UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _________________________ FORM 10-Q _________________________ (Mark One) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended May 30, 2008 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 77-0019522 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 345 Park Avenue, San Jose, California 95110-2704 (Address of principal executive offices and zip code) (408) 536-6000 (Registrant’s telephone number, including area code) _________________________ Indicate by checkmark 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 (the “Act”) 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 is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company (as defined in Rule 12b-2 of the Act). Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company (Do not check if a 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 number of shares outstanding of the registrant’s common stock as of June 27, 2008 was 530,454,186. ADOBE SYSTEMS INCORPORATED FORM 10-Q TABLE OF CONTENTS Page No. PART I—FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements: ............................................................................................. 3 Condensed Consolidated Balance Sheets May 30, 2008 and November 30, 2007 ................................................................................................. 3 Condensed Consolidated Statements of Income Three and Six Months Ended May 30, 2008 and June 1, 2007 ............................................................. 4 Condensed Consolidated Statements of Cash Flows Six Months Ended May 30, 2008 and June 1, 2007 .............................................................................. 5 Notes to Condensed Consolidated Financial Statements ....................................................................... 6 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations ......................... 22 Item 3. Quantitative and Qualitative Disclosures about Market Risk......................................................................... 32 Item 4. Controls and Procedures................................................................................................................................. 32 PART II—OTHER INFORMATION Item 1. Legal Proceedings .......................................................................................................................................... 33 Item 1A. Risk Factors .................................................................................................................................................... 33 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds ........................................................................ 40 Item 4. Submission of Matters to a Vote of Security Holders .................................................................................... 41 Item 5. Other Information........................................................................................................................................... 41 Item 6. Exhibits .......................................................................................................................................................... 41 Signature .............................................................................................................................................................................. 49 Summary of Trademarks ..................................................................................................................................................... 50 2 PART I—FINANCIAL INFORMATION ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ADOBE SYSTEMS INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except per share data) (Unaudited) May 30, November 30, 2008 2007 ASSETS Current assets: Cash and cash equivalents ................................................................................................ $ 1,162,453 $ 946,422 Short-term investments ..................................................................................................... 702,283 1,047,432 Trade receivables, net of allowances for doubtful accounts of $4,026 and $4,398, respectively ............................................................................................... 321,150 318,145 Other receivables .............................................................................................................. 46,980 44,666 Deferred income taxes ...................................................................................................... 100,206 171,472 Prepaid expenses and other assets ..................................................................................... 48,397 44,840 Total current assets ....................................................................................................... 2,381,469 2,572,977 Property and equipment, net ................................................................................................. 300,371 289,758 Goodwill ............................................................................................................................... 2,135,167 2,148,102 Purchased and other intangibles, net ..................................................................................... 313,245 402,619 Investment in lease receivable .............................................................................................. 207,239 207,239 Other assets ........................................................................................................................... 122,926 92,984 Total assets ................................................................................................................... $ 5,460,417 $ 5,713,679 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Trade and other payables .................................................................................................. $ 60,961 $ 66,867 Accrued expenses ............................................................................................................. 377,572 383,436 Accrued restructuring ....................................................................................................... 5,573 3,731 Income taxes payable ........................................................................................................ 37,065 215,058 Deferred revenue .............................................................................................................. 191,594 183,318 Total current liabilities .................................................................................................. 672,765 852,410 Long-term liabilities: Debt .................................................................................................................................. 350,000 — Accrued restructuring ....................................................................................................... 10,152 13,987 Income taxes payable ........................................................................................................ 200,111 — Deferred income taxes ...................................................................................................... 137,852 148,943 Deferred revenue .............................................................................................................. 24,819 25,950 Other liabilities ................................................................................................................. 24,061 22,407 Total liabilities .............................................................................................................. 1,419,760 1,063,697 Stockholders’ equity: Preferred stock, $0.0001 par value; 2,000 shares authorized, none issued ....................... — — Common stock, $0.0001 par value; 900,000 shares authorized; 600,834 shares issued; 530,194 and 571,409 shares outstanding, respectively .......................... 61 61 Additional paid-in-capital ................................................................................................. 2,308,054 2,340,969 Retained earnings .............................................................................................................. 4,475,880 4,041,592 Accumulated other comprehensive income ...................................................................... 21,301 27,948 Treasury stock, at cost (70,640 and 29,425 shares, respectively), net of reissuances ....... (2,764,639 ) (1,760,588 ) Total stockholders’ equity ............................................................................................ 4,040,657 4,649,982 Total liabilities and stockholders’ equity ....................................................................