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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended November 29, 2013
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 0-15175
ADOBE SYSTEMS INCORPORATED
(Exact name of registrant as specified in its charter)
_____________________________
Delaware
(State or other jurisdiction of
incorporation or organization)
77-0019522
(I.R.S. Employer
Identification No.)
345 Park Avenue, San Jose, California 95110-2704
(Address of principal executive offices)
(408) 536-6000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
Common Stock, $0.0001 par value per share The NASDAQ Stock Market LLC
(NASDAQ Global Select Market)
Securities registered pursuant to Section 12(g) of the Act: None
_____________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the
definitions of “large accelerated filer, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer Non-accelerated filer (Do not check if a smaller reporting company) Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No
The aggregate market value of the registrant’s common stock, $0.0001 par value per share, held by non-affiliates of the registrant on May 31, 2013, the last
business day of the registrant’s most recently completed second fiscal quarter, was $17,106,099,177 (based on the closing sales price of the registrant’s common
stock on that date). Shares of the registrant’s common stock held by each officer and director and each person who owns 5% or more of the outstanding common
stock of the registrant have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive
determination for other purposes. As of January 17, 2014, 496,604,463 shares of the registrant’s common stock, $0.0001 par value per share, were issued and
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the registrant's 2014 Annual Meeting of Stockholders (the “Proxy Statement”), to be filed within 120 days of the end of
the fiscal year ended November 29, 2013, are incorporated by reference in Part III hereof. Except with respect to information specifically incorporated by reference
in this Form 10-K, the Proxy Statement is not deemed to be filed as part hereof.

Table of contents

  • Page 1
    ... Avenue, San Jose, California 95110-2704 (Address of principal executive offices) (408) 536-6000 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Common Stock, $0.0001 par value per share Name of Each Exchange on...

  • Page 2
    ... Principal Accounting Fees and Services 104 104 104 105 105 Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Selected Financial Data Management's Discussion and Analysis of Financial Condition and Results of Operations Quantitative...

  • Page 3
    ... developers and service providers for use in their products and solutions. We offer some of our products via a Software-as-a-Service ("SaaS") model or a managed services model (both of which are referred to as a hosted or cloud-based model) as well as through term subscription and pay-per-use models...

  • Page 4
    ... our Adobe Creative Cloud offering. Creative Cloud is a subscription service that allows members to download and install the latest versions of our creative products such as Adobe Photoshop, Adobe Illustrator, Adobe Dreamweaver and Adobe InDesign, as well as utilize other tools such as Adobe Acrobat...

  • Page 5
    ... channel partners to reach new customers particularly in the small and medium business space; and utilizing Creative Cloud for teams and Creative Cloud for enterprise offerings to drive broad adoption with customers who license our products in volume. As part of our Creative Cloud strategy, we plan...

  • Page 6
    ... workflow to meet our customers' needs in areas such as video publishing, advertising and analytics. We believe customers using our Primetime solution can drive greater audience engagement, resulting in increased revenue from ad sales and subscriptions, while lowering operating costs. In addition to...

  • Page 7
    ... partners also license Creative Cloud with annual team subscriptions to small or medium-sized businesses, or to workgroups in enterprises. With larger enterprise customers, our direct sales force utilizes enterprise term license agreements, or ETLAs, for volume-based agreements often for multi-year...

  • Page 8
    ... print, web, interactive, video, and mobile. Illustrator is available to Creative Cloud subscribers, and customers can also subscribe to use it as an individual subscription product, or acquire a perpetual license of Illustrator CS6. InDesign InDesign is the leading professional page layout software...

  • Page 9
    ... code. Muse is available to Creative Cloud subscribers, or customers can subscribe to use it as an individual subscription product. Edge Tools & Services Our Edge web tools and services include: Edge Animate, a web motion and interaction design tool that allows designers to create animated content...

