Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Aug. 31, 2018 | Sep. 21, 2018 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | ADOBE SYSTEMS INC | |
Entity Central Index Key | 796,343 | |
Document Type | 10-Q | |
Document Period End Date | Aug. 31, 2018 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q3 | |
Current Fiscal Year End Date | --11-30 | |
Entity Well-known Seasoned Issuer | Yes | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 488,133,527 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands | Aug. 31, 2018 | Dec. 01, 2017 | |
Assets: | |||
Cash and cash equivalents | $ 1,747,144 | $ 2,306,072 | [1] |
Short-term investments | 3,197,326 | 3,513,702 | [1] |
Trade receivables, net of allowances for doubtful accounts of $12,034 and $9,151, respectively | 1,044,507 | 1,217,968 | [1] |
Prepaid expenses and other current assets | 311,936 | 210,071 | [1] |
Total current assets | 6,300,913 | 7,247,813 | [1] |
Property and equipment, net | 1,019,260 | 936,976 | [1] |
Goodwill | 7,136,853 | 5,821,561 | [1] |
Purchased and other intangibles, net | 669,476 | 385,658 | [1] |
Deferred income taxes | 85,297 | 0 | |
Other assets | 183,821 | 143,548 | [1] |
Total assets | 15,395,620 | 14,535,556 | [1] |
Current liabilities: | |||
Trade payables | 145,566 | 113,538 | [1] |
Accrued expenses | 1,020,047 | 993,773 | [1] |
Income taxes payable | 11,222 | 14,196 | [1] |
Deferred revenue | 2,615,192 | 2,405,950 | [1] |
Total current liabilities | 3,792,027 | 3,527,457 | [1] |
Long-term liabilities: | |||
Debt | 1,874,654 | 1,881,421 | [1] |
Deferred revenue | 92,182 | 88,592 | [1] |
Income taxes payable | 622,411 | 173,088 | [1] |
Deferred income taxes | 0 | 279,941 | [1] |
Other liabilities | 152,421 | 125,188 | [1] |
Total liabilities | 6,533,695 | 6,075,687 | [1] |
Stockholders' equity: | |||
Preferred stock, $0.0001 par value; 2,000 shares authorized, none issued | 0 | 0 | [1] |
Common stock, $0.0001 par value; 900,000 shares authorized; 600,834 shares issued; 489,007 and 491,262 shares outstanding, respectively | 61 | 61 | [1] |
Additional paid-in-capital | 5,549,322 | 5,082,195 | [1] |
Retained earnings | 11,137,357 | 9,573,870 | [1] |
Accumulated other comprehensive income (loss) | (128,048) | (111,821) | [1] |
Treasury stock, at cost (111,827 and 109,572 shares, respectively), net of reissuances | (7,696,767) | (6,084,436) | [1] |
Total stockholders’ equity | 8,861,925 | 8,459,869 | [1] |
Total liabilities and stockholders' equity | $ 15,395,620 | $ 14,535,556 | [1] |
[1] | The condensed consolidated balance sheet as of December 1, 2017 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) shares in Thousands, $ in Thousands | Aug. 31, 2018 | Dec. 01, 2017 |
Current assets: | ||
Allowances for doubtful accounts | $ 12,034 | $ 9,151 |
Stockholders' equity: | ||
Preferred stock, par value | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 2,000 | 2,000 |
Preferred stock, shares issued | 0 | 0 |
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 900,000 | 900,000 |
Common stock, shares issued | 600,834 | 600,834 |
Common stock, shares outstanding | 489,007 | 491,262 |
Treasury stock, shares | 111,827 | 109,572 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Income (Unaudited) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Aug. 31, 2018 | Sep. 01, 2017 | Aug. 31, 2018 | Sep. 01, 2017 | |
Revenue: | ||||
Subscription | $ 2,021,505 | $ 1,570,336 | $ 5,737,994 | $ 4,437,882 |
Product | 149,127 | 158,961 | 471,728 | 513,891 |
Services and support | 120,444 | 111,777 | 355,661 | 343,137 |
Total revenue | 2,291,076 | 1,841,074 | 6,565,383 | 5,294,910 |
Cost of revenue: | ||||
Subscription | 199,157 | 168,915 | 550,197 | 452,830 |
Product | 11,454 | 11,709 | 35,110 | 41,530 |
Services and support | 84,881 | 82,298 | 250,431 | 245,259 |
Total cost of revenue | 295,492 | 262,922 | 835,738 | 739,619 |
Gross profit | 1,995,584 | 1,578,152 | 5,729,645 | 4,555,291 |
Operating expenses: | ||||
Research and development | 398,957 | 315,555 | 1,121,854 | 900,033 |
Sales and marketing | 670,084 | 550,093 | 1,897,256 | 1,623,488 |
General and administrative | 184,063 | 147,402 | 532,543 | 455,139 |
Amortization of purchased intangibles | 23,874 | 19,428 | 58,169 | 57,876 |
Total operating expenses | 1,276,978 | 1,032,478 | 3,609,822 | 3,036,536 |
Operating income | 718,606 | 545,674 | 2,119,823 | 1,518,755 |
Non-operating income (expense): | ||||
Interest and other income (expense), net | 1,608 | 13,539 | 29,879 | 25,899 |
Interest expense | (21,107) | (18,809) | (61,369) | (55,286) |
Investment gains (losses), net | 2,251 | 975 | 6,326 | 5,261 |
Total non-operating income (expense), net | (17,248) | (4,295) | (25,164) | (24,126) |
Income before income taxes | 701,358 | 541,379 | 2,094,659 | 1,494,629 |
Provision for income taxes | 35,067 | 121,810 | 182,125 | 302,224 |
Net income | $ 666,291 | $ 419,569 | $ 1,912,534 | $ 1,192,405 |
Basic net income per share | $ 1.36 | $ 0.85 | $ 3.89 | $ 2.41 |
Shares used to compute basic net income per share | 490,025 | 493,426 | 491,336 | 494,138 |
Diluted net income per share | $ 1.34 | $ 0.84 | $ 3.84 | $ 2.38 |
Shares used to compute diluted net income per share | 496,866 | 500,398 | 498,587 | 501,060 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Aug. 31, 2018 | Sep. 01, 2017 | Aug. 31, 2018 | Sep. 01, 2017 | ||
Statement of Comprehensive Income [Abstract] | |||||
Net income | $ 666,291 | $ 419,569 | $ 1,912,534 | $ 1,192,405 | |
Available-for-sale securities: | |||||
Unrealized gains / losses on available-for-sale securities | (5,849) | (3,545) | 19,020 | (13,234) | |
Reclassification adjustment for recognized gains / losses on available-for-sale securities | 9,645 | (488) | 9,842 | [1] | (894) |
Net increase (decrease) from available-for-sale securities | 15,494 | 3,057 | (9,178) | 12,340 | |
Derivatives designated as hedging instruments: | |||||
Unrealized gains / losses on derivative instruments | 17,524 | 1,483 | 47,290 | 3,613 | |
Reclassification adjustment for recognized gains / losses on derivative instruments | (16,494) | 30 | (18,671) | [2] | (31,219) |
Net increase (decrease) from derivatives designated as hedging instruments | 1,030 | 1,513 | 28,619 | (27,606) | |
Foreign currency translation adjustments | (15,341) | 43,552 | (35,668) | 90,238 | |
Other comprehensive income (loss), net of taxes | 1,183 | 48,122 | (16,227) | 74,972 | |
Total comprehensive income, net of taxes | $ 667,474 | $ 467,691 | $ 1,896,307 | $ 1,267,377 | |
[1] | Reclassification adjustments for gains / losses on available-for-sale securities are classified in interest and other income (expense), net. | ||||
[2] | Reclassification adjustments for gains / losses on derivative instruments are classified in revenue. |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 9 Months Ended | ||
Aug. 31, 2018 | Sep. 01, 2017 | ||
Cash flows from operating activities: | |||
Net income | $ 1,912,534 | $ 1,192,405 | |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Depreciation, amortization and accretion | 239,772 | 244,763 | |
Stock-based compensation | 439,941 | 334,728 | |
Deferred income taxes | (418,114) | 47,859 | |
Unrealized losses (gains) on investments, net | (3,115) | (3,243) | |
Other non-cash items | 4,844 | 2,606 | |
Changes in operating assets and liabilities, net of acquired assets and assumed liabilities: | |||
Trade receivables, net | 199,002 | 26,461 | |
Prepaid expenses and other current assets | (89,823) | 31,824 | |
Trade payables | 25,362 | (68,397) | |
Accrued expenses | 4,099 | 78,297 | |
Income taxes payable | 433,559 | 6,880 | |
Deferred revenue | 173,250 | 185,450 | |
Net cash provided by operating activities | 2,921,311 | 2,079,633 | |
Cash flows from investing activities: | |||
Purchases of short-term investments | (541,878) | (1,419,411) | |
Maturities of short-term investments | 606,594 | 601,130 | |
Proceeds from sales of short-term investments | 238,303 | 978,737 | |
Acquisitions, net of cash acquired | (1,633,041) | (459,626) | |
Purchases of property and equipment | (204,016) | (140,438) | |
Purchases of long-term investments and other assets | (15,288) | (25,669) | |
Proceeds from sale of long-term investments and other assets | 2,909 | 2,034 | |
Net cash used for investing activities | (1,546,417) | (463,243) | |
Cash flows from financing activities: | |||
Purchases of treasury stock | (1,750,000) | (800,000) | |
Proceeds from reissuance of treasury stock | 189,743 | 157,682 | |
Taxes paid related to net share settlement of equity awards | (368,910) | (220,580) | |
Repayment of capital lease obligations | (1,132) | (1,328) | |
Net cash used for financing activities | (1,930,299) | (864,226) | |
Effect of foreign currency exchange rates on cash and cash equivalents | (3,523) | 11,071 | |
Net increase (decrease) in cash and cash equivalents | (558,928) | 763,235 | |
Cash and cash equivalents at beginning of period | 2,306,072 | [1] | 1,011,315 |
Cash and cash equivalents at end of period | 1,747,144 | 1,774,550 | |
Supplemental disclosures: | |||
Cash paid for income taxes, net of refunds | 141,674 | 211,343 | |
Cash paid for interest | 61,754 | 59,769 | |
Non-cash investing activities: | |||
Investment in lease receivable applied to building purchase | 0 | 80,439 | |
Issuance of common stock and stock awards assumed in business acquisitions | $ 2,784 | $ 10,348 | |
[1] | The condensed consolidated balance sheet as of December 1, 2017 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. |
Basis of Presentation and Summa
Basis of Presentation and Summary of Significant Accounting Policies | 9 Months Ended |
Aug. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation and Significant Accounting Policies | BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES We have prepared the accompanying unaudited condensed consolidated financial statements pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). Pursuant to these rules and regulations, we have condensed or omitted certain information and footnote disclosures we normally include in our annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In management’s opinion, we have made all adjustments (consisting only of normal, recurring adjustments, except as otherwise indicated) necessary to fairly present our financial position, results of operations and cash flows. Our interim period operating results do not necessarily indicate the results that may be expected for any other interim period or for the full fiscal year. These financial statements and accompanying notes should be read in conjunction with the consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the fiscal year ended December 1, 2017 on file with the SEC (our “Annual Report”). Reclassifications Certain immaterial prior year amounts have been reclassified to conform to current year presentation in the condensed consolidated statements of cash flows. Recently Adopted Accounting Guidance On January 26, 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2017-04, Simplifying the Test for Goodwill Impairment, which eliminated step two from the goodwill impairment test. In assessing impairment of goodwill, if it is concluded that it is more likely than not that the carrying amount of a reportable segment exceeds its fair value during the qualitative assessment, a one-step goodwill impairment test will be performed. If it is concluded during the quantitative test that the carrying amount of a reportable segment exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reportable segment. The effective date of the new standard for public companies is for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. Early adoption is permitted. In the first quarter of 2018, we early adopted ASU 2017-04. The standard did not have an impact to our qualitative assessment for goodwill impairment that we performed in the second quarter of fiscal 2018. Significant Accounting Policies There have been no other material changes to our significant accounting policies during the nine months ended August 31, 2018 , as compared to the significant accounting policies described in our Annual Report. Recent Accounting Pronouncements Not Yet Effective On May 28, 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The updated standard will replace most existing revenue recognition guidance in GAAP when it becomes effective and permits the use of either the full retrospective or modified retrospective transition method. The updated standard is effective for us in the first quarter of fiscal 2019. We expect to adopt this updated standard in the first quarter of fiscal 2019 on a modified retrospective basis. We are currently evaluating the effect that the updated standard will have on our condensed consolidated financial statements and related disclosures. While we are continuing to assess all potential impacts of the new standard, we believe there should not be a material change to the amount of consolidated revenues on an annual basis. We expect revenue related to our cloud offerings, including Creative Cloud and Document Cloud for business enterprises, individuals and teams, to remain substantially unchanged. When sold with cloud-enabled services, Creative Cloud and Document Cloud require a significant level of integration and interdependency with software and the individual components are not considered distinct. Revenue for these offerings will continue to be recognized over the period in which the cloud services are provided. We believe the most significant revenue-related impact relates to our accounting for arrangements that include on-premise term-based software licenses bundled with maintenance and support. Under current GAAP, the revenue attributable to these software licenses is recognized ratably over the term of the arrangement because vendor-specific objective evidence (“VSOE”) does not exist for the undelivered maintenance and support element as it is not sold separately. The requirement to have VSOE for undelivered elements to enable the separation of revenue for the delivered software licenses is eliminated under the new standard. Accordingly, under the new standard we will be required to recognize as revenue a portion of the arrangement fee upon delivery of the software licenses and potentially classify such revenue as “product” instead of “subscription” revenue on the income statement. We offer on-premise term-based software licenses bundled with maintenance and support as a deployment model for certain offerings within our Digital Experience, Digital Media, and Publishing business units. We do not expect these arrangements to have a material impact to revenue reported in annual reporting periods subsequent to adoption, however they may result in a material balance sheet impact on the date of adoption due to the application of the modified retrospective transition method. The modified retrospective method requires upon adoption that we recognize the impact of applying the new standard to contracts that are not completed at the date of initial adoption, but do not restate prior financial statements. We will record a cumulative effect of initially applying the provisions of the new standard as an adjustment to increase the opening retained earnings balance and reduce the opening deferred revenue balance. Further, some of our enterprise agreements allow our customers to renew on-premise term-based licenses on a monthly basis. Revenue associated with these arrangements would be recognized monthly. Other expected impacts to our policies and disclosures include: earlier recognition of revenue for certain contracts due to the elimination of contingent revenue limitations, an unbilled receivable balance on our balance sheets, the requirement to estimate variable consideration for certain arrangements, increased allocation of revenue to and from professional services and other offerings, and changes to our financial statement disclosures such as remaining performance obligations. Under current GAAP, we expense costs related to the acquisition of revenue-generating contracts as incurred. Under the new standard, we will be required to capitalize certain costs incremental to contract acquisition and amortize them over the expected period of benefit. There may be a material balance sheet impact at the period of adoption to capitalize costs of obtaining the contract as an asset, with a corresponding adjustment to opening retained earnings at the date of initial adoption. Additionally, we may have to record related deferred income taxes. We continue to evaluate the magnitude of the impact and the period over which these capitalized costs will be amortized. Due to the complexity of certain of our contracts, the actual accounting treatment required under the new standard for these arrangements may be dependent on contract-specific terms and therefore may vary in some instances. On February 24, 2016, the FASB issued ASU No. 2016-02, Leases, requiring lessees to recognize a right-of-use asset and a lease liability on the balance sheet for all leases with the exception of short-term leases with a lease term of twelve months or less. For lessees, leases will continue to be classified as either operating or finance leases in the income statement. Lessor accounting is similar to the current model but updated to align with certain changes to the lessee model. Lessors will continue to classify leases as operating, direct financing or sales-type leases. The effective date of the new standard for public companies is for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted. The new standard must be adopted using a modified retrospective transition and allows for the application of the new guidance at the beginning of the earliest comparative period presented or at the adoption date. The updated standard is effective for us beginning in the first quarter of fiscal 2020 and we do not plan to early adopt. We are currently evaluating the effect that the updated standard will have on our condensed consolidated financial statements and related disclosures. On August 28, 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging, requiring expanded hedge accounting for both non-financial and financial risk components and refining the measurement of hedge results to better reflect an entity's hedging strategies. The updated standard also amends the presentation and disclosure requirements and changes how entities assess hedge effectiveness. The effective date of the new standard for public companies is for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted. The new standard must be adopted using a modified retrospective transition with a cumulative effect adjustment recorded to opening retained earnings as of the initial adoption date. The updated standard is effective for us beginning in the first quarter of fiscal 2020 and we do not plan to early adopt. We are currently evaluating the effect that the updated standard will have on our condensed consolidated financial statements and related disclosures. With the exception of the new standards discussed above, there have been no other recent accounting pronouncements or changes in accounting pronouncements during the nine months ended August 31, 2018 , as compared to the recent accounting pronouncements described in our Annual Report, that are of significance or potential significance to us. |
