Item 2.02. Results of Operations and Financial Condition.
On June 11, 2020, Adobe Inc. ("Adobe") issued a press release announcing
financial results for its second fiscal quarter ended May 29, 2020. A copy of
this press release is furnished and attached hereto as Exhibit 99.1 and is
incorporated herein by reference.
The information in this report and the exhibit attached hereto are being
furnished and shall not be deemed filed for purposes of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), nor shall it be deemed
incorporated by reference in any filing under the Securities Act of 1933, as
amended, or the Exchange Act, except as shall be expressly stated by specific
reference in such filing.
The attached press release includes non-GAAP operating income, non-GAAP net
income, non-GAAP diluted net income per share and non-GAAP tax rate.
These non-GAAP measures are not in accordance with, or an alternative for,
generally accepted accounting principles and may be different from non-GAAP
measures used by other companies. In addition, these non-GAAP measures are not
based on any comprehensive set of accounting rules or principles. We believe
that non-GAAP measures have limitations in that they do not reflect all of the
amounts associated with our results of operations as determined in accordance
with GAAP and that these measures should only be used to evaluate our results of
operations in conjunction with the corresponding GAAP measures.
For our internal budgeting and resource allocation process, we use non-GAAP
financial measures, net of the related tax impacts, which exclude: (A)
stock-based and deferred compensation expense; (B) amortization of intangibles;
(C) investment gains and losses; (D) income tax adjustments; and (E) the income
tax effect of the non-GAAP pre-tax adjustments from the provision for income
taxes.
We use these non-GAAP financial measures in making operating decisions because
we believe the measures provide meaningful supplemental information regarding
our operational performance and give us a better understanding of how we should
invest in research and development and fund infrastructure and go-to-market
strategies. We use these measures to help us make budgeting decisions, for
example, as between product development expenses and research and development,
sales and marketing and general and administrative expenses and to facilitate
our internal comparisons to our historical operating results. In addition, we
believe these non-GAAP financial measures are useful because they allow for
greater transparency with respect to key metrics used by management in its
financial and operational decision-making. This allows institutional investors,
the analyst community and others to better understand and evaluate our operating
results and future prospects in the same manner as management and to compare
operating results across accounting periods and to those of our peer companies.
As described above, we exclude the following items from one or more of our
non-GAAP measures:
A.  Stock-based and deferred compensation expenses and related tax impact.
Stock-based compensation expense consists of charges for employee restricted
stock units, performance shares and employee stock purchases in accordance with
current GAAP including stock-based compensation expense associated with any
unvested options and restricted stock units assumed in connection with our
acquisitions. As we apply current stock-based compensation standards, we believe
that it is useful to investors to understand the impact of the application of
these standards to our operational performance, liquidity and our ability to
invest in research and development and fund acquisitions and capital
expenditures. Deferred compensation expense consists of charges associated with
movements in our deferred compensation plan liability. Although stock-based
compensation and deferred compensation expenses constitute ongoing and recurring
expenses, such expenses are excluded from non-GAAP results because they are not
expenses that typically require current cash settlement by us and because such
expenses are not used by us to assess the core profitability of our business
operations. We further believe these measures are useful to investors in that
they allow for greater transparency to certain line items in our financial
statements. In addition, excluding these items from various non-GAAP measures
facilitates comparisons to our competitors' operating results.
B.  Amortization of intangibles and related tax impact. We recognize
amortization expense of intangibles in connection with our acquisitions.
Intangibles include (i) purchased technology, (ii) trademarks, (iii) customer
contracts and relationships, and (iv) other intangible assets. In accordance
with GAAP, we amortize the fair value of the intangibles based on the pattern in
which we expect the economic benefits of the intangible assets will be consumed
as revenue is generated. Although the intangible assets generate revenue for us,
we exclude this item because the expense is non-cash in nature and because we
believe the non-GAAP financial measures excluding this item provide meaningful
supplemental information regarding our operational performance, liquidity and
our ability to invest in research and development, and fund acquisitions and
capital expenditures. In addition, excluding this item from various non-GAAP
measures facilitates our internal comparisons to our historical operating
results and comparisons to our competitors' operating results.
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C.  Investment gains and losses and related tax impact. We recognize investment
gains and losses principally from realized gains or losses from the sale and
exchange of marketable equity investments, other-than-temporary declines in the
value of marketable and non-marketable equity securities, unrealized holding
gains and losses associated with our available-for-sale securities and deferred
compensation plan assets (classified as trading securities), gains and losses on
the sale of equity securities held indirectly through investment partnerships,
and gains and losses associated with the recording of equity or cost method
investments to fair value upon obtaining control through a business combination,
as required by GAAP. We do not actively trade publicly held securities nor do we
rely on these securities positions for funding our ongoing operations. We
exclude investment gains and losses and the related tax impact on these equity
securities because these items are unrelated to our ongoing business and
operating results.
D.  Income tax adjustments. Our income tax expense is based on our GAAP taxable
income and actual tax rates in effect, which can differ significantly from the
non-GAAP tax rate applied to our non-GAAP financial results. In arriving at our
non-GAAP tax rate, certain non-recurring and period-specific income tax
adjustments, such as a one-time tax charge in connection with an acquisition,
resolution of certain income tax audits and any significant financial impacts
and certain indirect effects resulting from tax legislation or changes to our
trading structure are made to help us assess the core profitability of our
business operations. This non-GAAP tax rate could be subject to change for
several reasons, including significant changes in our geographic earnings mix or
fundamental tax law changes in major jurisdictions in which we operate. In
addition, excluding this item from various non-GAAP measures facilitates our
internal comparisons to our historical operating results.
E.  Income tax effect of the non-GAAP pre-tax adjustments from the provision for
income taxes. Excluding the income tax effect of the non-GAAP pre-tax
adjustments from the provision for income taxes assists investors in
understanding the tax provision associated with those adjustments and the
effective tax rate related to our ongoing operations.
We believe that non-GAAP measures have limitations in that they do not reflect
all of the amounts associated with our financial results as determined in
accordance with GAAP and that these measures should only be used to evaluate our
financial results in conjunction with the corresponding GAAP measures and that
is why we qualify the use of non-GAAP financial information in a statement when
non-GAAP information is presented.


Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
(e) 2020 Executive Annual Incentive Plan
On June 8, 2020, the Executive Compensation Committee (the "Committee") of the
Board of Directors (the "Board") of Adobe amended and restated the 2020
Executive Annual Incentive Plan previously approved by the Committee on January
24, 2020 (the "Original Incentive Plan", and as amended on June 8, 2020, the
"Incentive Plan") to (1) revise the minimum performance thresholds, (2) lower
the maximum Financial Performance Result from 125% to 110%, and (3) revise the
payout scales to align with a revised annual operating plan for fiscal year 2020
as approved by the Board on June 5, 2020 (the "Revised FY20 Operating Plan").
The minimum performance thresholds in the Incentive Plan now require that the
Company exceed (1) 60% of the GAAP revenue target set forth in the Revised FY20
Operating Plan and (2) 80% of the non-GAAP earnings per share target set forth
in the Revised FY20 Operating Plan, before participants may earn any incentive
bonus under the Incentive Plan.
The description of the Incentive Plan contained herein is a summary of material
changes to the Original Incentive Plan previously filed on Form 8-K on January
30, 2020, and is qualified in its entirety by reference to the Incentive Plan
which is filed herewith as Exhibit 10.1 and is incorporated herein by reference.

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Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit Number              Exhibit Description

10.1                          2020 Executive Annual Incentive Plan, as amended and restated

99.1                          Press release issued on     June 1    1    , 20    20     entitled
                            "Adobe Reports Record     Revenue"

104                         Cover Page Interactive Data File (the instance

document does not appear in


                            the Interactive Data File because its XBRL tags are embedded within the
                            Inline XBRL document)



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