Skip to content
AnalystLens

ADOBE INC. Annual Report, Year Ended Dec 1, 1995

Filing Date
Filed February 22, 1996
Period End
December 1, 1995
Security
ADBE
In the record · 2016–202610-K1110-Q338-K104

ADBE filed 11 annual reports (10-K), 33 quarterly reports (10-Q) and 104 current reports (8-K) between 2016 and 2026.

  1. FY2018 annual report10-K · Jan ’19Jan ’19
  2. Leadership change8-K · Jun ’21Jun ’21
  3. Leadership change8-K · Apr ’25Apr ’25

01—Abstract

Summary

Summary of the 10-K filed February 22, 1996. Cited figures are marked; the original filing is the authoritative source.

Adobe Systems Incorporated's fiscal 1995 10-K (fiscal year ended December 1, 1995) shows a company that grew revenue 13% to $762.3 milliona while swinging to a much stronger bottom line, with net income of $93.5 million ($1.26 per share) versus $15.3 million in 1994.

However, the headline earnings are distorted by one-time charges tied to the Frame Technology acquisition and the write-off of in-process R&D from the Ceneca acquisition. Excluding these items, Adobe reports net income of $135.6 millionb, or $1.80 per share, which is a more representative picture of underlying profitability. Gross margin held at roughly 83%, reflecting the high-margin licensing business and PostScript royalties, though application products (about 76% of revenue) carry the growth story.

The balance sheet is strong, with cash and short-term investments of $516.0 millionc, no noncurrent liabilities, and shareholders' equity rising to $698.4 million from $514.3 million, largely from employee stock plan issuances. Operating cash flow was $177.0 million. Management flagged several risks for investors: integration of the Adobe, Aldus, and Frame product lines; reliance on the higher-end Macintosh market; competition in desktop publishing (notably Quark and Corel); exposure to foreign currency; and a Quantel patent infringement suit against Photoshop.

A securities class action was also filed in February 1996 after the stock dropped following the Q4 1995 earnings announcement. Looking forward, management expects 1996 restructuring benefits to flow through in the first half, R&D spending to rise in absolute dollars but fall as a percentage of revenue, and the spin-off of the prepress business to Luminous Corporation (January 1996) to reduce revenue by roughly $10 milliond annually, with royalties from Luminous partially offsetting that loss over two years. Investors should weigh the strong cash position and underlying earnings power against the integration risk and the Macintosh concentration.

02—Key points

Key Highlights

  1. Revenue grew 13% to $762.3 million in fiscal 1995, driven by application products (up 12% to $578.9 million) and licensing (up 17% to $183.4 million)
  2. Reported net income rose to $93.5 million ($1.26 per share) from $15.3 million, but excluding one-time charges, net income was $135.6 million ($1.80 per share)
  3. Gross margin of about 83% ($632.0 million) underscores the high-margin PostScript licensing and application software model
  4. Cash and short-term investments reached $516.0 million with no noncurrent liabilities, and operating cash flow was $177.0 million
  5. Frame Technology acquisition (October 1995) brought $32.5 million in merger and restructuring charges, with about 200 employees terminated and integration ongoing into mid-1996
  6. Prepress applications business was spun off to Luminous Corporation in January 1996, with Adobe retaining a minority stake and receiving royalties for two years
  7. Key legal risks include a Quantel patent infringement suit over Photoshop and a securities class action filed February 6, 1996

03—Questions

Frequently Asked Questions

  1. How profitable was Adobe excluding one-time charges in fiscal 1995?

    Excluding one-time items such as in-process R&D write-offs, merger transaction costs, and restructuring charges, Adobe's net income was $135.6 million, or $1.80 per share, compared with reported net income of $93.5 million ($1.26 per share). The company's effective tax rate was 42.9% in 1995 due largely to nondeductible merger costs; management expects a future rate of about 36%.

  2. What is driving Adobe's revenue growth?

    Application products revenue rose 12% to $578.9 million, led by strong demand for Photoshop, PageMaker 6.0, FrameMaker, and the Acrobat family, with unit volume the principal growth factor. Licensing revenue, tied to OEM shipments of PostScript-enabled printers, rose 17% to $183.4 million, aided by CPSI demand, color printers, and Japanese market penetration.

  3. What risks could affect Adobe's future results?

    Management highlighted integration risk from combining the Adobe, Aldus, and Frame product lines; possible royalty renegotiations with OEM customers; dependence on the higher-end Macintosh market, which could suffer if Windows 95 gains share; intense competition in desktop publishing; foreign currency exposure, which is largely unhedged; and quarterly earnings volatility. The Quantel patent suit and the securities class action add legal uncertainty.

  4. How strong is Adobe's balance sheet?

    At December 1, 1995, Adobe had $516.0 million in cash and short-term investments, $698.4 million in shareholders' equity, and working capital of $506.5 million, with no noncurrent liabilities. Total assets were $884.7 million. Some cash is committed to a real estate development agreement, with $35.6 million on deposit and a potential obligation of about $52.0 million.

04—Continue

← View all 10-K filings