Acquisitions
Acquisitions | 9 Months Ended |
Aug. 31, 2018 | |
Business Combinations [Abstract] | |
ACQUISITIONS | ACQUISITIONS Magento On June 18, 2018 , we completed our acquisition of Magento Commerce (“Magento”), a privately-held commerce platform company. During the third quarter of fiscal 2018, we began integrating Magento into our Digital Experience reportable segment. The table below represents the preliminary purchase price allocation to the acquired net assets of Magento based on their estimated fair values as of June 18, 2018 and the associated estimated useful lives at that date. The fair values assigned to assets acquired and liabilities assumed are based on management’s best estimates and assumptions as of the reporting date and are considered preliminary pending finalization of valuation analyses pertaining to intangible assets acquired and tax liabilities assumed including the calculation of deferred tax assets and liabilities. (in thousands) Amount Weighted Average Useful Life (years) Customer contracts and relationships $ 208,000 8 Purchased technology 84,200 5 In-process research and development (1) 39,100 N/A Trademarks 21,100 3 Other intangibles 43,400 3 Total identifiable intangible assets 395,800 Net liabilities assumed (67,417 ) N/A Goodwill (2) 1,316,217 N/A Total estimated purchase price $ 1,644,600 _________________________________________ (1) Capitalized as purchased technology and are considered indefinite lived until the completion or abandonment of the associated research and development efforts. (2) Non-deductible for tax-purposes. TubeMogul On December 19, 2016 , we completed our acquisition of TubeMogul, a publicly held video advertising platform company. Under the acquisition method of accounting, the total purchase price was allocated to TubeMogul’s net tangible and intangible assets based upon their estimated fair values as of December 19, 2016 . The total final purchase price for TubeMogul was $560.8 million of which $348.4 million , was allocated to goodwill that was non-deductible for tax purposes, $113.1 million to identifiable intangible assets and $99.3 million to net assets acquired. Proforma financial information has not been presented as the impact of the acquisitions discussed above was not material to our condensed consolidated financial statements. Marketo Subsequent to August 31, 2018 , we entered into a definitive agreement to acquire Marketo, Inc. (“Marketo”), a privately-held marketing cloud platform company, for approximately $4.75 billion , subject to customary purchase price adjustments. The transaction is subject to regulatory approvals and customary closing conditions and is expected to close in the fourth quarter of our fiscal 2018. Following the closing, we intend to integrate Marketo into our Digital Experience reportable segment for financial reporting purposes. |
Cash, Cash Equivalents and Shor
Cash, Cash Equivalents and Short-Term Investments | 9 Months Ended |
Aug. 31, 2018 | |
Cash, Cash Equivalents, and Short-term Investments [Abstract] | |
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS | CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS Cash equivalents consist of instruments with remaining maturities of three months or less at the date of purchase. We classify all of our cash equivalents and short-term investments as “available-for-sale.” In general, these investments are free of trading restrictions. We carry these investments at fair value, based on quoted market prices or other readily available market information. Unrealized gains and losses, net of taxes, are included in accumulated other comprehensive income, which is reflected as a separate component of stockholders’ equity in our condensed consolidated balance sheets. Gains and losses are recognized when realized in our condensed consolidated statements of income. When we have determined that an other-than-temporary decline in fair value has occurred, the amount of the decline that is related to a credit loss is recognized in income. Gains and losses are determined using the specific identification method. Cash, cash equivalents and short-term investments consisted of the following as of August 31, 2018 (in thousands): Amortized Cost Unrealized Gains Unrealized Losses Estimated Fair Value Current assets: Cash $ 386,927 $ — $ — $ 386,927 Cash equivalents: Corporate debt securities 24,012 — (1 ) 24,011 Money market mutual funds 1,302,801 — — 1,302,801 Time deposits 33,405 — — 33,405 Total cash equivalents 1,360,218 — (1 ) 1,360,217 Total cash and cash equivalents 1,747,145 — (1 ) 1,747,144 Short-term fixed income securities: Asset-backed securities 77,393 2 (385 ) 77,010 Corporate debt securities 2,471,739 614 (20,590 ) 2,451,763 Foreign government securities 4,178 — (29 ) 4,149 Municipal securities 19,223 — (306 ) 18,917 U.S. Treasury securities 645,487 — — 645,487 Total short-term investments 3,218,020 616 (21,310 ) 3,197,326 Total cash, cash equivalents and short-term investments $ 4,965,165 $ 616 $ (21,311 ) $ 4,944,470 Cash, cash equivalents and short-term investments consisted of the following as of December 1, 2017 (in thousands): Amortized Cost Unrealized Gains Unrealized Losses Estimated Fair Value Current assets: Cash $ 280,488 $ — $ — $ 280,488 Cash equivalents: Money market mutual funds 2,006,741 — — 2,006,741 Time deposits 18,843 — — 18,843 Total cash equivalents 2,025,584 — — 2,025,584 Total cash and cash equivalents 2,306,072 — — 2,306,072 Short-term fixed income securities: Asset-backed securities 98,403 1 (403 ) 98,001 Corporate debt securities 2,461,691 2,694 (10,125 ) 2,454,260 Foreign government securities 2,396 — (8 ) 2,388 Municipal securities 21,189 8 (132 ) 21,065 U.S. Treasury securities 941,538 2 (3,552 ) 937,988 Total short-term investments 3,525,217 2,705 (14,220 ) 3,513,702 Total cash, cash equivalents and short-term investments $ 5,831,289 $ 2,705 $ (14,220 ) $ 5,819,774 See Note 4 for further information regarding the fair value of our financial instruments. The following table summarizes the fair value and gross unrealized losses related to available-for-sale securities, aggregated by investment category, that have been in an unrealized loss position for less than twelve months, as of August 31, 2018 and December 1, 2017 (in thousands): 2018 2017 Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Corporate debt securities $ 1,218,367 $ (16,414 ) $ 1,338,232 $ (5,459 ) Asset-backed securities 28,820 (240 ) 64,618 (193 ) Municipal securities 17,975 (281 ) 11,805 (115 ) Foreign government securities 4,149 (29 ) 2,388 (8 ) U.S. Treasury securities — — 593,296 (2,087 ) Total $ 1,269,311 $ (16,964 ) $ 2,010,339 $ (7,862 ) There were 767 securities and 894 securities in an unrealized loss position for less than twelve months at August 31, 2018 and at December 1, 2017 , respectively. The following table summarizes the fair value and gross unrealized losses related to available-for-sale securities, aggregated by investment category, that were in a continuous unrealized loss position for more than twelve months, as of August 31, 2018 and December 1, 2017 (in thousands): 2018 2017 Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Corporate debt securities $ 312,698 $ (4,176 ) $ 500,689 $ (4,666 ) Asset-backed securities 17,560 (145 ) 32,383 (210 ) Municipal securities 942 (25 ) 598 (17 ) U.S. Treasury securities — — 338,950 (1,465 ) Total $ 331,200 $ (4,346 ) $ 872,620 $ (6,358 ) There were 197 securities and 360 securities in an unrealized loss position for more than twelve months at August 31, 2018 and at December 1, 2017 , respectively. The following table summarizes the cost and estimated fair value of short-term fixed income securities classified as short-term investments based on stated effective maturities as of August 31, 2018 (in thousands): Amortized Cost Estimated Fair Value Due within one year $ 1,643,049 $ 1,640,836 Due between one and two years 788,794 782,312 Due between two and three years 608,978 600,690 Due after three years 177,199 173,488 Total $ 3,218,020 $ 3,197,326 We review our debt securities classified as short-term investments on a regular basis to evaluate whether or not any security has experienced an other-than-temporary decline in fair value. We consider factors such as the length of time and extent to which the market value has been less than the cost, the financial condition and near-term prospects of the issuer and our intent to sell, or whether it is more likely than not we will be required to sell the investment before recovery of the investment’s amortized cost basis. If we believe that an other-than-temporary decline exists in one of these securities, we write down these investments to fair value. The portion of the write-down related to credit loss would be recorded to interest and other income, net in our condensed consolidated statements of income. Any portion not related to credit loss would be recorded to accumulated other comprehensive income, which is reflected as a separate component of stockholders’ equity in our condensed consolidated balance sheets. During the nine months ended August 31, 2018 and September 1, 2017 , we did not consider any of our investments to be other-than-temporarily impaired. |
Fair Value Measurements
Fair Value Measurements | 9 Months Ended |
Aug. 31, 2018 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis We measure certain financial assets and liabilities at fair value on a recurring basis. There have been no transfers between fair value measurement levels during the nine months ended August 31, 2018 . The fair value of our financial assets and liabilities at August 31, 2018 was determined using the following inputs (in thousands): Fair Value Measurements at Reporting Date Using Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs Total (Level 1) (Level 2) (Level 3) Assets: Cash equivalents: Corporate debt securities $ 24,011 $ — $ 24,011 $ — Money market mutual funds 1,302,801 1,302,801 — — Time deposits 33,405 33,405 — — Short-term investments: Asset-backed securities 77,010 — 77,010 — Corporate debt securities 2,451,763 — 2,451,763 — Foreign government securities 4,149 — 4,149 — Municipal securities 18,917 — 18,917 — U.S. Treasury securities 645,487 — 645,487 — Prepaid expenses and other current assets: Foreign currency derivatives 43,084 — 43,084 — Other assets: Deferred compensation plan assets 69,705 3,192 66,513 — Total assets $ 4,670,332 $ 1,339,398 $ 3,330,934 $ — Liabilities: Accrued expenses: Foreign currency derivatives $ 2,463 $ — $ 2,463 $ — Other liabilities: Interest rate swap derivatives 10,312 — 10,312 — Total liabilities $ 12,775 $ — $ 12,775 $ — The fair value of our financial assets and liabilities at December 1, 2017 was determined using the following inputs (in thousands): Fair Value Measurements at Reporting Date Using Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs Total (Level 1) (Level 2) (Level 3) Assets: Cash equivalents: Money market mutual funds $ 2,006,741 $ 2,006,741 $ — $ — Time deposits 18,843 18,843 — — Short-term investments: Asset-backed securities 98,001 — 98,001 — Corporate debt securities 2,454,260 — 2,454,260 — Foreign government securities 2,388 — 2,388 — Municipal securities 21,065 — 21,065 — U.S. Treasury securities 937,988 — 937,988 — Prepaid expenses and other current assets: Foreign currency derivatives 14,198 — 14,198 — Other assets: Deferred compensation plan assets 56,690 2,573 54,117 — Total assets $ 5,610,174 $ 2,028,157 $ 3,582,017 $ — Liabilities: Accrued expenses: Foreign currency derivatives $ 1,598 $ — $ 1,598 $ — Other liabilities: Interest rate swap derivatives 1,058 — 1,058 — Total liabilities $ 2,656 $ — $ 2,656 $ — See Note 3 for further information regarding the fair value of our financial instruments. Our fixed income available-for-sale debt securities consist of high quality, investment grade securities from diverse issuers with a weighted average credit rating of A+. We value these securities based on pricing from independent pricing vendors who use matrix pricing valuation techniques including market approach methodologies that model information generated by market transactions involving identical or comparable assets, as well as discounted cash flow methodologies. Inputs include quoted prices in active markets for identical assets or inputs other than quoted prices that are observable either directly or indirectly in determining fair value, including benchmark yields, issuer spreads off benchmark yields, interest rates and U.S. Treasury or swap curves. We therefore classify all of our fixed income available-for-sale securities as Level 2. We perform routine procedures such as comparing prices obtained from multiple independent sources to ensure that appropriate fair values are recorded. The fair values of our money market mutual funds and time deposits are based on the closing price of these assets as of the reporting date. We classify our money market mutual funds and time deposits as Level 1. Our Level 2 over-the-counter foreign currency and interest rate swap derivatives are valued using pricing models and discounted cash flow methodologies based on observable foreign exchange and interest rate data at the measurement date. Our deferred compensation plan assets consist of money market mutual funds and other mutual funds. Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis We also have direct investments in privately held companies accounted for under the cost and equity method, which are periodically assessed for other-than-temporary impairment. If we determine that an other-than-temporary impairment has occurred, we write down the investment to its fair value. We estimate fair value of our cost and equity method investments considering available information such as pricing in recent rounds of financing, current cash positions, earnings and cash flow forecasts, recent operational performance and any other readily available market data. For the three and nine months ended August 31, 2018 and September 1, 2017 , we determined there were no other-than-temporary impairments of our cost and equity method investments. The fair value of our senior notes was $1.91 billion as of August 31, 2018 , based on observable market prices in less active markets and categorized as Level 2. See Note 13 for further details regarding our debt. |
Derivatives and Hedging Activit
Derivatives and Hedging Activities | 9 Months Ended |
Aug. 31, 2018 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
DERIVATIVES AND HEDGING ACTIVITIES | DERIVATIVES AND HEDGING ACTIVITIES Hedge Accounting and Hedging Programs We recognize derivative instruments and hedging activities as either assets or liabilities in our condensed consolidated balance sheets and measure them at fair value. Gains and losses resulting from changes in fair value are accounted for depending on the use of the derivative and whether it is designated and qualifies for hedge accounting. We evaluate hedge effectiveness at the inception of the hedge prospectively as well as retrospectively, and record any ineffective portion of the hedging instruments in interest and other income (expense), net on our condensed consolidated statements of income. The net gain (loss) recognized in interest and other income (expense), net for cash flow hedges due to hedge ineffectiveness was insignificant for all fiscal years presented. The time value of purchased contracts is recorded in interest and other income (expense), net in our condensed consolidated statements of income. The bank counterparties to these contracts expose us to credit-related losses in the event of their nonperformance which are largely mitigated with collateral security agreements that provide for collateral to be received or posted when the net fair value of certain financial instruments fluctuates from contractually established thresholds. In addition, we enter into master netting arrangements which have the ability to further limit credit-related losses with the same counterparty by permitting net settlement of transactions. Balance Sheet Hedging — Hedges of Foreign Currency Assets and Liabilities We also hedge our net recognized foreign currency denominated assets and liabilities with foreign exchange forward contracts to reduce the risk that the value of these assets and liabilities will be adversely affected by changes in exchange rates. These contracts hedge assets and liabilities that are denominated in foreign currencies and are carried at fair value with changes in the fair value recorded to interest and other income (expense), net in our condensed consolidated statements of income. These contracts do not subject us to material balance sheet risk due to exchange rate movements because gains and losses on these derivatives are intended to offset gains and losses on the assets and liabilities being hedged. Cash Flow Hedging—Hedges of Forecasted Foreign Currency Revenue and Interest Rate Risk In countries outside the United States, we transact business in U.S. Dollars and in various other currencies. We may use foreign exchange option contracts or forward contracts to hedge certain cash flow exposures resulting from changes in these foreign currency exchange rates. These foreign exchange contracts, carried at