Adobe 2009 Annual Report Download - page 69

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Other Liquidity and Capital Resources Considerations
Our existing cash, cash equivalents and investment balances may further decline during fiscal 2010 in the event of a
further weakening of the economy or changes in our planned cash outlay, including changes in incremental costs such as
direct and integration costs related to the acquisition. Cash from operations could also be affected by various risks and
uncertainties, including, but not limited to the risks detailed in Part I, Item 1A titled “Risk Factors.” However, based on our
current business plan and revenue prospects, we believe that our existing balances and our anticipated cash flows from
operations will be sufficient to meet our working capital and operating resource expenditure requirements for the next twelve
months. At November 27, 2009, our existing credit facility is $1.0 billion and we have borrowed against the entire amount.
See Note 18 of our Notes to Consolidated Financial Statements for further information regarding our credit agreement.
We use professional investment management firms to manage a large portion of our invested cash. External investment
firms managed, on average, 50% of our consolidated invested balances during the fourth quarter of fiscal 2009. Within the
U.S., the portfolio is invested primarily in money market funds for working capital purposes. Outside of the U.S., our fixed
income portfolio is primarily invested in U.S. Treasury securities.
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 also enter into structured repurchases 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 2009, 2008 and 2007 we entered into several structured repurchase agreements with large financial
institutions, whereupon we provided the financial institutions with prepayments of $350.0 million, $525.0 million and $1.1
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 over a specified period of time. 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 2009, we repurchased approximately 15.2 million shares at an average price per share of $27.89
through structured repurchase agreements entered into during fiscal 2008 and fiscal 2009. During fiscal 2008, we repurchased
22.4 million shares at an average price of $36.26 through structured repurchase agreements which included prepayments
from fiscal 2007. 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 2008, we also repurchased 3.6 million shares at an average price of $36.41 in open market transactions.
For fiscal 2009, 2008 and 2007, the prepayments were classified as treasury stock on our Consolidated Balance Sheets at
the payment date, though only shares physically delivered to us by November 27, 2009, November 28, 2008 and
November 30, 2007 were excluded from the denominator in the computation of earnings per share. As of November 27, 2009
and November 28, 2008, approximately $59.9 million and $134.7 million, respectively, of up-front payments remained under
the agreements.
See Item 5, Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities, for share repurchases during the quarter ended November 27, 2009.
Stock Repurchase Program II
Under this stock repurchase program, we had authorization to repurchase an aggregate of 50.0 million shares of our
common stock. From the inception of the 50.0 million share authorization under this program, we provided prepayments of
$1.9 billion under structured share repurchase agreements to large financial institutions. During the third quarter of fiscal
2008, the remaining authorized number of shares were repurchased.