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 December 1, 2006
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)
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 checkmark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes _ No †
Indicate by checkmark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes † No _
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 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 checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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 or a non-accelerated filer. See definition
of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. Large accelerated filer _ Accelerated filer † Non-
accelerated filer †
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
June 2, 2006, the last business day of the registrant’s most recently completed second fiscal quarter, was $14,829,198,488 (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
December 29, 2006, 588,456,485 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 2007 Annual Meeting of Stockholders (the “Proxy Statement”), to be filed within 120 days of
the end of the fiscal year ended December 1, 2006, 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.
 ADOBE SYSTEMS INCORPORATED
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
December 1, December 2,
2006 2005

ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 772,500 $ 420,818
Short-term investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,508,379 1,280,016
Trade receivables, net of allowances for doubtful accounts of $6,798 and
$5,376, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 356,815 173,245
Other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,851 31,504
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155,613 58,710
Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,311 44,285
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,884,469 2,008,578
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227,197 103,549
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,149,494 118,683
Purchased and other intangibles, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 506,405 16,477
Investment in lease receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126,800 126,800
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68,183 66,228
$ 5,962,548 $ 2,440,315
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 55,031 $ 41,042
Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 303,550 226,915
Accrued restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,088 70
Income taxes payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178,368 154,529
Deferred revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130,310 57,839
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 677,347 480,395
Long-term liabilities:
Deferred revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,644 9,731
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,715 78,800
Accrued restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,984 —
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,982 7,063
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 810,672 575,989
Commitments and contingencies
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 and
591,528 shares issued and outstanding, respectively . . . . . . . . . . . . . . . . . . 61 60
Additional paid-in-capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,451,610 1,350,692
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,317,785 2,838,560
Accumulated other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . 6,344 (914)
Treasury stock, at cost (13,608 and 102,799 shares, respectively), net of re-
issuances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (623,924) (2,324,072)
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,151,876 1,864,326
$ 5,962,548 $ 2,440,315

See accompanying Notes to Consolidated Financial Statements.

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 ADOBE SYSTEMS INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)

Years Ended
December 1, December 2, December 3,
2006 2005 2004
Revenue:
Products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,484,710 $ 1,923,278 $ 1,633,959
Services and support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,590 43,043 32,622
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,575,300 1,966,321 1,666,581
Costs of revenue:
Products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 226,506 89,942 86,572
Services and support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,951 22,636 17,806
Total cost of revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 292,457 112,578 104,378
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,282,843 1,853,743 1,562,203
Operating expenses:
Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 539,684 365,328 311,296
Sales and marketing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 867,145 593,323 521,143
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 235,115 166,658 137,970
Restructuring and other charges . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,733 — —
Amortization of purchased intangibles . . . . . . . . . . . . . . . . . . . . . 69,873 — —
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,731,550 1,125,309 970,409
Operating income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 551,293 728,434 591,794
Non-operating income:
Investment gain (loss), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,249 (1,301) 2,506
Interest and other income, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,185 38,643 14,345
Total non-operating income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128,434 37,342 16,851
Income before income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 679,727 765,776 608,645
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173,918 162,937 158,247
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 505,809 $ 602,839 $ 450,398
Basic net income per share. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.85 $ 1.23 $ 0.94
Shares used in computing basic income per share . . . . . . . . . . . . . . 593,750 489,921 477,658
Diluted net income per share. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.83 $ 1.19 $ 0.91
Shares used in computing diluted income per share . . . . . . . . . . . . 612,222 508,070 495,626
Cash dividends declared per share . . . . . . . . . . . . . . . . . . . . . . . . . . . — $ 0.00625 $ 0.025

See accompanying Notes to Consolidated Financial Statements.

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 ADOBE SYSTEMS INCORPORATED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)