fair value, have maturities of up to twelve months . We enter into these foreign exchange contracts to hedge a portion of our forecasted foreign currency denominated revenue in the normal course of business and accordingly, they are not speculative in nature. To receive hedge accounting treatment, all hedging relationships are formally documented at the inception of the hedge, and the hedges must be highly effective in offsetting changes to future cash flows on hedged transactions. We record changes in the intrinsic value of these cash flow hedges in accumulated other comprehensive income (loss) in our condensed consolidated balance sheets, until the forecasted transaction occurs. When the forecasted transaction occurs, we reclassify the related gain or loss on the cash flow hedge to revenue. In the event the underlying forecasted transaction does not occur, or it becomes probable that it will not occur, we reclassify the gain or loss on the related cash flow hedge from accumulated other comprehensive income (loss) to interest and other income (expense), net in our condensed consolidated statements of income at that time. If we do not elect hedge accounting, or the contract does not qualify for hedge accounting treatment, the changes in fair value from period to period are recorded in interest and other income (expense), net in our condensed consolidated statements of income. Fair Value Hedging - Hedges of Interest Rate Risk In fiscal 2014, we entered into interest rate swaps designated as fair value hedges related to our $900 million of 4.75% fixed interest rate senior notes due February 1, 2020. In effect, the interest rate swaps convert the fixed interest rate on these senior notes to a floating interest rate based on LIBOR. Under the terms of the swaps, we will pay monthly interest at the one-month LIBOR interest rate plus a fixed number of basis points on the $900 million notional amount through February 1, 2020. In exchange, we will receive 4.75% fixed rate interest from the swap counterparties. See Note 13 for further details regarding our debt. The interest rate swaps are accounted for as fair value hedges and substantially offset the changes in fair value of the hedged portion of the underlying debt that are attributable to the changes in market risk. Therefore, the gains and losses related to changes in the fair value of the interest rate swaps are included in interest and other income (expense), net in our condensed consolidated statements of income. The fair value of the interest rate swaps is reflected in other liabilities or other assets in our condensed consolidated balance sheets. The fair value of derivative instruments on our condensed consolidated balance sheets as of August 31, 2018 and December 1, 2017 were as follows (in thousands): 2018 2017 Fair Value Asset Derivatives Fair Value Liability Derivatives Fair Value Asset Derivatives Fair Value Liability Derivatives Derivatives designated as hedging instruments: Foreign exchange option contracts (1) (2) $ 41,862 $ — $ 12,918 $ — Interest rate swap (3) — 10,312 — 1,058 Derivatives not designated as hedging instruments: Foreign exchange forward contracts (1) 1,222 2,463 1,280 1,598 Total derivatives $ 43,084 $ 12,775 $ 14,198 $ 2,656 _________________________________________ (1) Fair value asset derivatives included in prepaid expenses and other current assets and fair value liability derivatives included in accrued expenses on our consolidated balance sheets. (2) Hedging effectiveness expected to be recognized into income within the next twelve months. (3) Included in other liabilities on our condensed consolidated balance sheets. The effect of foreign currency derivative instruments designated as cash flow hedges and of foreign currency derivative instruments not designated as hedges in our condensed consolidated statements of income for the three and nine months ended August 31, 2018 was as follows (in thousands): Three Months Nine Months Foreign Foreign Foreign Foreign Derivatives in cash flow hedging relationships: Net gain (loss) recognized in OCI, net of tax (1) $ 17,523 $ — $ 47,290 $ — Net gain (loss) reclassified from accumulated OCI into income, net of tax (2) $ 16,797 $ — $ 18,156 $ — Net gain (loss) recognized in income (3) $ (9,281 ) $ — $ (31,690 ) $ — Derivatives not designated as hedging relationships: Net gain (loss) recognized in income (4) $ — $ (1,695 ) $ — $ (2,572 ) The effect of foreign currency derivative instruments designated as cash flow hedges and of foreign currency derivative instruments not designated as hedges in our condensed consolidated statements of income for the three and nine months ended September 1, 2017 was as follows (in thousands): Three Months Nine Months Foreign Foreign Foreign Foreign Derivatives in cash flow hedging relationships: Net gain (loss) recognized in OCI, net of tax (1) $ 1,483 $ — $ 3,613 $ — Net gain (loss) reclassified from accumulated OCI into income, net of tax (2) $ 221 $ — $ 31,845 $ — Net gain (loss) recognized in income (3) $ (6,190 ) $ — $ (21,842 ) $ — Derivatives not designated as hedging relationships: Net gain (loss) recognized in income (4) $ — $ 2,920 $ — $ 6,456 _________________________________________ (1) Net change in the fair value of the effective portion classified in other comprehensive income (“OCI”). (2) Effective portion classified as revenue. (3) Ineffective portion and amount excluded from effectiveness testing classified in interest and other income (expense), net. (4) Classified in interest and other income (expense), net. |
Goodwill and Purchased and Othe
Goodwill and Purchased and Other Intangibles | 9 Months Ended |
Aug. 31, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
GOODWILL AND PURCHASED AND OTHER INTANGIBLES | GOODWILL AND PURCHASED AND OTHER INTANGIBLES Goodwill as of August 31, 2018 and December 1, 2017 was $7.14 billion and $5.82 billion , respectively. The increase was primarily due to our acquisition of Magento in the third quarter of fiscal 2018. Purchased and other intangible assets subject to amortization as of August 31, 2018 and December 1, 2017 were as follows (in thousands): 2018 2017 Cost Accumulated Amortization Net Cost Accumulated Amortization Net Purchased technology $ 307,101 $ (100,832 ) $ 206,269 $ 223,252 $ (110,433 ) $ 112,819 Customer contracts and relationships $ 753,870 $ (387,091 ) $ 366,779 $ 577,484 $ (356,613 ) $ 220,871 Trademarks 56,355 (20,016 ) 36,339 76,255 (56,094 ) 20,161 Acquired rights to use technology 58,966 (47,097 ) 11,869 71,130 (54,223 ) 16,907 Other intangibles 81,357 (33,137 ) 48,220 39,296 (24,396 ) 14,900 Total other intangible assets $ 950,548 $ (487,341 ) $ 463,207 $ 764,165 $ (491,326 ) $ 272,839 Purchased and other intangible assets, net $ 1,257,649 $ (588,173 ) $ 669,476 $ 987,417 $ (601,759 ) $ 385,658 Amortization expense related to purchased and other intangible assets was $47.0 million and $115.5 million for the three and nine months ended August 31, 2018 , respectively. Comparatively, amortization expense related to purchased and other intangible assets was $39.1 million and $116.3 million for the three and nine months ended September 1, 2017 , respectively. Of these amounts, $23.1 million and $57.1 million were included in cost of sales for the three and nine months ended August 31, 2018 , respectively, and $19.5 million and $57.7 million the three and nine months ended September 1, 2017 , respectively. During the nine months ended August 31, 2018 , purchased and other intangible assets, net increased primarily due to identifiable intangible assets acquired through Magento, offset in part by write-offs of fully amortized purchased intangibles associated with our acquisitions of Omniture, Inc. and Day Software Holding AG from the condensed consolidated balance sheets. See Note 2 for details regarding our acquisitions. As of August 31, 2018 , we expect amortization expense in future periods to be as follows (in thousands): Fiscal Year Purchased Technology Other Intangible Assets Remainder of 2018 $ 13,596 $ 36,274 2019 51,112 118,652 2020 48,820 86,498 2021 26,369 54,119 2022 18,610 39,749 Thereafter 47,762 127,915 Total expected amortization expense $ 206,269 $ 463,207 |
Accrued Expenses
Accrued Expenses | 9 Months Ended |
Aug. 31, 2018 | |
Payables and Accruals [Abstract] | |
ACCRUED EXPENSES | ACCRUED EXPENSES Accrued expenses as of August 31, 2018 and December 1, 2017 consisted of the following (in thousands): 2018 2017 Accrued compensation and benefits $ 428,575 $ 417,742 Accrued media costs 103,470 134,525 Sales and marketing allowances 46,432 47,389 Accrued corporate marketing 76,574 72,087 Taxes payable 50,149 49,550 Royalties payable 42,742 46,411 Accrued interest expense 10,469 25,594 Other 261,636 200,475 Accrued expenses $ 1,020,047 $ 993,773 Accrued media costs primarily relate to our advertising platform offerings which are part of the Advertising Cloud. We accrue for media costs related to impressions purchased from third-party ad inventory sources. Other primarily includes general corporate accruals for local and regional expenses. Other is also comprised of deferred rent related to office locations with rent escalations and foreign currency liability derivatives. |
Income Taxes
Income Taxes | 9 Months Ended |
Aug. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | INCOME TAXES On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted into law, which significantly changes existing U.S. tax law and includes many provisions applicable to us, such as reducing the U.S. federal statutory tax rate, imposing a one-time transition tax on deemed repatriation of deferred foreign income, and adopting a territorial tax system. The Tax Act reduced the U.S. federal statutory tax rate from 35% to 21% effective January 1, 2018. For fiscal 2018 , our blended U.S. federal statutory tax rate is 22.2% . This is the result of using the tax rate of 35% for the first month of fiscal 2018 and the reduced tax rate of 21% for the remaining eleven months of fiscal 2018 . The Tax Act also required us to incur a one-time transition tax on deferred foreign income not previously subject to U.S. income tax at a rate of 15.5% for foreign cash and certain other net current assets, and 8% on the remaining income, in each case reduced by certain foreign tax credits. The Tax Act also includes a provision to tax global intangible low-taxed income of foreign subsidiaries, a special tax deduction for foreign-derived intangible income, and a base erosion anti-abuse tax measure that may tax certain payments between a U.S. corporation and its subsidiaries. These additional provisions of the Tax Act will be effective for us beginning December 1, 2018. The Tax Act was effective in the first quarter of our fiscal 2018. As of August 31, 2018 , we have not completed our accounting for the tax effects of the Tax Act. During the quarter, we recorded an adjustment to the provisional tax charge based on reasonable estimates for those tax effects using the current available information and technical guidance on the interpretations of the Tax Act. In order to complete our accounting for the impact of the Tax Act, we continue to obtain, analyze and interpret additional guidance as such guidance becomes available from the U.S. Treasury Department, the Internal Revenue Service (“IRS”), state taxing jurisdictions, the FASB, and other standard-setting and regulatory bodies. New guidance or interpretations may materially impact our provision for income taxes in future periods. Additional information that is needed to complete the analysis but is currently unavailable includes, but is not limited to, the amount of earnings of certain subsidiaries as well as the amount of foreign taxes paid on such earnings for our fiscal 2018 , the final determination of certain net deferred tax assets subject to remeasurement and when the related temporary differences will be settled or realized, and the tax treatment of such provisions of the Tax Act by various state tax authorities. In addition, we do not currently have sufficient information and guidance to determine the impact of certain changes to the taxation of our foreign earnings that will become effective for us in fiscal 2019 . The provisional accounting impacts may change in the subsequent reporting period when our accounting analysis is finalized, as permitted by SEC Staff Accounting Bulletin 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act. As a result of the reduction in the federal corporate tax rate, we remeasured our deferred taxes as of the date of enactment of the Tax Act and recorded a provisional tax charge of $10 million based on the tax rate that is expected to apply when such deferred taxes are settled or realized in future periods. We have not completed our accounting for the measurement of deferred taxes. To calculate the remeasurement of deferred taxes, we estimated when the existing deferred taxes will be settled or realized. The remeasurement of deferred taxes included in our financial statements will be subject to further revisions if our current estimates are different from our actual future operating results. As part of the adoption of a new territorial tax system we recorded a provisional transition tax expense of $118 million on deferred foreign earnings, which was comprised of $86 million for fiscal 2018 plus other ancillary effects recorded in the first fiscal quarter, long-term income taxes payable of $533 million , and a reduction in our deferred tax liability of $415 million . As a result of a change to our corporate tax structure that provided us the ability to deduct more expenses against our earnings in the U.S., we updated our Tax Act calculation during the three months ended June 1, 2018. This included an additional provisional transition tax expense of $28 million on deferred foreign earnings, a decrease of deferred tax assets by $72 million which also included utilization of credits that we estimate will be available to reduce the transition tax, and a reduction of long-term income tax payable by $44 million . As a result of technical guidance updates on the interpretations of the Tax Act available in the quarter, we updated our Tax Act calculation during the three months ended August 31, 2018. The application of this guidance resulted in an additional net provisional tax expense of $24 million , a decrease of net deferred tax assets by $25 million , an increase in unrecognized tax benefits included in the long-term income tax payable of $69 million , a reduction of the short-term income taxes payable of $7 million , and a reduction to the long-term income tax payable of $62 million . To calculate the transition tax, we estimated our deferred foreign income for fiscal 2018 because the information needed to complete the calculation will not be known until our taxable income is known. In addition, U.S. and foreign audit settlements may significantly impact the estimated transition tax. The impact of the U.S. and foreign audits on the transition tax will be known as the audits are concluded. We intend to elect to pay the federal transition tax over a period of eight years as permitted by the Tax Act. As a result, in the second quarter of fiscal 2018, we reclassified $39 million from long-term income taxes payable to short-term income taxes payable for the first installment payment due in fiscal 2019. During the three months ended August 31, 2018, we reclassified $5 million from short-term income taxes payable to long-term income taxes payable as a result of the updated technical guidance on the interpretations of the Tax Act. Certain international provisions introduced in the Tax Act will be effective for us in fiscal 2019 . We need additional information to complete our analysis on whether to adopt an accounting policy to account for the tax effects of these provisions in the period that it is subject to such tax, or to provide deferred taxes for book and tax basis differences that upon reversal may be subject to these taxes. Accordingly, we have not recorded any tax with respect to these provisions in the nine months ended August 31, 2018 . We will make an accounting policy election and complete the required accounting no later than the first quarter of fiscal 2019 . |
Stock-Based Compensation
Stock-Based Compensation | 9 Months Ended |
Aug. 31, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