  • Page 10
    ... advertising management. Adobe Experience Manager Adobe Experience Manager helps customers organize, create, and manage the delivery of creative assets and other content across digital marketing channels, including web, mobile, email, communities and video. It enables customers to manage content...

  • Page 11
    ...on our corporate website, www.adobe.com, under the "Products" tab. COMPETITION The markets for our products and services are characterized by intense competition, new industry standards, evolving business and distribution models, disruptive software and hardware technology developments, frequent new...

  • Page 12
    ... customers' internally developed applications. Of the competitors listed, no single company has products identical to our Adobe Marketing Cloud offerings. Adobe Marketing Cloud competes in a variety of areas, including: reporting and analytics; cross-channel marketing and optimization; online...

  • Page 13
    ...products through sales channels, which include distributors, retailers, software developers, systems integrators, ISVs and VARs, as well as through OEM and hardware bundle customers. We support our end users through local field offices and our worldwide distribution network, which includes locations...

  • Page 14
    ... enable our customer and partner teams in the use of our products. Our training portfolio includes free on-line informational services on our website (www.adobe.com) and a growing series of howto books published by Adobe Press pursuant to a joint publishing agreement with Peachpit Press. We sponsor...

  • Page 15
    ... of Contents developed by others with license or technology transfer agreements that may obligate us to pay a flat license fee or royalties, typically based on a dollar amount per unit shipped or a percentage of the revenue generated by those programs. During fiscal 2013, 2012 and 2011, our research...

  • Page 16
    ...and Chief Financial Officer of the Software Group of EMC Corporation, a products, services and solutions provider for information management and storage, from June 2004 to January 2007, his most recent position since EMC's acquisition of Documentum, Inc., an enterprise content management company, in...

  • Page 17
    ...Lamkin previously was with Adobe from 1992 to 2006 and held various senior management positions including Senior Vice President, Creative Solutions Business Unit. Richard T. Rowley 57 Vice President, Corporate Controller and Principal Accounting Officer Mr. Rowley joined Adobe in November 2006 as...

  • Page 18
    ...direct sales and software delivery environment. These digital application marketplaces often have exclusive distribution for certain platforms, which may make it more difficult for us to compete in these markets. If any competing products, services, or operating systems achieve widespread acceptance...

  • Page 19
    ...our creative tools and cloud-based offerings. This subscription model prices and delivers our products in a way that differs from the historical pricing and delivery methods of our creative tools. These changes reflect a significant shift from perpetual license sales and distribution of our software...

  • Page 20
    ...over the applicable subscription term. Further, any increases in sales under our subscription sales model could result in decreased revenues over the short term if they are offset by a decline in sales from perpetual license customers. Additionally, in connection with our sales efforts to enterprise...

  • Page 21
    ...products and services to customers. We devote significant resources to address security vulnerabilities through engineering more secure products, enhancing security and reliability features in our products and systems, code hardening, conducting rigorous penetration tests, deploying security updates...

  • Page 22
    ... or product architecture, data back-up and security (including security from cyber-attacks), privacy practices, revenue recognition or other accounting practices, employee, customer or partner issues or legal and financial contingencies; exposure to litigation or other claims in connection with...

  • Page 23
    ... of and demand for our products, thereby harming our revenues. On behalf of certain of our customers using some of our services, we collect and store information derived from the activities of website visitors, which may include anonymous or personal information. This enables us to provide...

  • Page 24
    ... for damages or incur other losses. Failure to manage our sales and distribution channels and third-party customer service and technical support providers effectively could result in a loss of revenue and harm to our business. In fiscal 2013, revenue from Ingram Micro has declined to less than 10...

  • Page 25
    ... prevent us from fulfilling our customers' orders. Our corporate headquarters, a significant portion of our research and development activities, certain of our data centers and certain other critical business operations are located in the San Francisco Bay Area, and additional facilities where we...

  • Page 26
    ...business, including trade protection, import and export control, data and transaction processing security, payment card industry data security standards, records management, user-generated content hosted on websites we operate, corporate governance, employee and third-party complaints, gift policies...

