.S. District Court, District of Massachusetts, alleging infringement of U.S. Patent No. 5,835,712, entitled "Client-Server System Using Embedded Hypertext Tags for Application and Database...

  • Page 90
    ... at fair value. Gains and losses resulting from changes in fair value are accounted for depending on the use of the derivative and whether it is designated and qualifies for hedge accounting. As of December 3, 2004, our cash equivalents, short-term investments, and marketable equity securities, are...

  • Page 91
    ... into these foreign exchange contracts to hedge forecasted product licensing revenue in the normal course of business, and accordingly, they are not speculative in nature. We record changes in the intrinsic value of these cash flow hedges in accumulated other comprehensive income (loss), until the...

  • Page 92
    ...rate swap agreements to manage our exposure to operating lease obligations, on our East and West towers, that were tied to short-term interest rates (LIBOR). The swaps allowed us to exchange variable interest rate payments for fixed interest rate payments, thereby securing a fixed payment amount for...

  • Page 93
    ... and Acrobat Professional as part of its Adobe Creative Suite products. The Intelligent Documents segment provides electronic document distribution software that allows users to create, enhance, annotate and securely send Adobe PDF files that can be shared, viewed, navigated and printed exactly...

  • Page 94
    ... and 2002 are reported by operating segments below: Digital OEM Imaging and Creative Intelligent PostScript Video Professional Documents and Other Fiscal 2004 Revenue ...$ 430,177 $ 613,062 $ 541,804 $ 81,538 $ 1,666,581 Cost of revenue...40,149 21,125 38,077 5,027 104,378 Gross profit...$ 390,028...

  • Page 95
    ... Customers In fiscal 2004, licenses of application products to Ingram Micro, Inc. ("Ingram") and Tech Data Corporation ("Tech Data"), including their respective affiliates, accounted for 23% and 13%, respectively. In fiscal 2003, licenses of application products to Ingram and Tech Data, accounted...

  • Page 96
    ADOBE SYSTEMS INCORPORATED SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS (In thousands) Valuation and Qualifying Accounts Which are Deducted in the Balance Sheet from the Assets to Which They Apply Balance Charged/ at Credited to Beginning Operating of Period Expenses Allowance for doubtful accounts...

  • Page 97
    ..., on February 2, 2005. ADOBE SYSTEMS INCORPORATED By: /s/ Murray J. Demo Murray J. Demo, Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the...

  • Page 98
    ... in this Form 10-K: Adobe Acrobat Acrobat Capture Acrobat Messenger Adobe Audition Adobe Encore Adobe LiveCycle Adobe Premiere Adobe Type Manager After Effects Atmosphere Distiller Extreme Font Folio FrameMaker GoLive Illustrator InCopy InDesign PageMaker Photoshop PostScript Reader Version Cue All...

  • Page 99
    ... Investor Services, LLC 1984 Stock Option Plan, as amended* Amended 1994 Performance and Restricted Stock Plan* Form of Restricted Stock Agreement used in connection with the Amended 1994 Performance and Restricted Stock Plan* 1994 Stock Option Plan, as amended* 1997 Employee Stock Purchase Plan, as...

  • Page 100
    ... Form Date Number Filed Herewith Executive Severance Plan in the Event of a Change of Control* 10.18 Amendment No.1 to Lease Agreement between Adobe and Selco Services Corporation 10.19 Adobe Systems Incorporated 2004 Annual Executive Incentive Plan* 10.20 Adobe Systems Incorporated 2005 Annual...

  • Page 101
    ... Systems Europe Ltd. Adobe Systems France SARL Adobe Systems GmbH Adobe Systems (Schweiz) GmbH Adobe Systems Iberica SL Adobe Systems Italia SRL Adobe Systems Nordic AB Adobe Systems Norge AS Adobe Software Trading Company Limited Adobe Systems Software Ireland Limited Frame Technology International...

  • Page 102
    ..., and the related consolidated statements of income, stockholders' equity, and cash flows for each of the years in the three-year period ended December 3, 2004, and related financial statement schedule, management's assessment of the effectiveness of internal control over financial reporting as of...

  • Page 103
    ... Executive Officer of the registrant, certify that: 1. I have reviewed this annual report on Form 10-K of Adobe Systems Incorporated; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made...

  • Page 104
    (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Dated: February 2, 2005 /s/ BRUCE R. CHIZEN Bruce R. Chizen Chief Executive Officer

  • Page 105
    ... Financial Officer of the registrant, certify that: 1. I have reviewed this annual report on Form 10-K of Adobe Systems Incorporated; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made...

  • Page 106
    (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Dated: February 2, 2005 /s/ MURRAY J. DEMO Murray J. Demo Senior Vice President and Chief Financial Officer

  • Page 107
    ... connection with the Annual Report of Adobe Systems Incorporated (the "Registrant") on Form 10-K for the annual period ended December 3, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Bruce R. Chizen, Chief Executive Officer of the Registrant, certify...

  • Page 108
    ... with the Annual Report of Adobe Systems Incorporated (the "Registrant") on Form 10-K for the annual period ended December 3, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Murray J. Demo, Senior Vice President and Chief Financial Officer of the...