STOCK-BASED COMPENSATION | STOCK-BASED COMPENSATION Summary of Restricted Stock Units Restricted stock unit activity for the nine months ended August 31, 2018 and the fiscal year ended December 1, 2017 was as follows (in thousands): 2018 2017 Beginning outstanding balance 9,304 8,316 Awarded 3,742 5,018 Released (3,686 ) (3,859 ) Forfeited (525 ) (766 ) Increase due to acquisition — 595 Ending outstanding balance 8,835 9,304 Information regarding restricted stock units outstanding at August 31, 2018 and September 1, 2017 is summarized below: Number of Shares (thousands) Weighted Average Remaining Contractual Life (years) Aggregate Intrinsic Value (*) (millions) 2018 Restricted stock units outstanding 8,835 1.23 $ 2,328.1 Restricted stock units vested and expected to vest 8,104 1.18 $ 2,135.7 2017 Restricted stock units outstanding 9,443 1.27 $ 1,464.2 Restricted stock units vested and expected to vest 8,636 1.22 $ 1,339.1 _________________________________________ (*) The intrinsic value is calculated as the market value as of the end of the fiscal period. As reported by the NASDAQ Global Select Market, the market values as of August 31, 2018 and September 1, 2017 were $263.51 and $155.06 , respectively. Summary of Performance Shares Our Performance Share Programs aim to help focus key employees on building stockholder value, provide significant award potential for achieving outstanding Company performance and enhance the ability of the Company to attract and retain highly talented and competent individuals. The Executive Compensation Committee of our Board of Directors approves the terms of each of our Performance Share Programs, including the award calculation methodology, under the terms of our 2003 Equity Incentive Plan. Shares may be earned based on the achievement of an objective relative total stockholder return measured over a three-year performance period. Performance share awards will be awarded and fully vest upon the Executive Compensation Committee's certification of the level of achievement following the three-year anniversary of each grant date. Program participants generally have the ability to receive up to 200% of the target number of shares originally granted. In the first quarter of fiscal 2018, the Executive Compensation Committee approved the 2018 Performance Share Program. In the first quarter of fiscal 2018, the Executive Compensation Committee also certified the actual performance achievement of participants in the 2015 Performance Share Program. Actual performance resulted in participants achieving 200% of target or approximately 1.0 million shares. The shares granted and achieved under the 2015 Performance Share Program fully vested on the three-year anniversary of the grant on January 24, 2018, if not forfeited. In the first quarter of fiscal 2017, the Executive Compensation Committee certified the actual performance achievement of participants in the 2014 Performance Share Program. Actual performance resulted in participants achieving 198% of target or approximately 1.1 million shares. The shares granted and achieved under the 2014 Performance Share Program fully vested on the three-year anniversary of the grant on January 24, 2017, if not forfeited. As of August 31, 2018 , the shares awarded under our 2018, 2017 and 2016 Performance Share Programs are yet to be achieved. The following table sets forth the summary of performance share activity under our Performance Share Programs for the nine months ended August 31, 2018 and the fiscal year ended December 1, 2017 (in thousands): 2018 2017 Shares Granted Maximum Shares Eligible to Receive Shares Granted Maximum Shares Eligible to Receive Beginning outstanding balance 1,534 3,068 1,630 3,261 Awarded 837 (1) 628 1,082 (2) 1,040 Achieved (1,050 ) (1,053 ) (1,135 ) (1,147 ) Forfeited (165 ) (331 ) (43 ) (86 ) Ending outstanding balance 1,156 2,312 1,534 3,068 _________________________________________ (1) Included in the 0.8 million shares awarded during the nine months ended August 31, 2018 were 0.5 million shares awarded for the final achievement of the 2015 Performance Share program. The remaining awarded shares were for the 2018 Performance Share Program. (2) Included in the 1.1 million shares awarded during the fiscal year ended December 1, 2017 were 0.6 million shares awarded for the final achievement of the 2014 Performance Share program. The remaining awarded shares were for the 2017 Performance Share Program. Summary of Employee Stock Purchase Plan Shares The expected life of the ESPP shares is the average of the remaining purchase periods under each offering period. The assumptions used to value employee stock purchase rights during the three and nine months ended August 31, 2018 and September 1, 2017 were as follows: Three Months Nine Months 2018 2017 2018 2017 Expected life (in years) 0.5 - 2.0 0.5 - 2.0 0.5 - 2.0 0.5 - 2.0 Volatility 29 % 25% - 27% 26% - 29% 22% - 27% Risk free interest rate 2.09% - 2.52% 1.12% - 1.41% 1.54% - 2.52% 0.62% - 1.41% Employees purchased 1.8 million shares at an average price of $104.94 and 1.9 million shares at an average price of $77.63 for the nine months ended August 31, 2018 and September 1, 2017 , respectively. The intrinsic value of shares purchased during the nine months ended August 31, 2018 and September 1, 2017 was $198.9 million and $97.7 million , respectively. The intrinsic value is calculated as the difference between the market value on the date of purchase and the purchase price of the shares. Summary of Stock Options The Executive Compensation Committee of Adobe’s Board of Directors eliminated the use of stock option grants for all employees and the Board of Directors effective fiscal 2012 and fiscal 2014, respectively. However, we may assume the stock option plans of certain companies we acquire. As of August 31, 2018 and December 1, 2017 , we had 0.3 million stock options outstanding at each period end. Compensation Costs As of August 31, 2018 , there was $1.09 billion of unrecognized compensation cost, adjusted for estimated forfeitures, related to non-vested stock-based awards which will be recognized over a weighted average period of 1.9 years. Total unrecognized compensation cost will be adjusted for future changes in estimated forfeitures. Total stock-based compensation costs included in our condensed consolidated statements of income for the three months ended August 31, 2018 and September 1, 2017 were as follows (in thousands): 2018 2017 Income Statement Classifications Option Grants and Stock Purchase Rights Restricted Stock Units and Performance Share Awards Option Grants and Stock Purchase Rights Restricted Stock Units and Performance Share Awards Cost of revenue—subscription $ 934 $ 4,509 $ 628 $ 3,633 Cost of revenue—services and support 1,930 2,789 1,626 2,409 Research and development 6,347 66,308 4,608 43,243 Sales and marketing 7,551 47,885 4,658 36,064 General and administrative 2,932 17,853 1,140 19,033 Total $ 19,694 $ 139,344 $ 12,660 $ 104,382 Total stock-based compensation costs included in our condensed consolidated statements of income for the nine months ended August 31, 2018 and September 1, 2017 were as follows (in thousands): 2018 2017 Income Statement Classifications Option Grants and Stock Purchase Rights Restricted Stock Units and Performance Share Awards Option Grants and Stock Purchase Rights Restricted Stock Units and Performance Share Awards Cost of revenue—subscription $ 2,431 $ 12,979 $ 1,899 $ 10,467 Cost of revenue—services and support 5,593 8,455 4,850 7,151 Research and development 16,997 183,989 12,884 119,068 Sales and marketing 18,314 129,480 13,832 103,982 General and administrative 5,762 55,941 3,623 56,972 Total $ 49,097 $ 390,844 $ 37,088 $ 297,640 |
Stockholders' Equity
Stockholders' Equity | 9 Months Ended |
Aug. 31, 2018 | |
Stockholders' Equity Note [Abstract] | |
STOCKHOLDERS' EQUITY | STOCKHOLDERS’ EQUITY Retained Earnings The changes in retained earnings for the nine months ended August 31, 2018 were as follows (in thousands): Balance as of December 1, 2017 $ 9,573,870 Net income 1,912,534 Reissuance of treasury stock (348,729 ) Adjustments to equity as a result of the Tax Act (318 ) Balance as of August 31, 2018 $ 11,137,357 We account for treasury stock under the cost method. When treasury stock is re-issued at a price higher than its cost, the difference is recorded as a component of additional paid-in-capital in our condensed consolidated balance sheets. When treasury stock is re-issued at a price lower than its cost, the difference is recorded as a component of additional paid-in-capital to the extent that there are treasury stock gains to offset the losses. If there are no treasury stock gains in additional paid-in-capital, the losses upon re-issuance of treasury stock are recorded as a reduction of retained earnings in our condensed consolidated balance sheets. The components of accumulated other comprehensive income (loss) and activity, net of related taxes, as of August 31, 2018 were as follows (in thousands): December 1, Increase / Decrease Reclassification Adjustments August 31, Net unrealized gains / losses on available-for-sale securities: Unrealized gains on available-for-sale securities $ 2,704 $ (1,836 ) $ (252 ) $ 616 Unrealized losses on available-for-sale securities (14,220 ) (17,184 ) 10,094 (21,310 ) Total net unrealized gains / losses on available-for-sale securities (11,516 ) (19,020 ) 9,842 (1) (20,694 ) Net unrealized gains / losses on derivative instruments designated as hedging instruments (3,367 ) 47,290 (18,671 ) (2) 25,252 Cumulative foreign currency translation adjustments (96,938 ) (35,668 ) — (132,606 ) Total accumulated other comprehensive income (loss), net of taxes $ (111,821 ) $ (7,398 ) $ (8,829 ) $ (128,048 ) _________________________________________ (1) Reclassification adjustments for gains / losses on available-for-sale securities are classified in interest and other income (expense), net. (2) Reclassification adjustments for gains / losses on derivative instruments are classified in revenue. The following table sets forth the taxes related to each component of other comprehensive income for the three and nine months ended August 31, 2018 and September 1, 2017 (in thousands): Three Months Nine Months 2018 2017 2018 2017 Available-for-sale securities: Unrealized gains / losses $ — $ 235 $ — $ 523 Reclassification adjustments — (214 ) — (323 ) Subtotal available-for-sale securities — 21 — 200 Derivatives designated as hedging instruments: Reclassification adjustments on derivative instruments (101 ) (149 ) (1,726 ) (582 ) Foreign currency translation adjustments — 1,434 (1,742 ) 3,081 Total taxes, other comprehensive income $ (101 ) $ 1,306 $ (3,468 ) $ 2,699 Stock Repurchase Program To facilitate our stock repurchase program, designed to return value to our stockholders and minimize dilution from stock issuances, we may repurchase shares in the open market or enter into structured repurchase agreements with third parties. In January 2017, our Board of Directors approved our current stock repurchase program granting us authority to repurchase up to $2.5 billion in common stock through the end of fiscal 2019. In May 2018, our Board of Directors granted us another authority to repurchase up to $8 billion in common stock through the end of fiscal 2021. During the nine months ended August 31, 2018 and September 1, 2017 , we entered into several structured stock repurchase agreements with large financial institutions, whereupon we provided them with prepayments totaling $1.75 billion and $800 million , respectively. 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 the nine months ended August 31, 2018 , we repurchased approximately 7.1 million shares at an average price of $225.15 through structured repurchase agreements entered into during fiscal 2017 and the nine months ended August 31, 2018 . During the nine months ended September 1, 2017 we repurchased approximately 6.3 million shares at an average price of $126.58 through structured repurchase agreements entered into during fiscal 2016 and the nine months ended September 1, 2017 . For the nine months ended August 31, 2018 , the prepayments were classified as treasury stock on our condensed consolidated balance sheets at the payment date, though only shares physically delivered to us by August 31, 2018 were excluded from the computation of earnings per share. As of August 31, 2018 , $247.3 million of prepayment remained under this agreement. As of August 31, 2018 , $150 million remains under the $2.5 billion authority and we have not drawn from our $8 billion authority. |
Net Income Per Share
Net Income Per Share | 9 Months Ended |
Aug. 31, 2018 | |
Earnings Per Share [Abstract] | |
NET INCOME PER SHARE | NET INCOME PER SHARE The following table sets forth the computation of basic and diluted net income per share for the three and nine months ended August 31, 2018 and September 1, 2017 (in thousands, except per share data): Three Months Nine Months 2018 2017 2018 2017 Net income $ 666,291 $ 419,569 $ 1,912,534 $ 1,192,405 Shares used to compute basic net income per share 490,025 493,426 491,336 494,138 Dilutive potential common shares: Unvested restricted stock units and performance share awards 6,716 6,664 7,109 6,574 Stock options 125 308 142 348 Shares used to compute diluted net income per share 496,866 500,398 498,587 501,060 Basic net income per share $ 1.36 $ 0.85 $ 3.89 $ 2.41 Diluted net income per share $ 1.34 $ 0.84 $ 3.84 $ 2.38 |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Aug. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Royalties We have royalty commitments associated with the licensing of certain offerings. Royalty expense is generally based on a dollar amount per unit sold or a percentage of the underlying revenue. Indemnifications In the ordinary course of business, we provide indemnifications of varying scope to customers and channel partners against claims of intellectual property infringement made by third parties arising from the use of our products and from time to time, we are subject to claims by our customers under these indemnification provisions. Historically, costs related to these indemnification provisions have not been significant and we are unable to estimate the maximum potential impact of these indemnification provisions on our future results of operations. To the extent permitted under Delaware law, we have agreements whereby we indemnify our officers and directors for certain events or occurrences while the officer or director is or was serving at our request in such capacity. The indemnification period covers all pertinent events and occurrences during the officer’s or director’s lifetime. The maximum potential amount of future payments we could be required to make under these indemnification agreements is unlimited; however, we have director and officer insurance coverage that reduces our exposure and enables us to recover a portion of any future amounts paid. We believe the estimated fair value of these indemnification agreements in excess of applicable insurance coverage is minimal. Legal Proceedings In connection with disputes relating to the validity or alleged infringement of third-party intellectual property rights, including patent rights, we have been, are currently and may in the future be subject to claims, negotiations or complex, protracted litigation. Intellectual property disputes and litigation may be very costly and can be disruptive to our business operations by diverting the attention and energies of management and key technical personnel. Although we have successfully defended or resolved past litigation and disputes, we may not prevail in any ongoing or future litigation and disputes. Third-party intellectual property disputes could subject us to significant liabilities, require us to enter into royalty and licensing arrangements on unfavorable terms, prevent us from licensing certain of our products or offering certain of our services, subject us to injunctions restricting our sale of products or services, cause severe disruptions to our operations or the markets in which we compete, or require us to satisfy indemnification commitments with our customers including contractual provisions under various license arrangements and service agreements. In addition to intellectual property disputes, we are subject to legal proceedings, claims and investigations in the ordinary course of business, including claims relating to commercial, employment and other matters. Some of these disputes and legal proceedings may include speculative claims for substantial or indeterminate amounts of damages. We consider all claims on a quarterly basis in accordance with GAAP and based on known facts assess whether potential losses are considered reasonably possible, probable and estimable. Based upon this assessment, we then evaluate disclosure requirements and whether to accrue for such claims in our financial statements. This determination is then reviewed and discussed with our Audit Committee and our independent registered public accounting firm. We make a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. Unless otherwise specifically disclosed in this note, we have determined that no provision for liability nor disclosure is required related to any claim against us because: (a) there is not a reasonable possibility that a loss exceeding amounts already recognized (if any) may be incurred with respect to such claim; (b) a reasonably possible loss or range of loss cannot be estimated; or (c) such estimate is immaterial. All legal costs associated with litigation are expensed as incurred. Litigation is inherently unpredictable. However, we believe that we have valid defenses with respect to the legal matters pending against us. It is possible, nevertheless, that our consolidated financial position, cash flows or results of operations could be negatively affected by an unfavorable resolution of one or more of such proceedings, claims or investigations. In connection with our anti-piracy efforts, conducted both internally and through organizations such as the Business Software Alliance, from time to time we undertake litigation against alleged copyright infringers. Such lawsuits may lead to counter-claims alleging improper use of litigation or violation of other laws. We believe we have valid defenses with respect to such counter-claims; however, it is possible that our consolidated financial position, cash flows or results of operations could be negatively affected in any particular period by the resolution of one or more of these counter-claims. |
Debt
Debt | 9 Months Ended |
Aug. 31, 2018 | |
Debt Disclosure [Abstract] | |