  • Page 27
    ... likely would have a direct impact on our operating costs. We may continue to expand our international operations and international sales and marketing activities. Expansion in international markets has required, and will continue to require, significant management attention and resources. We may be...

  • Page 28
    ...to tax laws applicable to corporate multinationals such as Adobe. These potential changes could adversely affect our effective tax rates or result in other costs to us. In addition, we are subject to the continual examination of our income tax returns by the U.S. Internal Revenue Service ("IRS") and...

  • Page 29
    ... are in high demand and competition for their talents is intense in many areas where our employees are located. If we are unable to continue to successfully attract and retain key personnel, our business may be harmed. Effective succession planning is also a key factor for our long-term success. Our...

  • Page 30
    ... space. In May 2013, management approved a plan to sell the land, building and other assets located in Waltham, Massachusetts. We finalized its sale in September 2013. See Note 6 of our Notes to Consolidated Financial Statements for further information regarding the sale of the Waltham property...

  • Page 31
    ... flows or results of operations could be negatively affected by an unfavorable resolution of one or more of such proceedings, claims or investigations. In connection with our anti-piracy efforts, conducted both internally and through organizations such as the Business Software Alliance, from time to...

  • Page 32
    ... EQUITY SECURITIES Market Information for Common Stock Our common stock is traded on the NASDAQ Global Select Market under the symbol "ADBE." The following table sets forth the high and low sales price per share of our common stock for the periods indicated. Price Range High Low Fiscal 2013: First...

  • Page 33
    Table of Contents Issuer Purchases of Equity Securities Below is a summary of stock repurchases for the three months ended November 29, 2013. See Note 13 of our Notes to Consolidated Financial Statements for information regarding our stock repurchase programs. Total Number of Shares Purchased as ...

  • Page 34
    ...7, Management's Discussion and Analysis of Financial Condition and Results of Operations. Fiscal Years 2013 2012 2011 2010 2009 Operations: Revenue Gross profit Income before income taxes Net income Net income per share: Basic Diluted Shares used to compute basic net income per share Shares used to...

  • Page 35
    ...results. Revenue Recognition Our revenue is derived from the licensing of perpetual, time-based and subscription software products, associated software maintenance and support plans, non-software related hosting services, consulting services, training and technical support. We recognize revenue when...

  • Page 36
    ... prices for a product or service fall within a reasonably narrow pricing range. We have established VSOE for our software maintenance and support services, custom software development services, consulting services and training. For multiple-element arrangements containing our non-software services...

  • Page 37
    ... to future expected cash flows from software license sales, subscriptions, support agreements, consulting contracts and acquired developed technologies and patents; expected costs to develop the in-process research and development into commercially viable products and estimated cash flows from the...

  • Page 38
    ... changes to tax laws applicable to corporate multinationals such as Adobe. These potential changes could adversely affect our effective tax rates or result in other costs to us. Recent Accounting Pronouncements In December 2011, the FASB amended the accounting standards to increase the prominence...

  • Page 39
    ... of subscriptions to the offering. Key aspects of the value Creative Cloud provides include more frequent product updates, storage and access to user files stored in the cloud with syncing of files across users' machines, community-based features and services through our acquisition of Behance in...

  • Page 40
    ... Acrobat family of products primarily through license agreements with enterprise customers. During fiscal 2013, a higher percentage of these agreements were ETLAs, which like ETLAs with our creative customers, cause more revenue to be recognized over time rather than at the time of contract signing...

  • Page 41
    ... revenue is comprised of consulting, training and maintenance and support, primarily related to the licensing of our enterprise, developer and platform products and the sale of our Adobe Marketing Cloud services. Our support revenue also includes technical support and developer support to partners...

  • Page 42
    ... traditional perpetual license revenue to decline. Revenue associated with our other creative products increased during fiscal 2013 as compared to fiscal 2012, primarily due to increases associated with distribution of third-party software via Flash Player downloads and our Digital Publishing Suite...

