Adobe 2014 Annual Report Download - page 98

ADOBE SYSTEMS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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Subsequent to November 28, 2014, the Board of Directors approved a new stock repurchase program granting the company
authority to repurchase up to $2.0 billion in common stock through the end of fiscal 2017. The new stock repurchase program
approved by our Board of Directors is similar to our previous $2.0 billion stock repurchase program.
During fiscal 2014, 2013 and 2012, we entered into several structured stock repurchase agreements with large financial
institutions, whereupon we provided them with prepayments totaling $600.0 million, $1.1 billion and $405.0 million, respectively.
The $600.0 million and $1.1 billion prepayments during fiscal 2014 and 2013 were under the $2.0 billion stock repurchase authority.
Of the $405.0 million of prepayments during fiscal 2012, $100.0 million were under the $2.0 billion stock repurchase program
and the remaining $305.0 million were under our previous $1.6 billion stock repurchase authority. We enter 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 2014, we repurchased approximately 10.9 million shares at an average price of $63.48 through structured
repurchase agreements entered into during fiscal 2014 and fiscal 2013. During fiscal 2013, we repurchased approximately 21.6
million shares at an average price of $46.47 through structured repurchase agreements entered into during fiscal 2013 and fiscal
2012. During fiscal 2012, we repurchased approximately 11.5 million shares at an average price per share of $32.29 through
structured repurchase agreements entered into during fiscal 2012.
For fiscal 2014, 2013 and 2012, 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 28, 2014, November 29, 2013 and November 30,
2012 were excluded from the computation of earnings per share. As of November 28, 2014, $40.3 million of prepayments remained
under the agreement.
NOTE 14. NET INCOME PER SHARE
Basic net income per share is computed using the weighted average number of common shares outstanding for the period,
excluding unvested restricted stock. Diluted net income per share is based upon the weighted average common shares outstanding
for the period plus dilutive potential common shares, including unvested restricted stock and stock options using the treasury stock
method.
The following table sets forth the computation of basic and diluted net income per share for fiscal 2014, 2013 and 2012 (in
thousands, except per share data):
2014 2013 2012
Net income................................................................................................................ $ 268,395 $ 289,985 $ 832,775
Shares used to compute basic net income per share................................................. 497,867 501,372 494,731
Dilutive potential common shares:
Unvested restricted stock and performance share awards...................................... 8,586 8,736 7,624
Stock options.......................................................................................................... 2,027 3,368 366
Shares used to compute diluted net income per share.............................................. 508,480 513,476 502,721
Basic net income per share ....................................................................................... $ 0.54 $ 0.58 $ 1.68
Diluted net income per share.................................................................................... $ 0.53 $ 0.56 $ 1.66
For fiscal 2014 and 2013, options to purchase shares of common stock with exercise prices greater than the average fair
market value of our stock of $65.93 and $45.08, respectively, were not included in the calculation because the effect would have
been anti-dilutive. The number of shares of common stock under these options was immaterial. For fiscal 2012, options to purchase
approximately 19.4 million shares of common stock with exercise prices greater than the annual average fair market value of our
stock of $31.98 were not included in the calculation because the effect would have been anti-dilutive.