DEBT | DEBT Notes In February 2010, we issued $900 million of 4.75% senior notes due February 1, 2020 (the “2020 Notes”). Our proceeds were $900 million and were net of an issuance discount of $5.5 million . In addition, we incurred issuance costs of $6.4 million . Both the discount and issuance costs are being amortized to interest expense over the term of the 2020 Notes using the effective interest method. The effective interest rate including the discount and issuance costs is 4.92% . Interest is payable semi-annually, in arrears, on February 1 and August 1, and commenced on August 1, 2010 . In June 2014, we entered into interest rate swaps with a total notional amount of $900 million designated as a fair value hedge related to our 2020 Notes. The interest rate swaps effectively convert the fixed interest rate on our 2020 Notes to a floating interest rate based on LIBOR. Under the terms of the swap, we will pay monthly interest at the one-month LIBOR interest rate plus a fixed number of basis points on the $900 million notional amount. In exchange, we will receive 4.75% fixed rate interest from the swap counterparties. See Note 5 for further details regarding our interest rate swap derivatives. In January 2015, we issued $1 billion of 3.25% senior notes due February 1, 2025 (the “2025 Notes”). Our proceeds were approximately $989.3 million which is net of an issuance discount of $10.7 million . In addition, we incurred issuance costs of $7.9 million . Both the discount and issuance costs are being amortized to interest expense over the term of the 2025 Notes using the effective interest method. The effective interest rate including the discount, issuance costs and interest rate agreement is 3.67% . Interest is payable semi-annually, in arrears on February 1 and August 1, and commenced on August 1, 2015 . As of August 31, 2018 , our outstanding notes payable consist of the 2020 Notes and 2025 Notes (the “Notes”) with a total carrying value of $1.87 billion which includes the fair value of the interest rate swap and is net of debt issuance costs. Based on quoted prices in inactive markets, the total fair value of the Notes was $1.91 billion as of August 31, 2018 and excludes the effect of the fair value hedge of the 2020 Notes for which we entered into interest rate swaps as described above. The Notes rank equally with our other unsecured and unsubordinated indebtedness. We may redeem the Notes at any time, subject to a make-whole premium. In addition, upon the occurrence of certain change of control triggering events, we may be required to repurchase the Notes, at a price equal to 101% of their principal amount, plus accrued and unpaid interest to the date of repurchase. The Notes also include covenants that limit our ability to grant liens on assets and to enter into sale and leaseback transactions, subject to significant allowances. As of August 31, 2018 , we were in compliance with all of the covenants. In February and August 2018, we made semi-annual interest payments on our 2020 and 2025 Notes each totaling $37.6 million . Credit Agreement On March 2, 2012, we entered into a five-year $1 billion senior unsecured revolving credit agreement (the “Credit Agreement”), providing for loans to us and certain of our subsidiaries. Pursuant to the terms of the Credit Agreement, we may, subject to the agreement of the applicable lenders, request up to an additional $500 million in commitments, for a maximum aggregate commitment of $1.5 billion . Loans under the Credit Agreement will bear interest at either (i) LIBOR plus a margin, based on our public debt ratings, ranging from 0.795% and 1.30% or (ii) the base rate, which is defined as the highest of (a) the agent’s prime rate, (b) the federal funds effective rate plus 0.50% or (c) LIBOR plus 1.00% plus a margin, based on our debt ratings, ranging from 0.00% to 0.30% . Commitment fees are payable quarterly at rates between 0.08% and 0.20% per year, also based on our debt ratings. Subject to certain conditions stated in the Credit Agreement, we and any of our subsidiaries designated as additional borrowers may borrow, prepay and re-borrow amounts under the revolving credit facility at any time during the term of the Credit Agreement. On July 27, 2015, we entered into an amendment to further extend the maturity date to July 27, 2020 and reallocated the facility among the syndicate of lenders that are parties to the Credit Agreement. The Credit Agreement contains customary representations, warranties, affirmative and negative covenants, including a financial covenant, events of default and indemnification provisions in favor of the lenders. The negative covenants include restrictions regarding the incurrence of liens and indebtedness, certain merger and acquisition transactions, dispositions and other matters, all subject to certain exceptions. The financial covenant, based on a quarterly financial test, requires us not to exceed a maximum leverage ratio. The facility will terminate and all amounts owing thereunder will be due and payable on the maturity date unless (a) the commitments are terminated earlier upon the occurrence of certain events, including an event of default, or (b) the maturity date is further extended upon our request, subject to the agreement of the lenders. As of August 31, 2018 , there were no outstanding borrowings under this Credit Agreement and we were in compliance with all covenants. |
Non-Operating Income (Expense)
Non-Operating Income (Expense) | 9 Months Ended |
Aug. 31, 2018 | |
Other Income and Expenses [Abstract] | |
NON-OPERATING INCOME (EXPENSE) | NON-OPERATING INCOME (EXPENSE) Non-operating income (expense) for the three and nine months ended August 31, 2018 and September 1, 2017 included the following (in thousands): Three Months Nine Months 2018 2017 2018 2017 Interest and other income (expense), net: Interest income $ 21,561 $ 17,180 $ 69,962 $ 46,553 Foreign exchange gains (losses) (10,349 ) (4,140 ) (30,460 ) (21,620 ) Realized gains on fixed income investment 63 574 253 1,224 Realized losses on fixed income investment (9,708 ) (86 ) (10,094 ) (330 ) Other 41 11 218 72 Interest and other income (expense), net $ 1,608 $ 13,539 $ 29,879 $ 25,899 Interest expense $ (21,107 ) $ (18,809 ) $ (61,369 ) $ (55,286 ) Investment gains (losses), net: Realized investment gains $ 836 $ 681 $ 5,333 $ 3,071 Unrealized investment gains 1,415 294 993 2,190 Investment gains (losses), net $ 2,251 $ 975 $ 6,326 $ 5,261 Non-operating income (expense), net $ (17,248 ) $ (4,295 ) $ (25,164 ) $ (24,126 ) |
Segments
Segments | 9 Months Ended |
Aug. 31, 2018 | |
Segment Reporting [Abstract] | |
SEGMENTS | SEGMENTS We report segment information based on the “management” approach. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of our reportable segments. Our CEO, the chief operating decision maker, reviews revenue and gross margin information for each of our reportable segments, but does not review operating expenses on a segment by segment basis. In addition, with the exception of goodwill and intangible assets, we do not identify or allocate our assets by the reportable segments. Effective in fiscal 2018, our business organized into three reportable segments: Digital Media, Digital Experience (formerly Digital Marketing), and Publishing (formerly Print and Publishing). These segments provide our senior management with a comprehensive financial view of our key businesses. Our segments are aligned around our two strategic growth opportunities described above, placing our Publishing business in a third segment that contains some of our mature products and solutions. Additionally, in the first quarter of fiscal 2018, we moved our legacy enterprise offerings — Adobe Connect web conferencing platform and Adobe LiveCycle, an enterprise document and forms platform — from our Digital Experience segment into Publishing, in order to more closely align our Digital Experience business with the strategic growth opportunity. Prior year information in the tables below have been reclassified to reflect this change. We have the following reportable segments: • Digital Media— Our Digital Media segment provides tools and solutions that enable individuals, small and medium businesses and enterprises to create, publish, promote and monetize their digital content anywhere. Our customers include traditional content creators, web application developers and digital media professionals, as well as their management in marketing departments and agencies, companies and publishers. Our customers also include knowledge workers who create, collaborate and distribute documents. • Digital Experience— Our Digital Experience segment provides solutions and services for how digital advertising and marketing are created, managed, executed, measured and optimized. Our customers include digital marketers, advertisers, publishers, merchandisers, web analysts, chief marketing officers, chief information officers and chief revenue officers. This segment also includes our commerce platform offerings from the Magento acquisition in the third quarter of fiscal 2018. • Publishing— Our Publishing segment addresses market opportunities ranging from the diverse authoring and publishing needs of technical and business publishing to our legacy type and OEM printing businesses. It also includes our web conferencing and document and forms platforms effective the first quarter of fiscal 2018. Our segment results for the three months ended August 31, 2018 and September 1, 2017 were as follows (dollars in thousands): Digital Media Digital Experience Publishing Total Three months ended August 31, 2018 Revenue $ 1,608,875 $ 613,983 $ 68,218 $ 2,291,076 Cost of revenue 61,417 227,731 6,344 295,492 Gross profit $ 1,547,458 $ 386,252 $ 61,874 $ 1,995,584 Gross profit as a percentage of revenue 96 % 63 % 91 % 87 % Three months ended September 1, 2017 Revenue $ 1,270,215 $ 507,764 $ 63,095 $ 1,841,074 Cost of revenue 69,533 187,647 5,742 262,922 Gross profit $ 1,200,682 $ 320,117 $ 57,353 $ 1,578,152 Gross profit as a percentage of revenue 95 % 63 % 91 % 86 % Our segment results for the nine months ended August 31, 2018 and September 1, 2017 were as follows (dollars in thousands): Digital Media Digital Experience Publishing Total Nine months ended August 31, 2018 Revenue $ 4,615,860 $ 1,754,042 $ 195,481 $ 6,565,383 Cost of revenue 171,646 647,219 16,873 835,738 Gross profit $ 4,444,214 $ 1,106,823 $ 178,608 $ 5,729,645 Gross profit as a percentage of revenue 96 % 63 % 91 % 87 % Nine months ended September 1, 2017 Revenue $ 3,620,282 $ 1,480,451 $ 194,177 $ 5,294,910 Cost of revenue 182,935 539,574 17,110 739,619 Gross profit $ 3,437,347 $ 940,877 $ 177,067 $ 4,555,291 Gross profit as a percentage of revenue 95 % 64 % 91 % 86 % |
Basis of Presentation and Sum22
Basis of Presentation and Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Aug. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | We have prepared the accompanying unaudited condensed consolidated financial statements pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). Pursuant to these rules and regulations, we have condensed or omitted certain information and footnote disclosures we normally include in our annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). In management’s opinion, we have made all adjustments (consisting only of normal, recurring adjustments, except as otherwise indicated) necessary to fairly present our financial position, results of operations and cash flows. Our interim period operating results do not necessarily indicate the results that may be expected for any other interim period or for the full fiscal year. These financial statements and accompanying notes should be read in conjunction with the consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the fiscal year ended December 1, 2017 on file with the SEC (our “Annual Report”). |
Recent Accounting Pronouncements | Recently Adopted Accounting Guidance On January 26, 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2017-04, Simplifying the Test for Goodwill Impairment, which eliminated step two from the goodwill impairment test. In assessing impairment of goodwill, if it is concluded that it is more likely than not that the carrying amount of a reportable segment exceeds its fair value during the qualitative assessment, a one-step goodwill impairment test will be performed. If it is concluded during the quantitative test that the carrying amount of a reportable segment exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reportable segment. The effective date of the new standard for public companies is for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. Early adoption is permitted. In the first quarter of 2018, we early adopted ASU 2017-04. The standard did not have an impact to our qualitative assessment for goodwill impairment that we performed in the second quarter of fiscal 2018. Significant Accounting Policies There have been no other material changes to our significant accounting policies during the nine months ended August 31, 2018 , as compared to the significant accounting policies described in our Annual Report. Recent Accounting Pronouncements Not Yet Effective On May 28, 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The updated standard will replace most existing revenue recognition guidance in GAAP when it becomes effective and permits the use of either the full retrospective or modified retrospective transition method. The updated standard is effective for us in the first quarter of fiscal 2019. We expect to adopt this updated standard in the first quarter of fiscal 2019 on a modified retrospective basis. We are currently evaluating the effect that the updated standard will have on our condensed consolidated financial statements and related disclosures. While we are continuing to assess all potential impacts of the new standard, we believe there should not be a material change to the amount of consolidated revenues on an annual basis. We expect revenue related to our cloud offerings, including Creative Cloud and Document Cloud for business enterprises, individuals and teams, to remain substantially unchanged. When sold with cloud-enabled services, Creative Cloud and Document Cloud require a significant level of integration and interdependency with software and the individual components are not considered distinct. Revenue for these offerings will continue to be recognized over the period in which the cloud services are provided. We believe the most significant revenue-related impact relates to our accounting for arrangements that include on-premise term-based software licenses bundled with maintenance and support. Under current GAAP, the revenue attributable to these software licenses is recognized ratably over the term of the arrangement because vendor-specific objective evidence (“VSOE”) does not exist for the undelivered maintenance and support element as it is not sold separately. The requirement to have VSOE for undelivered elements to enable the separation of revenue for the delivered software licenses is eliminated under the new standard. Accordingly, under the new standard we will be required to recognize as revenue a portion of the arrangement fee upon delivery of the software licenses and potentially classify such revenue as “product” instead of “subscription” revenue on the income statement. We offer on-premise term-based software licenses bundled with maintenance and support as a deployment model for certain offerings within our Digital Experience, Digital Media, and Publishing business units. We do not expect these arrangements to have a material impact to revenue reported in annual reporting periods subsequent to adoption, however they may result in a material balance sheet impact on the date of adoption due to the application of the modified retrospective transition method. The modified retrospective method requires upon adoption that we recognize the impact of applying the new standard to contracts that are not completed at the date of initial adoption, but do not restate prior financial statements. We will record a cumulative effect of initially applying the provisions of the new standard as an adjustment to increase the opening retained earnings balance and reduce the opening deferred revenue balance. Further, some of our enterprise agreements allow our customers to renew on-premise term-based licenses on a monthly basis. Revenue associated with these arrangements would be recognized monthly. Other expected impacts to our policies and disclosures include: earlier recognition of revenue for certain contracts due to the elimination of contingent revenue limitations, an unbilled receivable balance on our balance sheets, the requirement to estimate variable consideration for certain arrangements, increased allocation of revenue to and from professional services and other offerings, and changes to our financial statement disclosures such as remaining performance obligations. Under current GAAP, we expense costs related to the acquisition of revenue-generating contracts as incurred. Under the new standard, we will be required to capitalize certain costs incremental to contract acquisition and amortize them over the expected period of benefit. There may be a material balance sheet impact at the period of adoption to capitalize costs of obtaining the contract as an asset, with a corresponding adjustment to opening retained earnings at the date of initial adoption. Additionally, we may have to record related deferred income taxes. We continue to evaluate the magnitude of the impact and the period over which these capitalized costs will be amortized. Due to the complexity of certain of our contracts, the actual accounting treatment required under the new standard for these arrangements may be dependent on contract-specific terms and therefore may vary in some instances. On February 24, 2016, the FASB issued ASU No. 2016-02, Leases, requiring lessees to recognize a right-of-use asset and a lease liability on the balance sheet for all leases with the exception of short-term leases with a lease term of twelve months or less. For lessees, leases will continue to be classified as either operating or finance leases in the income statement. Lessor accounting is similar to the current model but updated to align with certain changes to the lessee model. Lessors will continue to classify leases as operating, direct financing or sales-type leases. The effective date of the new standard for public companies is for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted. The new standard must be adopted using a modified retrospective transition and allows for the application of the new guidance at the beginning of the earliest comparative period presented or at the adoption date. The updated standard is effective for us beginning in the first quarter of fiscal 2020 and we do not plan to early adopt. We are currently evaluating the effect that the updated standard will have on our condensed consolidated financial statements and related disclosures. On August 28, 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging, requiring expanded hedge accounting for both non-financial and financial risk components and refining the measurement of hedge results to better reflect an entity's hedging strategies. The updated standard also amends the presentation and disclosure requirements and changes how entities assess hedge effectiveness. The effective date of the new standard for public companies is for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early adoption is permitted. The new standard must be adopted using a modified retrospective transition with a cumulative effect adjustment recorded to opening retained earnings as of the initial adoption date. The updated standard is effective for us beginning in the first quarter of fiscal 2020 and we do not plan to early adopt. We are currently evaluating the effect that the updated standard will have on our condensed consolidated financial statements and related disclosures. With the exception of the new standards discussed above, there have been no other recent accounting pronouncements or changes in accounting pronouncements during the nine months ended August 31, 2018 , as compared to the recent accounting pronouncements described in our Annual Report, that are of significance or potential significance to us. |