  • Page 43
    ... our Adobe Marketing Cloud, which increased 35% year-over-year and includes revenue generated from products associated with our fiscal 2012 acquisition of Efficient Frontier. Also contributing to the growth in revenue was our Adobe Connect hosted offering. As expected, increases in these areas were...

  • Page 44
    ... not represent the total contract value of annual or multi-year, non-cancellable subscription agreements. Unbilled deferred revenue represents expected future billings which are contractually committed under our existing subscription, SaaS and managed services agreements that have not been invoiced...

  • Page 45
    ... the decrease in the number of perpetual units sold and packaging costs associated with our CS6 products. During May 2013, we announced that, while we will continue to offer and support CS6 products, we plan to focus our future creative development efforts on our Creative Cloud offering. Excess and...

  • Page 46
    ... acquisition of Efficient Frontier in the first quarter of fiscal 2012. Services and Support Cost of services and support revenue is primarily comprised of employee-related costs and associated costs incurred to provide consulting services, training and product support. Cost of services and support...

  • Page 47
    ... due to higher incentive compensation program achievement in fiscal 2013, increases in stock-based compensation expense due to higher share prices during fiscal 2013 as compared to fiscal 2012 as well as a shorter vesting term, which decreased from four years to three years, for stock awards granted...

  • Page 48
    ... the last several years, we have completed a number of business combinations and asset acquisitions including Omniture in fiscal 2009, Day in fiscal 2010, Efficient Frontier in fiscal 2012, and Behance and Neolane in fiscal 2013. As a result of these acquisitions, we purchased intangible assets that...

  • Page 49
    ... deferred compensation plan assets (classified as trading securities) and gains and losses associated with our direct and indirect investments in privately held companies. Investment gains (losses), net fluctuated due to the following (in millions): Fiscal 2013 Fiscal 2012 Fiscal 2011 Write-downs...

  • Page 50
    ... to the expiration of the U.S. research and development credit in fiscal 2011, as well as items in fiscal 2011 including tax benefits associated with a favorable state income tax ruling and tax costs associated with licensing acquired company assets to Adobe's trading companies that were not present...

  • Page 51
    ...in trade receivables. Deferred revenue increased primarily due to increased subscription and ETLA activity for our Creative Cloud offering and increases in Digital Marketing hosted services, offset in part by decreases in billings for our maintenance and Creative product software upgrade plans which...

  • Page 52
    ... expansion 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 program and to strategically acquire companies, products or technologies...

  • Page 53
    ... 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...

  • Page 54
    ... discussion of our stock repurchase programs. 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 29, 2013. Summary of Stock Repurchases for Fiscal 2013, 2012 and 2011 (in...

  • Page 55
    Table of Contents Under the terms of our credit agreement and lease agreements, we are not prohibited from paying cash dividends unless payment would trigger an event of default or one currently exists. We do not anticipate paying any cash dividends in the foreseeable future. Accounting for ...

  • Page 56
    ... as of November 29, 2013. This sensitivity analysis measures the hypothetical market value resulting from a 10% shift in the value of exchange rates relative to the U.S. Dollar. For option contracts, the Black-Scholes option pricing model was used. A 10% increase in the value of the U.S. Dollar and...

  • Page 57
    ...to equity price risk on our portfolio of marketable equity securities. As of November 29, 2013 and November 30, 2012, our total equity holdings in publicly traded companies were insignificant. -100 BPS 2,360.9 -100 BPS 2,136.6 -50 BPS 2,353.8 -50 BPS 2,129.3 Fair Value 11/29/13 2,338.5 Fair Value 11...

  • Page 58
    ... Contents ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page...Report of KPMG LLP, Independent Registered Public Accounting Firm 59 60 61 62 63 64 103 All financial statement schedules have been omitted, since the required information is not applicable...

