Adobe 2007 Annual Report Download - page 95

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95
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.
As part of this program, on April 17, 2005, the Board of Directors approved the use of an additional $1.0 billion for
stock repurchase 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 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.
The financial institutions agree to deliver shares to us at monthly intervals during the contract term. The parameters used
to calculate the number of shares deliverable are: the total notional amount of the contract, the number of trading days in the
contract, the number of trading days in the interval and the average VWAP of our stock during the interval less the agreed
upon discount. During fiscal 2007, we repurchased 22.0 million shares at an average price of $40.04 through structured
repurchase agreements which included prepayments from fiscal 2006. During fiscal 2006, we repurchased 1.7 million shares
at an average price of $36.04 through open market repurchases and 36.8 million shares at an average price of $34.00 through
structured repurchase agreements which included prepayments from fiscal 2005.
For fiscal 2007, the prepayments were classified as treasury stock on our balance sheet at the payment date, though only
shares physically delivered to us by November 30, 2007 are excluded from the denominator in the computation of earnings
per share. All outstanding structured repurchase agreements as of November 30, 2007 under this program will expire on or
before June 19, 2008. As of November 30, 2007, approximately $422.6 million of up-front payments remained under the
agreements.
Subsequent to November 30, 2007, we entered into additional structured stock repurchase agreements with large
financial institutions whereupon we provided the financial institutions with prepayments of $150.0 million. The $150.0
million will be classified as treasury stock on our balance sheet. See Note 21 for discussion of our subsequent event related to
the Stock Repurchase Program I.
Stock Repurchase Program II
In April 2007, we announced that our Board of Directors authorized a new stock repurchase program. Under the new
program, which is not subject to expiration, we are authorized to repurchase in aggregate up to 20.0 million shares of our
common stock. This program is in addition to our existing stock repurchase program designed to return value to our
shareholders and offset dilution from employee stock programs. During fiscal 2007, we provided prepayments of $850.0
million under structured share repurchase agreements to large financial institutions under this program. During fiscal 2007,
we repurchased 17.7 million shares through structured share repurchase agreements at an average price of $40.50 and
approximately $133.7 million of up-front payments remained under these agreements. All outstanding structured repurchase
agreements as of November 30, 2007 under this program will expire on or before March 18, 2008.
As part of this program, in November 2007, the Board of Directors approved a 30 million share increase commencing in
2008 to the Stock Repurchase Program II. This increases the authorization under this program from the original 20 million
shares to 50 million shares. Subsequent to November 30, 2007, we entered into additional structured stock repurchase
agreements with large financial institutions whereupon we provided the financial institutions with prepayments of $1.0