Derivatives and Hedging Activ23
Derivatives and Hedging Activities Derivatives Policy (Policies) | 9 Months Ended |
Aug. 31, 2018 | |
Accounting Policies [Abstract] | |
Derivatives, Policy | Hedge Accounting and Hedging Programs We recognize derivative instruments and hedging activities as either assets or liabilities in our condensed consolidated balance sheets and measure them at fair value. Gains and losses resulting from changes in fair value are accounted for depending on the use of the derivative and whether it is designated and qualifies for hedge accounting. We evaluate hedge effectiveness at the inception of the hedge prospectively as well as retrospectively, and record any ineffective portion of the hedging instruments in interest and other income (expense), net on our condensed consolidated statements of income. The net gain (loss) recognized in interest and other income (expense), net for cash flow hedges due to hedge ineffectiveness was insignificant for all fiscal years presented. The time value of purchased contracts is recorded in interest and other income (expense), net in our condensed consolidated statements of income. The bank counterparties to these contracts expose us to credit-related losses in the event of their nonperformance which are largely mitigated with collateral security agreements that provide for collateral to be received or posted when the net fair value of certain financial instruments fluctuates from contractually established thresholds. In addition, we enter into master netting arrangements which have the ability to further limit credit-related losses with the same counterparty by permitting net settlement of transactions. Balance Sheet Hedging — Hedges of Foreign Currency Assets and Liabilities We also hedge our net recognized foreign currency denominated assets and liabilities with foreign exchange forward contracts to reduce the risk that the value of these assets and liabilities will be adversely affected by changes in exchange rates. These contracts hedge assets and liabilities that are denominated in foreign currencies and are carried at fair value with changes in the fair value recorded to interest and other income (expense), net in our condensed consolidated statements of income. These contracts do not subject us to material balance sheet risk due to exchange rate movements because gains and losses on these derivatives are intended to offset gains and losses on the assets and liabilities being hedged. Cash Flow Hedging—Hedges of Forecasted Foreign Currency Revenue and Interest Rate Risk In countries outside the United States, we transact business in U.S. Dollars and in various other currencies. We may use foreign exchange option contracts or forward contracts to hedge certain cash flow exposures resulting from changes in these foreign currency exchange rates. These foreign exchange contracts, carried at fair value, have maturities of up to twelve months . We enter into these foreign exchange contracts to hedge a portion of our forecasted foreign currency denominated revenue in the normal course of business and accordingly, they are not speculative in nature. To receive hedge accounting treatment, all hedging relationships are formally documented at the inception of the hedge, and the hedges must be highly effective in offsetting changes to future cash flows on hedged transactions. We record changes in the intrinsic value of these cash flow hedges in accumulated other comprehensive income (loss) in our condensed consolidated balance sheets, until the forecasted transaction occurs. When the forecasted transaction occurs, we reclassify the related gain or loss on the cash flow hedge to revenue. In the event the underlying forecasted transaction does not occur, or it becomes probable that it will not occur, we reclassify the gain or loss on the related cash flow hedge from accumulated other comprehensive income (loss) to interest and other income (expense), net in our condensed consolidated statements of income at that time. If we do not elect hedge accounting, or the contract does not qualify for hedge accounting treatment, the changes in fair value from period to period are recorded in interest and other income (expense), net in our condensed consolidated statements of income. Fair Value Hedging - Hedges of Interest Rate Risk In fiscal 2014, we entered into interest rate swaps designated as fair value hedges related to our $900 million of 4.75% fixed interest rate senior notes due February 1, 2020. In effect, the interest rate swaps convert the fixed interest rate on these senior notes to a floating interest rate based on LIBOR. Under the terms of the swaps, we will pay monthly interest at the one-month LIBOR interest rate plus a fixed number of basis points on the $900 million notional amount through February 1, 2020. In exchange, we will receive 4.75% fixed rate interest from the swap counterparties. See Note 13 for further details regarding our debt. The interest rate swaps are accounted for as fair value hedges and substantially offset the changes in fair value of the hedged portion of the underlying debt that are attributable to the changes in market risk. Therefore, the gains and losses related to changes in the fair value of the interest rate swaps are included in interest and other income (expense), net in our condensed consolidated statements of income. The fair value of the interest rate swaps is reflected in other liabilities or other assets in our condensed consolidated balance sheets. |
Acquisitions (Tables)
Acquisitions (Tables) | 9 Months Ended |
Aug. 31, 2018 | |
Business Combinations [Abstract] | |
Schedule of acquired assets and liabilities [Table Text Block] | (in thousands) Amount Weighted Average Useful Life (years) Customer contracts and relationships $ 208,000 8 Purchased technology 84,200 5 In-process research and development (1) 39,100 N/A Trademarks 21,100 3 Other intangibles 43,400 3 Total identifiable intangible assets 395,800 Net liabilities assumed (67,417 ) N/A Goodwill (2) 1,316,217 N/A Total estimated purchase price $ 1,644,600 _________________________________________ (1) Capitalized as purchased technology and are considered indefinite lived until the completion or abandonment of the associated research and development efforts. (2) Non-deductible for tax-purposes. |
Cash, Cash Equivalents and Sh25
Cash, Cash Equivalents and Short-Term Investments (Tables) | 9 Months Ended |
Aug. 31, 2018 | |
Cash, Cash Equivalents, and Short-term Investments [Abstract] | |
Cash Cash Equivalents and Short term Investments | Cash, cash equivalents and short-term investments consisted of the following as of August 31, 2018 (in thousands): Amortized Cost Unrealized Gains Unrealized Losses Estimated Fair Value Current assets: Cash $ 386,927 $ — $ — $ 386,927 Cash equivalents: Corporate debt securities 24,012 — (1 ) 24,011 Money market mutual funds 1,302,801 — — 1,302,801 Time deposits 33,405 — — 33,405 Total cash equivalents 1,360,218 — (1 ) 1,360,217 Total cash and cash equivalents 1,747,145 — (1 ) 1,747,144 Short-term fixed income securities: Asset-backed securities 77,393 2 (385 ) 77,010 Corporate debt securities 2,471,739 614 (20,590 ) 2,451,763 Foreign government securities 4,178 — (29 ) 4,149 Municipal securities 19,223 — (306 ) 18,917 U.S. Treasury securities 645,487 — — 645,487 Total short-term investments 3,218,020 616 (21,310 ) 3,197,326 Total cash, cash equivalents and short-term investments $ 4,965,165 $ 616 $ (21,311 ) $ 4,944,470 Cash, cash equivalents and short-term investments consisted of the following as of December 1, 2017 (in thousands): Amortized Cost Unrealized Gains Unrealized Losses Estimated Fair Value Current assets: Cash $ 280,488 $ — $ — $ 280,488 Cash equivalents: Money market mutual funds 2,006,741 — — 2,006,741 Time deposits 18,843 — — 18,843 Total cash equivalents 2,025,584 — — 2,025,584 Total cash and cash equivalents 2,306,072 — — 2,306,072 Short-term fixed income securities: Asset-backed securities 98,403 1 (403 ) 98,001 Corporate debt securities 2,461,691 2,694 (10,125 ) 2,454,260 Foreign government securities 2,396 — (8 ) 2,388 Municipal securities 21,189 8 (132 ) 21,065 U.S. Treasury securities 941,538 2 (3,552 ) 937,988 Total short-term investments 3,525,217 2,705 (14,220 ) 3,513,702 Total cash, cash equivalents and short-term investments $ 5,831,289 $ 2,705 $ (14,220 ) $ 5,819,774 |
Continuous Unrealized Loss Position Less Than Twelve Months Related to Available-for-Sale Securities | The following table summarizes the fair value and gross unrealized losses related to available-for-sale securities, aggregated by investment category, that have been in an unrealized loss position for less than twelve months, as of August 31, 2018 and December 1, 2017 (in thousands): 2018 2017 Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Corporate debt securities $ 1,218,367 $ (16,414 ) $ 1,338,232 $ (5,459 ) Asset-backed securities 28,820 (240 ) 64,618 (193 ) Municipal securities 17,975 (281 ) 11,805 (115 ) Foreign government securities 4,149 (29 ) 2,388 (8 ) U.S. Treasury securities — — 593,296 (2,087 ) Total $ 1,269,311 $ (16,964 ) $ 2,010,339 $ (7,862 ) |
Continuous Unrealized Loss Position Twelve Months or Longer Related to Available-for-Sale-Securities | The following table summarizes the fair value and gross unrealized losses related to available-for-sale securities, aggregated by investment category, that were in a continuous unrealized loss position for more than twelve months, as of August 31, 2018 and December 1, 2017 (in thousands): 2018 2017 Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Corporate debt securities $ 312,698 $ (4,176 ) $ 500,689 $ (4,666 ) Asset-backed securities 17,560 (145 ) 32,383 (210 ) Municipal securities 942 (25 ) 598 (17 ) U.S. Treasury securities — — 338,950 (1,465 ) Total $ 331,200 $ (4,346 ) $ 872,620 $ (6,358 ) |
Cost and Estimated Fair Value of Debt Securities | The following table summarizes the cost and estimated fair value of short-term fixed income securities classified as short-term investments based on stated effective maturities as of August 31, 2018 (in thousands): Amortized Cost Estimated Fair Value Due within one year $ 1,643,049 $ 1,640,836 Due between one and two years 788,794 782,312 Due between two and three years 608,978 600,690 Due after three years 177,199 173,488 Total $ 3,218,020 $ 3,197,326 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 9 Months Ended |
Aug. 31, 2018 | |
Fair Value Disclosures [Abstract] | |
Financial assets and liabilities at fair value on a recurring basis | The fair value of our financial assets and liabilities at August 31, 2018 was determined using the following inputs (in thousands): Fair Value Measurements at Reporting Date Using Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs Total (Level 1) (Level 2) (Level 3) Assets: Cash equivalents: Corporate debt securities $ 24,011 $ — $ 24,011 $ — Money market mutual funds 1,302,801 1,302,801 — — Time deposits 33,405 33,405 — — Short-term investments: Asset-backed securities 77,010 — 77,010 — Corporate debt securities 2,451,763 — 2,451,763 — Foreign government securities 4,149 — 4,149 — Municipal securities 18,917 — 18,917 — U.S. Treasury securities 645,487 — 645,487 — Prepaid expenses and other current assets: Foreign currency derivatives 43,084 — 43,084 — Other assets: Deferred compensation plan assets 69,705 3,192 66,513 — Total assets $ 4,670,332 $ 1,339,398 $ 3,330,934 $ — Liabilities: Accrued expenses: Foreign currency derivatives $ 2,463 $ — $ 2,463 $ — Other liabilities: Interest rate swap derivatives 10,312 — 10,312 — Total liabilities $ 12,775 $ — $ 12,775 $ — The fair value of our financial assets and liabilities at December 1, 2017 was determined using the following inputs (in thousands): Fair Value Measurements at Reporting Date Using Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs Total (Level 1) (Level 2) (Level 3) Assets: Cash equivalents: Money market mutual funds $ 2,006,741 $ 2,006,741 $ — $ — Time deposits 18,843 18,843 — — Short-term investments: Asset-backed securities 98,001 — 98,001 — Corporate debt securities 2,454,260 — 2,454,260 — Foreign government securities 2,388 — 2,388 — Municipal securities 21,065 — 21,065 — U.S. Treasury securities 937,988 — 937,988 — Prepaid expenses and other current assets: Foreign currency derivatives 14,198 — 14,198 — Other assets: Deferred compensation plan assets 56,690 2,573 54,117 — Total assets $ 5,610,174 $ 2,028,157 $ 3,582,017 $ — Liabilities: Accrued expenses: Foreign currency derivatives $ 1,598 $ — $ 1,598 $ — Other liabilities: Interest rate swap derivatives 1,058 — 1,058 — Total liabilities $ 2,656 $ — $ 2,656 $ — |
Derivatives and Hedging Activ27
Derivatives and Hedging Activities (Tables) | 9 Months Ended |
Aug. 31, 2018 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Fair Value of Derivative Instruments | The fair value of derivative instruments on our condensed consolidated balance sheets as of August 31, 2018 and December 1, 2017 were as follows (in thousands): 2018 2017 Fair Value Asset Derivatives Fair Value Liability Derivatives Fair Value Asset Derivatives Fair Value Liability Derivatives Derivatives designated as hedging instruments: Foreign exchange option contracts (1) (2) $ 41,862 $ — $ 12,918 $ — Interest rate swap (3) — 10,312 — 1,058 Derivatives not designated as hedging instruments: Foreign exchange forward contracts (1) 1,222 2,463 1,280 1,598 Total derivatives $ 43,084 $ 12,775 $ 14,198 $ 2,656 _________________________________________ (1) Fair value asset derivatives included in prepaid expenses and other current assets and fair value liability derivatives included in accrued expenses on our consolidated balance sheets. (2) Hedging effectiveness expected to be recognized into income within the next twelve months. (3) Included in other liabilities on our condensed consolidated balance sheets. |
Effect of Derivative Instruments as Designated Cash Flow Hedges and Not Designated as Hedges | The effect of foreign currency derivative instruments designated as cash flow hedges and of foreign currency derivative instruments not designated as hedges in our condensed consolidated statements of income for the three and nine months ended August 31, 2018 was as follows (in thousands): Three Months Nine Months Foreign Foreign Foreign Foreign Derivatives in cash flow hedging relationships: Net gain (loss) recognized in OCI, net of tax (1) $ 17,523 $ — $ 47,290 $ — Net gain (loss) reclassified from accumulated OCI into income, net of tax (2) $ 16,797 $ — $ 18,156 $ — Net gain (loss) recognized in income (3) $ (9,281 ) $ — $ (31,690 ) $ — Derivatives not designated as hedging relationships: Net gain (loss) recognized in income (4) $ — $ (1,695 ) $ — $ (2,572 ) The effect of foreign currency derivative instruments designated as cash flow hedges and of foreign currency derivative instruments not designated as hedges in our condensed consolidated statements of income for the three and nine months ended September 1, 2017 was as follows (in thousands): Three Months Nine Months Foreign Foreign Foreign Foreign Derivatives in cash flow hedging relationships: Net gain (loss) recognized in OCI, net of tax (1) $ 1,483 $ — $ 3,613 $ — Net gain (loss) reclassified from accumulated OCI into income, net of tax (2) $ 221 $ — $ 31,845 $ — Net gain (loss) recognized in income (3) $ (6,190 ) $ — $ (21,842 ) $ — Derivatives not designated as hedging relationships: Net gain (loss) recognized in income (4) $ — $ 2,920 $ — $ 6,456 _________________________________________ (1) Net change in the fair value of the effective portion classified in other comprehensive income (“OCI”). (2) Effective portion classified as revenue. (3) Ineffective portion and amount excluded from effectiveness testing classified in interest and other income (expense), net. (4) Classified in interest and other income (expense), net. |
Goodwill and Purchased and Ot28
Goodwill and Purchased and Other Intangibles (Tables) | 9 Months Ended |
Aug. 31, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Purchased and other intangible assets | Purchased and other intangible assets subject to amortization as of August 31, 2018 and December 1, 2017 were as follows (in thousands): 2018 2017 Cost Accumulated Amortization Net Cost Accumulated Amortization Net Purchased technology $ 307,101 $ (100,832 ) $ 206,269 $ 223,252 $ (110,433 ) $ 112,819 Customer contracts and relationships $ 753,870 $ (387,091 ) $ 366,779 $ 577,484 $ (356,613 ) $ 220,871 Trademarks 56,355 (20,016 ) 36,339 76,255 (56,094 ) 20,161 Acquired rights to use technology 58,966 (47,097 ) 11,869 71,130 (54,223 ) 16,907 Other intangibles 81,357 (33,137 ) 48,220 39,296 (24,396 ) 14,900 Total other intangible assets $ 950,548 $ (487,341 ) $ 463,207 $ 764,165 $ (491,326 ) $ 272,839 Purchased and other intangible assets, net $ 1,257,649 $ (588,173 ) $ 669,476 $ 987,417 $ (601,759 ) $ 385,658 |
Amortization expense in future periods | As of August 31, 2018 , we expect amortization expense in future periods to be as follows (in thousands): Fiscal Year Purchased Technology Other Intangible Assets Remainder of 2018 $ 13,596 $ 36,274 2019 51,112 118,652 2020 48,820 86,498 2021 26,369 54,119 2022 18,610 39,749 Thereafter 47,762 127,915 Total expected amortization expense $ 206,269 $ 463,207 |
Accrued Expenses (Tables)
Accrued Expenses (Tables) | 9 Months Ended |
Aug. 31, 2018 | |
Payables and Accruals [Abstract] | |