  • Page 59
    Table of Contents ADOBE SYSTEMS INCORPORATED CONSOLIDATED BALANCE SHEETS (In thousands, except par value) November 29, 2013 November 30, 2012 ASSETS Current assets: Cash and cash equivalents Short-term investments Trade receivables, net of allowances for doubtful accounts of $10,228 and $12,643, ...

  • Page 60
    ... per share data) Years Ended November 29, 2013 November 30, 2012 December 2, 2011 Revenue: Products Subscription Services and support Total revenue Cost of revenue: Products Subscription Services and support Total cost of revenue Gross profit Operating expenses: Research and development Sales and...

  • Page 61
    Table of Contents ADOBE SYSTEMS INCORPORATED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) Years Ended November 29, 2013 November 30, 2012 Increase/(Decrease) December 2, 2011 Net income Other comprehensive income, net of taxes: Available-for-sale securities: Unrealized gains / ...

  • Page 62
    ...of taxes Re-issuance of treasury stock under stock compensation plans Tax benefit from employee stock plans Purchase of treasury stock Equity awards assumed for acquisition Stock-based compensation Value of shares in deferred compensation plan Balances at November 29, 2013 600,834 600,834 600,834...

  • Page 63
    ...) Years Ended November 29, 2013 November 30, 2012 December 2, 2011 Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization and accretion Stock-based compensation Write-down of assets held for sale...

  • Page 64
    .... Significant Accounting Policies Revenue Recognition Our revenue is derived from the licensing of perpetual, time-based, and subscription software products, associated software maintenance and support plans, non-software related hosting services, consulting services, training and technical support...

  • Page 65
    ... for returns are adjusted periodically based upon historical rates of returns, inventory levels in the distribution channel and other related factors. We record the estimated costs of providing free technical phone support to customers for our software products. We recognize OEM licensing revenue...

  • Page 66
    ... Solutions products. Our support revenue also includes technical support and developer support to partners and developer organizations related to our desktop products. Our consulting revenue is recognized using a time and materials basis and is measured monthly based on input measures, such as hours...

  • Page 67
    ... as historical experience, credit-worthiness, the age of the trade receivable balances and current economic conditions that may affect a customer's ability to pay and we specifically reserve for those deemed uncollectible. (in thousands) 2013 2012 2011 Beginning balance Increase due to acquisition...

  • Page 68
    ... based on the pattern in which the economic benefits will be consumed. To date, software development costs incurred between completion of a working prototype and general availability of the related product have not been material. Internal Use Software We capitalize costs associated with customized...

  • Page 69
    ...use of the derivative and whether it is designated and qualifies for hedge accounting. Contracts that do not qualify for hedge accounting are adjusted to fair value through earnings. See Note 5 for information regarding our hedging activities. Gains and losses from foreign exchange forward contracts...

  • Page 70
    ... on the resale of the product or on the collection of payments from their customers. We also purchase credit insurance to mitigate credit risk in some foreign markets where we believe it is warranted. If we license our software or provide SaaS services to a customer where we have a reason to...

  • Page 71
    ... Statements beginning on the acquisition date. Under the acquisition method of accounting, the total purchase price was allocated to Efficient Frontier's net tangible and intangible assets based upon their estimated fair values as of January 13, 2012. During fiscal 2012, we made adjustments to...

  • Page 72
    Table of Contents ADOBE SYSTEMS INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) the amount of the decline that is related to a credit loss is recognized in income. Gains and losses are determined using the specific identification method. Cash, cash equivalents and short-term ...

  • Page 73
    ... loss position for less than twelve months, as of November 29, 2013 and November 30, 2012 (in thousands): 2013 Fair Value Gross Unrealized Losses Fair Value 2012 Gross Unrealized Losses Corporate bonds and commercial paper Foreign government securities Municipal securities U.S. Treasury and agency...

  • Page 74
    ... Unrealized Losses Corporate bonds and commercial paper Total $ $ 2,999 2,999 $ $ (1) (1) The following table summarizes the cost and estimated fair value of short-term fixed income securities classified as shortterm investments based on stated effective maturities as of November 29, 2013 (in...

