Adobe 2007 Annual Report Download - page 57

Download and view the complete annual report

Please find page 57 of the 2007 Adobe annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 124

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124

57
Provision for Income Taxes
Fiscal
2007
% Change
2007 to 2006
Fiscal
2006
% Change
2006 to 2005
Fiscal
2005
Provision......................... $ 223.4 28% $ 173.9 7 % $ 162.9
Percentage of total revenue........ 7% 7% 8%
Effective tax rate................. 24% 26% 21%
Our effective tax rate decreased approximately 2% during fiscal 2007 as compared to fiscal 2006. The decrease is
primarily due to the reinstatement of the federal research and development tax credit in December 2006. The reinstatement of
the credit was retroactive to January 1, 2006. A $12.3 million cumulative tax benefit for the credit relating to fiscal 2006 was
reflected in its entirety in the first quarter of fiscal 2007.
Our effective tax rate increased 5% during fiscal 2006 as compared to fiscal 2005. The net increase is primarily due to
the expiration of the federal research and development tax credit on December 31, 2005 and because the 2005 effective tax
rate included a tax benefit recognized in connection with the repatriation of certain foreign earnings.
LIQUIDITY AND CAPITAL RESOURCES
This data should be read in conjunction with the consolidated statements of cash flows.
Fiscal
2007
Fiscal
2006
Cash, cash equivalents and short-term
investments............................ $ 1,993.9 $ 2,280.9
Working capital .......................... 1,720.6 2,207.1
Stockholders’ equity....................... $ 4,650.0 $ 5,151.9
Summary of our cash flows:
Fiscal
2007
Fiscal
2006
Fiscal
2005
Net cash provided by operating activities .............................. $ 1,439.3 $ 900.0 $ 758.4
Net cash provided by (used for) investing activities ..................... 83.3 195.2 (348.4)
Net cash used for financing activities ................................. (1,350.4) (747.4) (246.6)
Effect of foreign currency exchange rates on cash and cash equivalents..... 1.7 3.9 (1.6)
Net increase in cash and cash equivalents.............................. $ 173.9 $ 351.7 $ 161.8
Our primary source of cash is receipts from revenue. The primary uses of cash are payroll related expenses; general
operating expenses including marketing, travel and office rent; and cost of product revenue. Another source of cash is
proceeds from the exercise of employee options and participation in the employee stock purchase plan and another use of
cash is our stock repurchase program, which is detailed below.
Cash flows from operating activities
Net cash provided by operating activities of $1.4 billion for fiscal 2007, was primarily comprised of net income, net of
non-cash related expenses. The primary working capital sources of cash were increases in net income, accrued expenses,
income taxes payable, deferred revenue and trade payables and decreases in trade receivables. Net changes in accrued
expenses is primarily attributable to increases in accrued bonuses and accrued localization costs related to the localization of
CS3 during fiscal 2007. Income taxes payable increased due to overall increased taxable income. Increases to deferred
revenue relate primarily to deferred maintenance and service revenue due to strong upgrade plan sales in the fourth quarter of
fiscal 2007 for CS3 and related point products. The decrease in accounts receivable was due to collections in the first quarter
of fiscal 2007 related to high Acrobat 8 sales at the end of fiscal 2006 and strong collections during the third quarter of fiscal
2007 resulting from shipments of our CS3 family of products. We ended fiscal 2007 with days sales outstanding (“DSO”) in
trade receivables of 32 days.