Accrued Expenses | Accrued expenses as of August 31, 2018 and December 1, 2017 consisted of the following (in thousands): 2018 2017 Accrued compensation and benefits $ 428,575 $ 417,742 Accrued media costs 103,470 134,525 Sales and marketing allowances 46,432 47,389 Accrued corporate marketing 76,574 72,087 Taxes payable 50,149 49,550 Royalties payable 42,742 46,411 Accrued interest expense 10,469 25,594 Other 261,636 200,475 Accrued expenses $ 1,020,047 $ 993,773 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 9 Months Ended |
Aug. 31, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Restricted Stock Unit Activity | Restricted stock unit activity for the nine months ended August 31, 2018 and the fiscal year ended December 1, 2017 was as follows (in thousands): 2018 2017 Beginning outstanding balance 9,304 8,316 Awarded 3,742 5,018 Released (3,686 ) (3,859 ) Forfeited (525 ) (766 ) Increase due to acquisition — 595 Ending outstanding balance 8,835 9,304 |
Restricted Stock Units Outstanding | Information regarding restricted stock units outstanding at August 31, 2018 and September 1, 2017 is summarized below: Number of Shares (thousands) Weighted Average Remaining Contractual Life (years) Aggregate Intrinsic Value (*) (millions) 2018 Restricted stock units outstanding 8,835 1.23 $ 2,328.1 Restricted stock units vested and expected to vest 8,104 1.18 $ 2,135.7 2017 Restricted stock units outstanding 9,443 1.27 $ 1,464.2 Restricted stock units vested and expected to vest 8,636 1.22 $ 1,339.1 _________________________________________ (*) The intrinsic value is calculated as the market value as of the end of the fiscal period. As reported by the NASDAQ Global Select Market, the market values as of August 31, 2018 and September 1, 2017 were $263.51 and $155.06 , respectively. |
Performance Share Activity | The following table sets forth the summary of performance share activity under our Performance Share Programs for the nine months ended August 31, 2018 and the fiscal year ended December 1, 2017 (in thousands): 2018 2017 Shares Granted Maximum Shares Eligible to Receive Shares Granted Maximum Shares Eligible to Receive Beginning outstanding balance 1,534 3,068 1,630 3,261 Awarded 837 (1) 628 1,082 (2) 1,040 Achieved (1,050 ) (1,053 ) (1,135 ) (1,147 ) Forfeited (165 ) (331 ) (43 ) (86 ) Ending outstanding balance 1,156 2,312 1,534 3,068 _________________________________________ (1) Included in the 0.8 million shares awarded during the nine months ended August 31, 2018 were 0.5 million shares awarded for the final achievement of the 2015 Performance Share program. The remaining awarded shares were for the 2018 Performance Share Program. (2) Included in the 1.1 million shares awarded during the fiscal year ended December 1, 2017 were 0.6 million shares awarded for the final achievement of the 2014 Performance Share program. The remaining awarded shares were for the 2017 Performance Share Program. |
Schedule of Share-based Payment Award, Employee Stock Purchase Plan, Valuation Assumptions | The expected life of the ESPP shares is the average of the remaining purchase periods under each offering period. The assumptions used to value employee stock purchase rights during the three and nine months ended August 31, 2018 and September 1, 2017 were as follows: Three Months Nine Months 2018 2017 2018 2017 Expected life (in years) 0.5 - 2.0 0.5 - 2.0 0.5 - 2.0 0.5 - 2.0 Volatility 29 % 25% - 27% 26% - 29% 22% - 27% Risk free interest rate 2.09% - 2.52% 1.12% - 1.41% 1.54% - 2.52% 0.62% - 1.41% |
Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs | Total stock-based compensation costs included in our condensed consolidated statements of income for the three months ended August 31, 2018 and September 1, 2017 were as follows (in thousands): 2018 2017 Income Statement Classifications Option Grants and Stock Purchase Rights Restricted Stock Units and Performance Share Awards Option Grants and Stock Purchase Rights Restricted Stock Units and Performance Share Awards Cost of revenue—subscription $ 934 $ 4,509 $ 628 $ 3,633 Cost of revenue—services and support 1,930 2,789 1,626 2,409 Research and development 6,347 66,308 4,608 43,243 Sales and marketing 7,551 47,885 4,658 36,064 General and administrative 2,932 17,853 1,140 19,033 Total $ 19,694 $ 139,344 $ 12,660 $ 104,382 Total stock-based compensation costs included in our condensed consolidated statements of income for the nine months ended August 31, 2018 and September 1, 2017 were as follows (in thousands): 2018 2017 Income Statement Classifications Option Grants and Stock Purchase Rights Restricted Stock Units and Performance Share Awards Option Grants and Stock Purchase Rights Restricted Stock Units and Performance Share Awards Cost of revenue—subscription $ 2,431 $ 12,979 $ 1,899 $ 10,467 Cost of revenue—services and support 5,593 8,455 4,850 7,151 Research and development 16,997 183,989 12,884 119,068 Sales and marketing 18,314 129,480 13,832 103,982 General and administrative 5,762 55,941 3,623 56,972 Total $ 49,097 $ 390,844 $ 37,088 $ 297,640 |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 9 Months Ended |
Aug. 31, 2018 | |
Stockholders' Equity Note [Abstract] | |
Retained Earnings | The changes in retained earnings for the nine months ended August 31, 2018 were as follows (in thousands): Balance as of December 1, 2017 $ 9,573,870 Net income 1,912,534 Reissuance of treasury stock (348,729 ) Adjustments to equity as a result of the Tax Act (318 ) Balance as of August 31, 2018 $ 11,137,357 |
Schedule of Accumulated Other Comprehensive Income (Loss) | The components of accumulated other comprehensive income (loss) and activity, net of related taxes, as of August 31, 2018 were as follows (in thousands): December 1, Increase / Decrease Reclassification Adjustments August 31, Net unrealized gains / losses on available-for-sale securities: Unrealized gains on available-for-sale securities $ 2,704 $ (1,836 ) $ (252 ) $ 616 Unrealized losses on available-for-sale securities (14,220 ) (17,184 ) 10,094 (21,310 ) Total net unrealized gains / losses on available-for-sale securities (11,516 ) (19,020 ) 9,842 (1) (20,694 ) Net unrealized gains / losses on derivative instruments designated as hedging instruments (3,367 ) 47,290 (18,671 ) (2) 25,252 Cumulative foreign currency translation adjustments (96,938 ) (35,668 ) — (132,606 ) Total accumulated other comprehensive income (loss), net of taxes $ (111,821 ) $ (7,398 ) $ (8,829 ) $ (128,048 ) _________________________________________ (1) Reclassification adjustments for gains / losses on available-for-sale securities are classified in interest and other income (expense), net. (2) Reclassification adjustments for gains / losses on derivative instruments are classified in revenue. |
Other Comprehensive Income, Tax | The following table sets forth the taxes related to each component of other comprehensive income for the three and nine months ended August 31, 2018 and September 1, 2017 (in thousands): Three Months Nine Months 2018 2017 2018 2017 Available-for-sale securities: Unrealized gains / losses $ — $ 235 $ — $ 523 Reclassification adjustments — (214 ) — (323 ) Subtotal available-for-sale securities — 21 — 200 Derivatives designated as hedging instruments: Reclassification adjustments on derivative instruments (101 ) (149 ) (1,726 ) (582 ) Foreign currency translation adjustments — 1,434 (1,742 ) 3,081 Total taxes, other comprehensive income $ (101 ) $ 1,306 $ (3,468 ) $ 2,699 |
Net Income Per Share (Tables)
Net Income Per Share (Tables) | 9 Months Ended |
Aug. 31, 2018 | |
Earnings Per Share [Abstract] | |
Net Income Per Share | The following table sets forth the computation of basic and diluted net income per share for the three and nine months ended August 31, 2018 and September 1, 2017 (in thousands, except per share data): Three Months Nine Months 2018 2017 2018 2017 Net income $ 666,291 $ 419,569 $ 1,912,534 $ 1,192,405 Shares used to compute basic net income per share 490,025 493,426 491,336 494,138 Dilutive potential common shares: Unvested restricted stock units and performance share awards 6,716 6,664 7,109 6,574 Stock options 125 308 142 348 Shares used to compute diluted net income per share 496,866 500,398 498,587 501,060 Basic net income per share $ 1.36 $ 0.85 $ 3.89 $ 2.41 Diluted net income per share $ 1.34 $ 0.84 $ 3.84 $ 2.38 |
Non-Operating Income (Expense)
Non-Operating Income (Expense) (Tables) | 9 Months Ended |
Aug. 31, 2018 | |
Other Income and Expenses [Abstract] | |
Non-Operating Income (Expense) | Non-operating income (expense) for the three and nine months ended August 31, 2018 and September 1, 2017 included the following (in thousands): Three Months Nine Months 2018 2017 2018 2017 Interest and other income (expense), net: Interest income $ 21,561 $ 17,180 $ 69,962 $ 46,553 Foreign exchange gains (losses) (10,349 ) (4,140 ) (30,460 ) (21,620 ) Realized gains on fixed income investment 63 574 253 1,224 Realized losses on fixed income investment (9,708 ) (86 ) (10,094 ) (330 ) Other 41 11 218 72 Interest and other income (expense), net $ 1,608 $ 13,539 $ 29,879 $ 25,899 Interest expense $ (21,107 ) $ (18,809 ) $ (61,369 ) $ (55,286 ) Investment gains (losses), net: Realized investment gains $ 836 $ 681 $ 5,333 $ 3,071 Unrealized investment gains 1,415 294 993 2,190 Investment gains (losses), net $ 2,251 $ 975 $ 6,326 $ 5,261 Non-operating income (expense), net $ (17,248 ) $ (4,295 ) $ (25,164 ) $ (24,126 ) |
Segments (Tables)
Segments (Tables) | 9 Months Ended |
Aug. 31, 2018 | |
Segment Reporting [Abstract] | |
Segment Reporting | Our segment results for the three months ended August 31, 2018 and September 1, 2017 were as follows (dollars in thousands): Digital Media Digital Experience Publishing Total Three months ended August 31, 2018 Revenue $ 1,608,875 $ 613,983 $ 68,218 $ 2,291,076 Cost of revenue 61,417 227,731 6,344 295,492 Gross profit $ 1,547,458 $ 386,252 $ 61,874 $ 1,995,584 Gross profit as a percentage of revenue 96 % 63 % 91 % 87 % Three months ended September 1, 2017 Revenue $ 1,270,215 $ 507,764 $ 63,095 $ 1,841,074 Cost of revenue 69,533 187,647 5,742 262,922 Gross profit $ 1,200,682 $ 320,117 $ 57,353 $ 1,578,152 Gross profit as a percentage of revenue 95 % 63 % 91 % 86 % Our segment results for the nine months ended August 31, 2018 and September 1, 2017 were as follows (dollars in thousands): Digital Media Digital Experience Publishing Total Nine months ended August 31, 2018 Revenue $ 4,615,860 $ 1,754,042 $ 195,481 $ 6,565,383 Cost of revenue 171,646 647,219 16,873 835,738 Gross profit $ 4,444,214 $ 1,106,823 $ 178,608 $ 5,729,645 Gross profit as a percentage of revenue 96 % 63 % 91 % 87 % Nine months ended September 1, 2017 Revenue $ 3,620,282 $ 1,480,451 $ 194,177 $ 5,294,910 Cost of revenue 182,935 539,574 17,110 739,619 Gross profit $ 3,437,347 $ 940,877 $ 177,067 $ 4,555,291 Gross profit as a percentage of revenue 95 % 64 % 91 % 86 % |
Acquisitions (Details)
Acquisitions (Details) - Magento [Member] - USD ($) $ in Thousands | 3 Months Ended | ||
Aug. 31, 2018 | Jun. 18, 2018 | ||
Schedule of acquired assets and liabilities [Line Items] | |||
Finite-Lived Customer Relationships, Gross | $ 208,000 | ||
Other Finite-Lived Intangible Assets, Gross | 43,400 | ||
Finite-Lived purchased technology, gross | 84,200 | ||
Finite -lived in-process research and development | [1] | 39,100 | |
Finite-Lived Trademarks, Gross | 21,100 | ||
Purchase price allocation, identifiable intangible assets | 395,800 | ||
Purchase price allocation, net assets (liabilities) acquired (assumed) | (67,417) | ||
Purchase price allocation, goodwill | [2] | $ 1,316,217 | |
Business Combination Purchase Price | $ 1,644,600 | ||
Customer Contracts and Relationships [Member] | |||
Schedule of acquired assets and liabilities [Line Items] | |||
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life | 8 years | ||
Purchased technology | |||
Schedule of acquired assets and liabilities [Line Items] | |||
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life | 5 years | ||
Trademarks | |||
Schedule of acquired assets and liabilities [Line Items] | |||
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life | 3 years | ||
Other intangibles | |||
Schedule of acquired assets and liabilities [Line Items] | |||
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life | 3 years | ||
[1] | Capitalized as purchased technology and are considered indefinite lived until the completion or abandonment of the associated research and development efforts | ||
[2] | Non-deductible for tax-purposes |
Acquisitions (Details Numeric)
Acquisitions (Details Numeric) - USD ($) $ in Millions | 1 Months Ended | |
Dec. 19, 2016 | Sep. 20, 2018 | |
TubeMogul | ||
Business Acquisition | ||
Business Combination Purchase Price | $ 560.8 | |
Purchase price allocation, goodwill | 348.4 | |
Purchase price allocation, identifiable intangible assets | 113.1 | |
Purchase price allocation, net assets (liabilities) acquired (assumed) | $ 99.3 | |
Subsequent Event [Member] | Marketo | ||
Business Acquisition | ||
Business Combination Purchase Price | $ 4,750 |
Cash, Cash Equivalents and Sh37
Cash, Cash Equivalents and Short-Term Investments (Details) - USD ($) $ in Thousands | Aug. 31, 2018 | Dec. 01, 2017 |
Schedule of Available-for-sale Securities | ||
Amortized Cost | $ 4,965,165 | $ 5,831,289 |
Unrealized Gains | 616 | 2,705 |
Unrealized Losses | (21,311) | (14,220) |
Estimated Fair Value, Total cash, cash equivalents and short-term investments | 4,944,470 | 5,819,774 |
Cash and cash equivalents | ||
Schedule of Available-for-sale Securities | ||
Amortized Cost | 1,747,145 | 2,306,072 |
Unrealized Gains | 0 | 0 |
Unrealized Losses | (1) | 0 |
Cash and Cash Equivalents, Fair Value Disclosure | 1,747,144 | 2,306,072 |
Cash | ||
Schedule of Available-for-sale Securities | ||
Amortized Cost | 386,927 | 280,488 |
Unrealized Gains | 0 | 0 |
Unrealized Losses | 0 | 0 |
Cash and Cash Equivalents, Fair Value Disclosure | 386,927 | 280,488 |
Cash equivalents | ||
Schedule of Available-for-sale Securities | ||
Amortized Cost | 1,360,218 | 2,025,584 |
Unrealized Gains | 0 | 0 |
Unrealized Losses | (1) | 0 |
Cash and Cash Equivalents, Fair Value Disclosure | 1,360,217 | 2,025,584 |
Cash equivalents | Corporate Debt Securities | ||
Schedule of Available-for-sale Securities | ||
Amortized Cost | 24,012 | |
Unrealized Gains | 0 | |
Unrealized Losses | (1) | |
Cash and Cash Equivalents, Fair Value Disclosure | 24,011 | |
Cash equivalents | Money Market Mutual Funds | ||
Schedule of Available-for-sale Securities | ||
Amortized Cost | 1,302,801 | 2,006,741 |
Unrealized Gains | 0 | 0 |
Unrealized Losses | 0 | 0 |
Cash and Cash Equivalents, Fair Value Disclosure | 1,302,801 | 2,006,741 |
Cash equivalents | Time deposits | ||
Schedule of Available-for-sale Securities | ||
Amortized Cost | 33,405 | 18,843 |
Unrealized Gains | 0 | 0 |
Unrealized Losses | 0 | 0 |
Cash and Cash Equivalents, Fair Value Disclosure | 33,405 | 18,843 |
Short-term fixed income securities | ||
Schedule of Available-for-sale Securities | ||
Amortized Cost | 3,218,020 | 3,525,217 |
Unrealized Gains | 616 | 2,705 |
Unrealized Losses | (21,310) | (14,220) |
Estimated Fair Value, short-term investments | 3,197,326 | 3,513,702 |
Short-term fixed income securities | Asset-backed Securities | ||
Schedule of Available-for-sale Securities | ||
Amortized Cost | 77,393 | 98,403 |
Unrealized Gains | 2 | 1 |
Unrealized Losses | (385) | (403) |
Estimated Fair Value, short-term investments | 77,010 | 98,001 |
Short-term fixed income securities | Corporate Debt Securities | ||
Schedule of Available-for-sale Securities | ||
Amortized Cost | 2,471,739 | 2,461,691 |
Unrealized Gains | 614 | 2,694 |
Unrealized Losses | (20,590) | (10,125) |
Estimated Fair Value, short-term investments | 2,451,763 | 2,454,260 |
Short-term fixed income securities | Foreign Government Securities | ||
Schedule of Available-for-sale Securities | ||
Amortized Cost | 4,178 | 2,396 |
Unrealized Gains | 0 | 0 |
Unrealized Losses | (29) | (8) |
Estimated Fair Value, short-term investments | 4,149 | 2,388 |
Short-term fixed income securities | Municipal Securities | ||
Schedule of Available-for-sale Securities | ||
Amortized Cost | 19,223 | 21,189 |
Unrealized Gains | 0 | 8 |
Unrealized Losses | (306) | (132) |
Estimated Fair Value, short-term investments | 18,917 | 21,065 |
Short-term fixed income securities | U.S. Treasury Securities | ||
Schedule of Available-for-sale Securities | ||
Amortized Cost | 645,487 | 941,538 |
Unrealized Gains | 0 | 2 |
Unrealized Losses | 0 | (3,552) |
Estimated Fair Value, short-term investments | $ 645,487 | $ 937,988 |
Cash, Cash Equivalents and Sh38
Cash, Cash Equivalents and Short-Term Investments (Details 1) $ in Thousands | Aug. 31, 2018USD ($)securities | Dec. 01, 2017USD ($)securities |
Schedule of Available-for-sale Securities | ||
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value | $ 1,269,311 | $ 2,010,339 |
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss | (16,964) | (7,862) |
Available-for-sale securities in a continuous unrealized loss position for more than twelve months, fair value | 331,200 | 872,620 |
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss | (4,346) | (6,358) |
Fair Value and Gross Unrealized Losses Related to Available-For-Sale Securities | ||
Available-for-sale Securities, Amortized Cost Basis | $ 4,965,165 | $ 5,831,289 |
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Less than One Year | securities | 767 | 894 |
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Greater than or Equal to One Year | securities | 197 | 360 |
Asset-backed Securities | ||
Schedule of Available-for-sale Securities | ||
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value | $ 28,820 | $ 64,618 |
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss | (240) | (193) |
Available-for-sale securities in a continuous unrealized loss position for more than twelve months, fair value | 17,560 | 32,383 |
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss | (145) | (210) |
Corporate Debt Securities | ||
Schedule of Available-for-sale Securities | ||
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value | 1,218,367 | 1,338,232 |
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss | (16,414) | (5,459) |
Available-for-sale securities in a continuous unrealized loss position for more than twelve months, fair value | 312,698 | 500,689 |
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss | (4,176) | (4,666) |
Municipal Securities | ||