  • Page 75
    ... between fair value measurement levels during the year ended November 29, 2013. The fair value of our financial assets and liabilities at November 29, 2013 was determined using the following inputs (in thousands): Fair Value Measurements at Reporting Date Using Quoted Prices in Active Markets for...

  • Page 76
    ...of Contents ADOBE SYSTEMS INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The fair value of our financial assets and liabilities at November 30, 2012 was determined using the following inputs (in thousands): Fair Value Measurements at Reporting Date Using Quoted Prices in Active...

  • Page 77
    ... include Treasury rates, LIBOR rates and applicable credit spreads. See Note 15 for further details regarding our investment in lease receivables. The fair value of our long-term debt was approximately $1.6 billion as of November 29, 2013, based on Level 2 quoted prices in inactive markets. See Note...

  • Page 78
    ... twelve months. The effect of derivative instruments designated as cash flow hedges and of derivative instruments not designated as hedges in our Consolidated Statements of Income for fiscal 2013, 2012 and 2011 were as follows (in thousands): 2013 Foreign Exchange Option Contracts Foreign Exchange...

  • Page 79
    ... in market conditions for commercial real estate in the area. During May 2013, we began to actively market the Waltham property assets and we expected to sell the property within one year from management's approval of the plan and classified the Waltham property assets as held for sale at $23...

  • Page 80
    ... use of licensing rights and was expensed as cost of product revenue. Purchased intangibles associated with certain of our prior year acquisitions became fully amortized and were removed from the balance sheet in the first quarter of fiscal 2013. Excluding the expense associated with historical use...

  • Page 81
    ... includes general corporate accruals for local and regional expenses and technical support. Other is also comprised of deferred rent related to office locations with rent escalations and foreign currency liability derivatives. NOTE 9. INCOME TAXES Income before income taxes for fiscal 2013, 2012 and...

  • Page 82
    ...in thousands): 2013 2012 2011 Computed "expected" tax expense State tax expense, net of federal benefit Tax credits Differences between statutory rate and foreign effective tax rate Change in deferred tax asset valuation allowance Stock-based compensation (net of tax deduction) Resolution of income...

  • Page 83
    ... are presented below (in thousands): 2013 2012 Deferred tax assets: Acquired technology Reserves and accruals Deferred revenue Unrealized losses on investments Stock-based compensation Net operating loss carryforwards of acquired companies Credit carryforwards Capitalized expenses Other Total gross...

  • Page 84
    ...to date and expected to be incurred for closing redundant facilities are $12.2 million as all facilities under this plan have been exited as of November 29, 2013. Other Restructuring Plans Other restructuring plans include other Adobe plans and other plans associated with certain of our acquisitions...

  • Page 85
    ...substantially all of our U.S. employees, now referred to as the Adobe 401(k) Retirement Savings Plan. Under the plan, eligible employees may contribute up to 65% of their pretax or after-tax salary, subject to the Internal Revenue Service annual contribution limits. In fiscal 2013, we matched 50% of...

  • Page 86
    ...the terms of our 2003 Equity Incentive Plan. The purpose of the 2013 Program is to align key management and senior leadership with stockholders' interests over the long term and to retain key employees. Performance share awards will be awarded and fully vest upon the Executive Compensation Committee...

  • Page 87
    ... - 1.92% The expected term of ESPP shares is the average of the remaining purchase periods under each offering period. The assumptions used to value employee stock purchase rights were as follows: Fiscal Years 2013 2012 2011 Expected life (in years) Volatility Risk free interest rate 0.5 - 2.0 26...

  • Page 88
    ... Global Select Market, the market values as of November 29, 2013, November 30, 2012 and December 2, 2011 were $56.78, $34.61 and $27.11, respectively. Summary of Performance Shares The following table sets forth the summary of performance share activity under our 2013 Program for the fiscal year...