Accumulated
Additional Other
Common Stock Paid-In Retained Comprehensive Treasury Stock
Shares Amount Capital Earnings (Loss) Shares Amount Total
Balances at November 28, 2003 . . . . . 591,528 $ 30 $ 903,672 $ 1,800,398 $ (999) (114,928) $ (1,602,301) $ 1,100,800
Comprehensive income:
Net income . . . . . . . . . . . . . . . . . . — — — 450,398 — — — 450,398
Other comprehensive loss, net of
taxes . . . . . . . . . . . . . . . . . . . . . — — — — (1,290) — — (1,290)
Total comprehensive income, net of
taxes . . . . . . . . . . . . . . . . . . . . . . . 449,108
Tax benefit from employee stock
option plans . . . . . . . . . . . . . . . . . — — 97,794 — — — — 97,794
Issuance of compensatory stock . . . . . — — 225 — — 20 115 340
Dividends declared . . . . . . . . . . . . . . — — — (11,989) — — — (11,989)
Purchase of treasury stock . . . . . . . . . — — — — — (21,956) (608,681) (608,681)
Re-issuance of treasury stock under
employee stock purchase and stock
option plans . . . . . . . . . . . . . . . . . — — 192,498 — — 29,710 203,607 396,105
Balances at December 3, 2004 . . . . . . 591,528 $ 30 $ 1,194,189 $ 2,238,807 $ (2,289) (107,154) $ (2,007,260) $ 1,423,477
Comprehensive income:
Net income . . . . . . . . . . . . . . . . . . — — — 602,839 — — — 602,839
Other comprehensive income, net of
taxes . . . . . . . . . . . . . . . . . . . . . — — — — 1,375 — — 1,375
Total comprehensive income, net of
taxes . . . . . . . . . . . . . . . . . . . . . . . 604,214
Tax benefit from employee stock
option plans . . . . . . . . . . . . . . . . . — — 82,852 — — — — 82,852
Issuance of compensatory stock . . . . . — — 189 — — 16 202 391
Dividends declared . . . . . . . . . . . . . . — — — (3,056) — — — (3,056)
Purchase of treasury stock . . . . . . . . . — — — — — (18,715) (600,099) (600,099)
Re-issuance of treasury stock under
employee stock purchase and stock
option plans . . . . . . . . . . . . . . . . . — — 73,462 — — 23,054 283,085 356,547
Stock dividend . . . . . . . . . . . . . . . . . — 30 — (30) — — — —
Balances at December 2, 2005 . . . . . . 591,528 $ 60 $ 1,350,692 $ 2,838,560 $ (914) (102,799) $ (2,324,072) $ 1,864,326
Cumulative effect of adjustments from
the adoption of SAB No. 108, net of
taxes . . . . . . . . . . . . . . . . . . . . . . . — — 27,422 (26,584) — — — 838
Adjusted balances as of December 2,
2005 . . . . . . . . . . . . . . . . . . . . . . . 591,528 $ 60 $ 1,378,114 $ 2,811,976 $ (914) (102,799) (2,324,072) 1,865,164
Comprehensive income:
Net income . . . . . . . . . . . . . . . . . . . . — — — 505,809 — — — 505,809
Other comprehensive income, net of
taxes . . . . . . . . . . . . . . . . . . . . . . . — — — — 7,258 — — 7,258
Total comprehensive income, net of
taxes . . . . . . . . . . . . . . . . . . . . . . . — — — — — — — 513,067
Issuance of common stock and re-
issuance of treasury stock under
stock compensation plans. . . . . . . . 3,058 — (385,618) — — 24,972 895,430 509,812
Tax benefit from employee stock
option plans . . . . . . . . . . . . . . . . . — — 143,118 — — — — 143,118
Purchase of treasury stock . . . . . . . . . — — — — — (38,576) (1,364,412) (1,364,412)
Stock-based compensation. . . . . . . . . 170,534 — — — — 170,534
Issuance of common stock, re-issuance
of treasury stock and stock options
assumed for acquisition . . . . . . . . . 6,248 1 1,145,462 — — 102,795 2,169,130 3,314,593
Balances at December 1, 2006 . . . . . . 600,834 $ 61 $ 2,451,610 $ 3,317,785 $ 6,344 (13,608) $ (623,924) $ 5,151,876

See accompanying Notes to Consolidated Financial Statements.

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 ADOBE SYSTEMS INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

Years Ended
December 1, December 2, December 3,
2006 2005 2004
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 505,809 $ 602,839 $ 450,398
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 307,822 82,775 81,867
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170,534 391 340
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,264) (7,068) 46,270
Provision for (recovery of) losses on receivables . . . . . . . . . . . . . . . . . . 1,107 394 (443)
Tax benefit from employee stock option plans . . . . . . . . . . . . . . . . . . . . 143,118 82,852 97,794
Excess tax benefits from stock-based compensation . . . . . . . . . . . . . . . (80,230) — —
Retirements of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . 767 1,093 804
Net (gains) losses on sales and impairments of investments . . . . . . . . . (63,593) 1,322 (2,506)
Changes in operating assets and liabilities, net of acquired assets and
assumed liabilities:
Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (112,844) (36,091) 9,221
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . 12,430 (10,585) 4,908
Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,794 (2,456) 5,755
Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (31,057) 26,278 44,896
Accrued restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (41,091) — (871)
Income taxes payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,247 8,616 (47,571)
Deferred revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79,690 8,029 13,941
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . 927,239 758,389 704,803
Cash flows from investing activities:
Purchases of short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,596,442) (1,849,862) (1,866,740)
Maturities of short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 357,775 309,202 94,756
Sales of short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,010,284 1,291,131 1,655,596
Purchases of long-term investments and other assets. . . . . . . . . . . . . . . . . (23,094) (32,196) (35,286)
Acquisitions of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . (83,250) (48,875) (63,226)
Net cash received from (paid for) acquisitions . . . . . . . . . . . . . . . . . . . . . . 439,120 (19,137) (15,545)
Investment in lease receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — (126,800)
Proceeds from sale of equity securities and other assets . . . . . . . . . . . . . . 90,793 1,338 5,933
Net cash provided by (used for) investing activities . . . . . . . . . . . . . . 195,186 (348,399) (351,312)
Cash flows from financing activities:
Purchase of treasury stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,364,412) (600,099) (608,681)
Proceeds from re-issuance of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . 509,506 356,547 396,105
Excess tax benefits from stock-based compensation. . . . . . . . . . . . . . . . . . 80,230 — —
Payment of dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (3,044) (11,942)
Net cash used for financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (774,676) (246,596) (224,518)
Effect of exchange rates on cash and cash equivalents. . . . . . . . . . . . . . . . 3,933 (1,637) 3,566
Net increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 351,682 161,757 132,539
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . . . . . 420,818 259,061 126,522
Cash and cash equivalents at end of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 772,500 $ 420,818 $ 259,061
Supplemental disclosures:
Cash paid for income taxes, net of refunds . . . . . . . . . . . . . . . . . . . . . . . . . $ 36,632 $ 78,633 $ 61,423
Non-cash investing and financing activities:
Cash dividends declared but not paid . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ — $ 3,027
Unrealized losses on available-for-sale securities, net of taxes . . . . . . . $ (5,480) $ (2,306) $ (7,345)
Common and treasury stock issued and stock options assumed for
acquisition of Macromedia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,436,725 $ — $ —

See accompanying Notes to Consolidated Financial Statements.

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