Adobe 2007 Annual Report Download - page 59

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repurchases increased from the respective periods presented due to a higher average cost per share, a greater number of
shares being repurchased and remaining prepayments related to stock repurchase agreements. (See the following sections
titled “Stock Repurchase Program I and Stock Repurchase Program II”).
We expect to continue our investing activities, including 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. The Board of Directors has approved a facilities
expansion for our operations in India, which may include the purchase of land and buildings. As previously disclosed, we
plan to invest $100.0 million directly in venture capital, of which, approximately $16.2 million has already been spent. The
remaining balance will be invested over the next three to five years.
Our existing cash, cash equivalents and investment balances may decline during fiscal 2008 in the event of a weakening
of the economy or changes in our planned cash outlay. However, based on our current business plan and revenue prospects,
we believe that our existing balances, our anticipated cash flows from operations and our available credit facility will be
sufficient to meet our working capital and operating resource expenditure requirements for the next twelve months. Cash
from operations could be affected by various risks and uncertainties, including, but not limited to the risks detailed in Part II,
Item 1A titled “Risk Factors”. During the third quarter of fiscal 2007, we also increased our existing $500.0 million credit
facility to $1.0 billion. This credit facility will be used to provide backup liquidity for general corporate purposes including
stock repurchases. In January 2008, we drew down $450.0 million under this facility. Also, we believe that our banking
relationships and good credit should afford us the opportunity to raise additional capital in the bank or public market, if
required. See Notes 16 and 21 of our Notes to Consolidated Financial Statements for further information regarding our
credit facility.
We use professional investment management firms to manage most of our invested cash. External investment firms
managed, on average, 73% of our invested balances during the fourth quarter of fiscal 2007. Within the U.S., the fixed
income portfolio is primarily invested in municipal bonds. Outside of the U.S., our fixed income portfolio is primarily
invested in U.S. Treasury notes and highly rated corporate notes. The balance of the fixed income portfolio is managed
internally and invested primarily in money market funds for working capital purposes. As of the end of fiscal 2007, $530.8
million of the securities now classified as short-term investments have structural features that allow us to sell the securities at
par within 90 days and thus retain similar liquidity characteristics as cash equivalents. All investments are made according to
policies approved by the Board of Directors.
Stock Repurchase Program I
To facilitate our stock repurchase program, designed to return value to our stockholders and minimize dilution from
stock issuances, we repurchase shares in the open market and from time to time enter into structured stock 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. Refer to Part II, Item 5 in this Report for share
repurchases during the quarter ended November 30, 2007.
As part of this program, on April 17, 2005, the Board of Directors approved the use of an additional $1.0 billion for
stock repurchases commencing upon the close of the Macromedia acquisition. This additional $1.0 billion in stock
repurchases was completed by the third quarter of fiscal 2006.
During fiscal 2007 and 2006, we entered into several structured repurchase agreements with large financial institutions,
whereupon we provided the financial institutions with prepayments of $1.1 billion and $1.3 billion, respectively. We entered
into these agreements in order to take advantage of repurchasing shares at a guaranteed discount to the Volume Weighted
Average Price (“VWAP”) of our common stock. We only enter into such transactions when the discount that we receive is
higher than the foregone return on our cash prepayments to the financial institutions. There were no explicit commissions or
fees on these structured repurchases. Under the terms of the agreements, there is no requirement for the financial institutions
to return any portion of the prepayment to us.