  • Page 89
    ... annual anniversary dates of the grant, contingent upon the recipient's continued service to Adobe. The following table sets forth the summary of performance share activity under our 2010, 2011 and 2012 programs, based upon share awards actually achieved, for the fiscal years ended November 29, 2013...

  • Page 90
    .... As reported by the NASDAQ Global Select Market, the market values as of November 29, 2013, November 30, 2012 and December 2, 2011 were $56.78, $34.61 and $27.11, respectively. Summary of Employee Stock Purchase Plan Shares The weighted average subscription date fair value of shares under the...

  • Page 91
    ...) Summary of Stock Options Option activity under our stock option program for fiscal 2013, 2012 and 2011 was as follows (shares in thousands): Outstanding Options Weighted Average Exercise Price Number of Shares December 3, 2010 Granted Exercised Cancelled Increase due to acquisition December...

  • Page 92
    ...next annual meeting. Options granted have a seven-year term. The exercise price of the options that are issued is equal to the fair market value of our common stock on the date of grant. Options granted to directors for fiscal 2013, 2012 and 2011 were as follows (shares in thousands): 2013 2012 2011...

  • Page 93
    ... Classifications Cost of Revenue- Subscription Option Grants and Stock Purchase Rights Cost of Revenue- Services and Support Research and Development Sales and Marketing General and Administrative Total(1) 2013 2012 2011 Restricted Stock and Performance Share Awards $ $ $ $ $ $ 2,059 2,840...

  • Page 94
    ... 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...

  • Page 95
    ...363 We occupy three office buildings in San Jose, California where our corporate headquarters are located. We reference these office buildings as the Almaden Tower and the East and West Towers. The lease agreements for the East and West Towers and the Almaden Tower are effective through August 2014...

  • Page 96
    ... consist of agreements to purchase goods and services entered into in the ordinary course of business. The following table summarizes our non-cancellable unconditional purchase obligations, operating leases and capital leases for each of the next five years and thereafter as of November 29, 2013 (in...

  • Page 97
    ... of California, San Jose Division. In the consolidated complaint, Plaintiffs alleged that Adobe, along with Apple, Google, Intel, Intuit, Lucas Films and Pixar, agreed not to recruit each other's employees in violation of Federal and state antitrust laws. Plaintiffs claim the alleged agreements...

  • Page 98
    ... flows or results of operations could be negatively affected by an unfavorable resolution of one or more of such proceedings, claims or investigations. In connection with our anti-piracy efforts, conducted both internally and through organizations such as the Business Software Alliance, from time to...

  • Page 99
    ...effective rate plus 0.50% or (c) LIBOR plus 1.00% plus a margin, based on our debt ratings, ranging from 0.00% to 0.30%. Commitment fees are payable quarterly at rates between 0.08% and 0.20% per year also based on our public debt ratings. Subject to certain conditions stated in the Credit Agreement...

  • Page 100
    ...2013, we moved our video server solutions products from our Digital Media segment to our Digital Marketing segment to better align the role of how Adobe can help its customers monetize their video assets with our Digital Marketing solutions. Prior year information in the table below has been updated...

  • Page 101
    ...below list our revenue and property and equipment, net, by geographic area for fiscal 2013, 2012 and 2011 (in thousands). With the exception of property and equipment, we do not identify or allocate our assets (including long-lived assets) by geographic area. Revenue 2013 2012 2011 Americas: United...

  • Page 102
    Table of Contents ADOBE SYSTEMS INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 19. SELECTED QUARTERLY FINANCIAL DATA (unaudited) 2013 (in thousands, except per share data) March 1 Quarter Ended May 31 August 30 November 29 Revenue Gross profit Income before income taxes ...

  • Page 103
    ...of the years in the three-year period ended November 29, 2013, in conformity with U.S. generally accepted accounting principles. Also in our opinion, Adobe Systems Incorporated maintained, in all material respects, effective internal control over financial reporting as of November 29, 2013, based on...

