Adobe 2004 Annual Report Download - page 85

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Preferred Stock, which is equal to 1/1000 share of Series A Preferred 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 a unit of preferred stock at $700. The rights become
exercisable in certain circumstances, including upon an entity’s acquiring or announcing the intention to
acquire beneficial ownership of 15% or more of our common stock without the approval of the Board of
Directors or upon our being acquired by any person in a merger or business combination transaction. The
rights are redeemable by Adobe prior to exercise at $0.01 per right and expire on July 23, 2010.
Stock Repurchase Program I – On-going Dilution Coverage
To facilitate our stock repurchase program, designed to minimize dilution from stock issuance
primarily from employee stock plans, we repurchase shares in the open market and from time to time enter
into structured repurchase agreements with third parties. Authorization to repurchase shares to cover on-
going dilution is not subject to expiration. However, this repurchase program is limited to covering net
dilution from stock issuances and is subject to business conditions and cash flow requirements as
determined by our Board of Directors from time to time.
During fiscal 2004, we entered into several stock purchase agreements with large financial institutions.
Under these agreements, we provided the financial institutions with up-front payments totaling $350.0
million. The financial institutions agreed to deliver to us, at certain intervals during the contract term, a
certain number of our shares based on the volume weighted average price during such intervals less a
specified discount. Upon payment, the $350.0 million was classified as treasury stock on our balance sheet.
As of December 3, 2004, approximately $127.7 million of the up-front payments remained under the
agreements.
During fiscal 2004, we repurchased 11.0 million shares at an average price of $43.81 through open
market repurchases and structured repurchase agreements. During fiscal 2003, we repurchased 2.8 million
shares at an average price of $30.39 through open market repurchases and the exercise of put and call
options. During fiscal 2002, we repurchased 10.5 million shares at an average price of $27.57 through open
market repurchases and the exercise of put and call options.
Stock Repurchase Program II – Additional Authorization above Dilution Coverage
On September 25, 2002, our Board of Directors authorized a program to purchase up to an additional
5.0 million shares of our common stock over a three-year period, subject to certain business and cash flow
requirements. We have not made any purchases under this 5.0 million share repurchase program. The
authorization for this program will expire in September 2005.
Note 13. Comprehensive Income
Statement of Financial Accounting Standards No. 130 (“SFAS 130”), “Reporting Comprehensive
Income,” establishes standards for the reporting and display of comprehensive income and its components
in the financial statements. Items of comprehensive income that we currently report are unrealized gains
and losses on marketable securities categorized as available-for-sale and foreign currency translation
adjustments. We also report gains and losses on derivative instruments qualifying as cash flow hedges such
as (i) hedging a forecasted foreign currency transaction, (ii) the variability of cash flows to be received or
paid related to a recognized asset or liability and (iii) interest rate hedges.