  • Page 104
    ... 13a-15(f) under the Securities Exchange Act of 1934, as amended). Our management assessed the effectiveness of our internal control over financial reporting as of November 29, 2013. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of...

  • Page 105
    ...Contents ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by this Item13 of Form 10-K is incorporated by reference to our 2014 Proxy Statement. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The information... The exhibits listed in the ...

  • Page 106
    ... Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ JOHN E. WARNOCK John E. Warnock /s/ CHARLES M. GESCHKE Charles M. Geschke /s/ SHATANU NARAYEN Shantanu Narayen...

  • Page 107
    Table of Contents Signature Title Date /s/ EDWARD W. BARNHOLT Edward W. Barnholt /s/ ROBERT K. BURGESS Robert K. Burgess /s/ FRANK CALDERONI Frank Calderoni /s/ MICHAEL R. CANNON Michael R. Cannon /s/ JAMES E. DALEY James E. Daley /s/ LAURA DESMOND Laura Desmond /s/ DANIEL L. ...

  • Page 108
    ... in this Form 10-K: Acrobat Adobe Adobe Connect Adobe Muse Adobe Premiere After Effects Behance Creative Cloud Creative Suite Dreamweaver EchoSign Flash Illustrator InCopy InDesign Lightroom LiveCycle Omniture PhoneGap PhoneGap Build Photoshop PostScript Reader Revel Typekit All other trademarks are...

  • Page 109
    ... together with Form of Officer's Certificate setting forth the terms of the Notes Amended 1994 Performance and Restricted Stock Plan* Form of Restricted Stock Agreement used in connection with the Amended 1994 Performance and Restricted Stock Plan* 1997 Employee Stock Purchase Plan, as amended* 1996...

  • Page 110
    ...Option Agreement used in connection with the 2005 Equity Incentive Assumption Plan* Allaire Corporation 1997 Stock Incentive Plan* Allaire Corporation 1998 Stock Incentive Plan, as amended* Allaire Corporation 2000 Stock Incentive Plan* Andromedia, Inc. 1999 Stock Plan* Blue Sky Software Corporation...

  • Page 111
    ... Lenders Party Thereto Purchase and Sale Agreement, by and between NP Normandy Overlook, LLC, as Seller and Adobe Systems Incorporated as Buyer, effective as of May 12, 2008 Form of Director Annual Grant Stock Option Agreement used in connection with the 2003 Equity Incentive Plan* Form of Director...

  • Page 112
    ... Executive Annual Incentive Plan* Omniture, Inc. 1999 Equity Incentive Plan, as amended (the "Omniture 1999 Plan")* Forms of Stock Option Agreement under the Omniture 1999 Plan* Form of Stock Option Agreement under the Omniture 1999 Plan used for Named Executive Officers and Non-Employee Directors...

  • Page 113
    ... Date Number Filed Herewith 10.56 Day Software Holding AG International Stock Option/Stock Issuance Plan* Day Interactive Holding AG U.S. Stock Option/ Stock Issuance Plan* Form of RSU Grant Notice and Award Agreement pursuant to the 2005 Equity Incentive Assumption Plan* Demdex, Inc. 2008 Stock...

  • Page 114
    ... Group dated December 4, 2012 Behance, Inc. 2012 Equity Incentive Plan* Amendment No. 1 to the Behance, Inc. 2012 Equity Incentive Plan* 2013 Performance Share Program pursuant to the 2003 Equity Incentive Plan* 2013 Executive Annual Incentive Plan* Neolane 2008 Stock Option Plan* 2012 Neolane Stock...

  • Page 115
    ...Contents Incorporated by Reference** Exhibit Number Exhibit Description Form Date Number Filed Herewith 101.SCH XBRL Taxonomy Extension Schema X X X X X 101.CAL XBRL Taxonomy Extension Calculation... this Annual Report on Form 10-K are not deemed filed with the Securities and Exchange Commission ...