Schedule of Available-for-sale Securities | ||
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value | 17,975 | 11,805 |
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss | (281) | (115) |
Available-for-sale securities in a continuous unrealized loss position for more than twelve months, fair value | 942 | 598 |
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss | (25) | (17) |
Foreign Government Securities | ||
Schedule of Available-for-sale Securities | ||
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value | 4,149 | 2,388 |
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss | (29) | (8) |
U.S. Treasury Securities | ||
Schedule of Available-for-sale Securities | ||
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value | 0 | 593,296 |
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss | 0 | (2,087) |
Available-for-sale securities in a continuous unrealized loss position for more than twelve months, fair value | 0 | 338,950 |
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss | 0 | (1,465) |
Fixed Income Investments | ||
Fair Value and Gross Unrealized Losses Related to Available-For-Sale Securities | ||
Available-for-sale Securities, Amortized Cost Basis | 3,218,020 | 3,525,217 |
Fixed Income Investments | Asset-backed Securities | ||
Fair Value and Gross Unrealized Losses Related to Available-For-Sale Securities | ||
Available-for-sale Securities, Amortized Cost Basis | 77,393 | 98,403 |
Fixed Income Investments | Corporate Debt Securities | ||
Fair Value and Gross Unrealized Losses Related to Available-For-Sale Securities | ||
Available-for-sale Securities, Amortized Cost Basis | 2,471,739 | 2,461,691 |
Fixed Income Investments | Municipal Securities | ||
Fair Value and Gross Unrealized Losses Related to Available-For-Sale Securities | ||
Available-for-sale Securities, Amortized Cost Basis | 19,223 | 21,189 |
Fixed Income Investments | Foreign Government Securities | ||
Fair Value and Gross Unrealized Losses Related to Available-For-Sale Securities | ||
Available-for-sale Securities, Amortized Cost Basis | 4,178 | 2,396 |
Fixed Income Investments | U.S. Treasury Securities | ||
Fair Value and Gross Unrealized Losses Related to Available-For-Sale Securities | ||
Available-for-sale Securities, Amortized Cost Basis | $ 645,487 | $ 941,538 |
Cash, Cash Equivalents and Sh39
Cash, Cash Equivalents and Short-Term Investments (Details 2) $ in Thousands | Aug. 31, 2018USD ($) |
Amortized cost of short-term fixed Income Securities | |
Due within one year, Amortized Cost | $ 1,643,049 |
Due between one and two years, Amortized Cost | 788,794 |
Due between two and three years, Amortized Cost | 608,978 |
Due after three years, Amortized Cost | 177,199 |
Total, Amortized Cost | 3,218,020 |
Estimated Fair Value of Short-term fixed Income Securities | |
Due within one year, Estimated Fair value | 1,640,836 |
Due between one and two years, Estimated Fair value | 782,312 |
Due between two and three years, Estimated Fair value | 600,690 |
Due after three years, Estimated Fair value | 173,488 |
Total, Estimated Fair value | $ 3,197,326 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) $ in Millions | Aug. 31, 2018USD ($) |
Notes 2020 and 2025 | |
Fair Value, Balance Sheet Grouping, Financial Statement Captions | |
Debt Instrument, Fair Value Disclosure | $ 1,910 |
Fair Value Measurements (Deta41
Fair Value Measurements (Details 1) - Fair Value, Measurements, Recurring - USD ($) $ in Thousands | Aug. 31, 2018 | Dec. 01, 2017 |
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Foreign Currency Contracts, Asset, Fair Value Disclosure | $ 43,084 | $ 14,198 |
Deferred Compensation Plan Assets | 69,705 | 56,690 |
Assets, Fair Value Disclosure | 4,670,332 | 5,610,174 |
Foreign Currency Contracts, Liability, Fair Value Disclosure | 2,463 | 1,598 |
Interest Rate Derivative Liabilities, at Fair Value | 10,312 | 1,058 |
Financial and Nonfinancial Liabilities, Fair Value Disclosure | 12,775 | 2,656 |
Asset-backed Securities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Estimated Fair Value, short-term investments | 77,010 | 98,001 |
Corporate Debt Securities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Cash and Cash Equivalents, Fair Value Disclosure | 24,011 | |
Estimated Fair Value, short-term investments | 2,451,763 | 2,454,260 |
Foreign Government Securities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Estimated Fair Value, short-term investments | 4,149 | 2,388 |
Money Market Mutual Funds | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Cash and Cash Equivalents, Fair Value Disclosure | 1,302,801 | 2,006,741 |
Time deposits | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Cash and Cash Equivalents, Fair Value Disclosure | 33,405 | 18,843 |
U.S. Treasury Securities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Estimated Fair Value, short-term investments | 645,487 | 937,988 |
Municipal Securities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Estimated Fair Value, short-term investments | 18,917 | 21,065 |
Fair Value, Inputs, Level 1 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Foreign Currency Contracts, Asset, Fair Value Disclosure | 0 | 0 |
Deferred Compensation Plan Assets | 3,192 | 2,573 |
Assets, Fair Value Disclosure | 1,339,398 | 2,028,157 |
Foreign Currency Contracts, Liability, Fair Value Disclosure | 0 | 0 |
Interest Rate Derivative Liabilities, at Fair Value | 0 | 0 |
Financial and Nonfinancial Liabilities, Fair Value Disclosure | 0 | 0 |
Fair Value, Inputs, Level 1 | Asset-backed Securities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Estimated Fair Value, short-term investments | 0 | 0 |
Fair Value, Inputs, Level 1 | Corporate Debt Securities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Cash and Cash Equivalents, Fair Value Disclosure | 0 | |
Estimated Fair Value, short-term investments | 0 | 0 |
Fair Value, Inputs, Level 1 | Foreign Government Securities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Estimated Fair Value, short-term investments | 0 | 0 |
Fair Value, Inputs, Level 1 | Money Market Mutual Funds | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Cash and Cash Equivalents, Fair Value Disclosure | 1,302,801 | 2,006,741 |
Fair Value, Inputs, Level 1 | Time deposits | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Cash and Cash Equivalents, Fair Value Disclosure | 33,405 | 18,843 |
Fair Value, Inputs, Level 1 | U.S. Treasury Securities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Estimated Fair Value, short-term investments | 0 | 0 |
Fair Value, Inputs, Level 1 | Municipal Securities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Estimated Fair Value, short-term investments | 0 | 0 |
Fair Value, Inputs, Level 2 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Foreign Currency Contracts, Asset, Fair Value Disclosure | 43,084 | 14,198 |
Deferred Compensation Plan Assets | 66,513 | 54,117 |
Assets, Fair Value Disclosure | 3,330,934 | 3,582,017 |
Foreign Currency Contracts, Liability, Fair Value Disclosure | 2,463 | 1,598 |
Interest Rate Derivative Liabilities, at Fair Value | 10,312 | 1,058 |
Financial and Nonfinancial Liabilities, Fair Value Disclosure | 12,775 | 2,656 |
Fair Value, Inputs, Level 2 | Asset-backed Securities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Estimated Fair Value, short-term investments | 77,010 | 98,001 |
Fair Value, Inputs, Level 2 | Corporate Debt Securities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Cash and Cash Equivalents, Fair Value Disclosure | 24,011 | |
Estimated Fair Value, short-term investments | 2,451,763 | 2,454,260 |
Fair Value, Inputs, Level 2 | Foreign Government Securities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Estimated Fair Value, short-term investments | 4,149 | 2,388 |
Fair Value, Inputs, Level 2 | Money Market Mutual Funds | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Cash and Cash Equivalents, Fair Value Disclosure | 0 | 0 |
Fair Value, Inputs, Level 2 | Time deposits | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Cash and Cash Equivalents, Fair Value Disclosure | 0 | 0 |
Fair Value, Inputs, Level 2 | U.S. Treasury Securities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Estimated Fair Value, short-term investments | 645,487 | 937,988 |
Fair Value, Inputs, Level 2 | Municipal Securities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Estimated Fair Value, short-term investments | 18,917 | 21,065 |
Fair Value, Inputs, Level 3 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Foreign Currency Contracts, Asset, Fair Value Disclosure | 0 | 0 |
Deferred Compensation Plan Assets | 0 | 0 |
Assets, Fair Value Disclosure | 0 | 0 |
Foreign Currency Contracts, Liability, Fair Value Disclosure | 0 | 0 |
Interest Rate Derivative Liabilities, at Fair Value | 0 | 0 |
Financial and Nonfinancial Liabilities, Fair Value Disclosure | 0 | 0 |
Fair Value, Inputs, Level 3 | Asset-backed Securities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Estimated Fair Value, short-term investments | 0 | 0 |
Fair Value, Inputs, Level 3 | Corporate Debt Securities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Cash and Cash Equivalents, Fair Value Disclosure | 0 | |
Estimated Fair Value, short-term investments | 0 | 0 |
Fair Value, Inputs, Level 3 | Foreign Government Securities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Estimated Fair Value, short-term investments | 0 | 0 |
Fair Value, Inputs, Level 3 | Money Market Mutual Funds | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Cash and Cash Equivalents, Fair Value Disclosure | 0 | 0 |
Fair Value, Inputs, Level 3 | Time deposits | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Cash and Cash Equivalents, Fair Value Disclosure | 0 | 0 |
Fair Value, Inputs, Level 3 | U.S. Treasury Securities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Estimated Fair Value, short-term investments | 0 | 0 |
Fair Value, Inputs, Level 3 | Municipal Securities | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Estimated Fair Value, short-term investments | $ 0 | $ 0 |
Derivatives and Hedging Activ42
Derivatives and Hedging Activities (Details) - USD ($) $ in Thousands | 9 Months Ended | ||||
Aug. 31, 2018 | Dec. 01, 2017 | Jun. 13, 2014 | Feb. 28, 2010 | ||
Derivative, Fair Value, Net [Abstract] | |||||
Fair value asset derivatives | $ 43,084 | $ 14,198 | |||
Fair value liability derivatives | 12,775 | 2,656 | |||
Derivatives designated as hedging instruments | Foreign Exchange Option Contracts | |||||
Derivative, Fair Value, Net [Abstract] | |||||
Fair value asset derivatives | [1],[2] | 41,862 | 12,918 | ||
Fair value liability derivatives | [1],[2] | 0 | 0 | ||
Derivatives designated as hedging instruments | Interest Rate Swap | |||||
Derivative, Fair Value, Net [Abstract] | |||||
Fair value asset derivatives | [3] | 0 | 0 | ||
Fair value liability derivatives | [3] | 10,312 | 1,058 | ||
Derivatives not designated as hedging instruments | Foreign Exchange Forward Contracts | |||||
Derivative, Fair Value, Net [Abstract] | |||||
Fair value asset derivatives | [1] | 1,222 | 1,280 | ||
Fair value liability derivatives | [1] | $ 2,463 | $ 1,598 | ||
Notes 2,020 | |||||
Derivative, Fair Value, Net [Abstract] | |||||
Debt Instrument, Interest Rate, Stated Percentage | 4.75% | ||||
Senior Notes | $ 900,000 | ||||
Cash Flow Hedging | Foreign Exchange Contract | |||||
Derivative, Fair Value, Net [Abstract] | |||||
Maximum Remaining Maturity of Foreign Currency Derivatives | 12 months | ||||
Fair Value Hedging | |||||
Derivative, Fair Value, Net [Abstract] | |||||
Derivative, Notional Amount | $ 900,000 | ||||
Derivative, Fixed Interest Rate | 4.75% | ||||
[1] | Fair value asset derivatives included in prepaid expenses and other current assets and fair value liability derivatives included in accrued expenses on our consolidated balance sheets. | ||||
[2] | Hedging effectiveness expected to be recognized into income within the next twelve months. | ||||
[3] | Included in other liabilities on our condensed consolidated balance sheets. |
Derivatives and Hedging Activ43
Derivatives and Hedging Activities (Details 1) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Aug. 31, 2018 | Sep. 01, 2017 | Aug. 31, 2018 | Sep. 01, 2017 | ||
Foreign Exchange Option Contracts | |||||
Derivative Instruments, Gain (Loss) | |||||
Derivative Instruments Not Designated as Hedging Instruments, Gain (Loss), Net | $ 0 | [1] | $ 0 | $ 0 | $ 0 |
Foreign Exchange Forward Contracts | |||||
Derivative Instruments, Gain (Loss) | |||||
Derivative Instruments Not Designated as Hedging Instruments, Gain (Loss), Net | (1,695) | [1] | 2,920 | (2,572) | 6,456 |
Cash Flow Hedging | Foreign Exchange Option Contracts | |||||
Derivative Instruments, Gain (Loss) | |||||
Derivative Instruments, Gain (Loss) Recognized in Other Comprehensive Income (Loss), Effective Portion, Net | 17,523 | [2] | 1,483 | 47,290 | 3,613 |
Derivative Instruments, Gain (Loss) Reclassified from Accumulated OCI into Income, Effective Portion, Net | 16,797 | [3] | 221 | 18,156 | 31,845 |
Derivative Instruments, Gain (Loss) Recognized in Income, Ineffective Portion and Amount Excluded from Effectiveness Testing, Net | (9,281) | [4] | (6,190) | (31,690) | (21,842) |
Cash Flow Hedging | Foreign Exchange Forward Contracts | |||||
Derivative Instruments, Gain (Loss) | |||||
Derivative Instruments, Gain (Loss) Recognized in Other Comprehensive Income (Loss), Effective Portion, Net | 0 | [2] | 0 | 0 | 0 |
Derivative Instruments, Gain (Loss) Reclassified from Accumulated OCI into Income, Effective Portion, Net | 0 | [3] | 0 | 0 | 0 |
Derivative Instruments, Gain (Loss) Recognized in Income, Ineffective Portion and Amount Excluded from Effectiveness Testing, Net | $ 0 | [4] | $ 0 | $ 0 | $ 0 |
[1] | Classified in interest and other income (expense), net | ||||
[2] | Net change in the fair value of the effective portion classified in other comprehensive income (“OCI”). | ||||
[3] | Effective portion classified as revenue. | ||||
[4] | Ineffective portion and amount excluded from effectiveness testing classified in interest and other income (expense), net. |
Goodwill and Purchased and Ot44
Goodwill and Purchased and Other Intangibles (Details) - USD ($) $ in Thousands | Aug. 31, 2018 | Dec. 01, 2017 | |
Finite-Lived Intangible Assets | |||
Cost | $ 1,257,649 | $ 987,417 | |
Accumulated Amortization | (588,173) | (601,759) | |
Net | 669,476 | 385,658 | [1] |
Purchased technology | |||
Finite-Lived Intangible Assets | |||
Cost | 307,101 | 223,252 | |
Accumulated Amortization | (100,832) | (110,433) | |
Net | 206,269 | 112,819 | |
Total other intangible assets | |||
Finite-Lived Intangible Assets | |||
Cost | 950,548 | 764,165 | |
Accumulated Amortization | (487,341) | (491,326) | |
Net | 463,207 | 272,839 | |
Customer contracts and relationships | |||
Finite-Lived Intangible Assets | |||
Cost | 753,870 | 577,484 | |
Accumulated Amortization | (387,091) | (356,613) | |
Net | 366,779 | 220,871 | |
Trademarks | |||
Finite-Lived Intangible Assets | |||
Cost | 56,355 | 76,255 | |
Accumulated Amortization | (20,016) | (56,094) | |
Net | 36,339 | 20,161 | |
Acquired rights to use technology | |||
Finite-Lived Intangible Assets | |||
Cost | 58,966 | 71,130 | |
Accumulated Amortization | (47,097) | (54,223) | |
Net | 11,869 | 16,907 | |
Other intangibles | |||
Finite-Lived Intangible Assets | |||
Cost | 81,357 | 39,296 | |
Accumulated Amortization | (33,137) | (24,396) | |
Net | $ 48,220 | $ 14,900 | |
[1] | The condensed consolidated balance sheet as of December 1, 2017 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. |
Goodwill and Purchased and Ot45
Goodwill and Purchased and Other Intangibles (Details 1) $ in Thousands | Aug. 31, 2018USD ($) |
Purchased technology | |
Amortization Expense in Future Periods | |
Remainder of 2018 | $ 13,596 |
2,019 | 51,112 |
2,020 | 48,820 |
2,021 | 26,369 |
2,022 | 18,610 |
Thereafter | 47,762 |
Total expected amortization expense | 206,269 |
Other intangibles | |
Amortization Expense in Future Periods | |
Remainder of 2018 | 36,274 |
2,019 | 118,652 |
2,020 | 86,498 |
2,021 | 54,119 |
2,022 | 39,749 |
Thereafter | 127,915 |
Total expected amortization expense | $ 463,207 |
Goodwill and Purchased and Ot46
Goodwill and Purchased and Other Intangibles (Details Numeric) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||||
Aug. 31, 2018 | Sep. 01, 2017 | Aug. 31, 2018 | Sep. 01, 2017 | Dec. 01, 2017 | [1] | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||||||
Goodwill | $ 7,136,853 | $ 7,136,853 | $ 5,821,561 | |||
Finite-Lived Intangible Assets | ||||||
Amortization of purchased and other intangible assets | 47,000 | $ 39,100 | 115,500 | $ 116,300 | ||
Amortization expense included in cost of sales | $ 23,100 | $ 19,500 | $ 57,100 | $ 57,700 | ||
[1] | The condensed consolidated balance sheet as of December 1, 2017 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. |
Accrued Expenses (Details)
Accrued Expenses (Details) - USD ($) $ in Thousands | Aug. 31, 2018 | Dec. 01, 2017 | |
Accrued Expense | |||
Accrued compensation and benefits | $ 428,575 | $ 417,742 | |
Accrued media costs | 103,470 | 134,525 | |
Sales and marketing allowances | 46,432 | 47,389 | |
Accrued corporate marketing | 76,574 | 72,087 | |
Taxes payable | 50,149 | 49,550 | |
Royalties payable | 42,742 | 46,411 | |
Accrued interest expense | 10,469 | 25,594 | |
Other | 261,636 | 200,475 | |
Accrued expenses | $ 1,020,047 | $ 993,773 | [1] |
[1] | The condensed consolidated balance sheet as of December 1, 2017 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Aug. 31, 2018 | Jun. 01, 2018 | Mar. 02, 2018 | Aug. 31, 2018 | |
Income Tax Disclosure [Abstract] | ||||
Reclassification of short term income taxes payable to long term income taxes payable due to Tax Cuts and Jobs Act 2017 | $ 5 | |||
US Federal statutory tax rate effective before the Tax Cuts and Jobs Act 2017 | 35.00% | |||
US Federal statutory tax rate effective after the Tax Cuts and Jobs Act 2017 | 21.00% | |||
One-time transition tax due to Tax Cuts and Jobs Act 2017 | 15.50% | 15.50% | ||
One-time transition tax other income due to Tax Cuts and Jobs act of 2017 | 8.00% | 8.00% | ||
Blended U.S. Federal Statutory tax Rate for FY2018 due to Tax Cuts and Jobs Act 2017 | 22.20% | |||
Provisional tax charge due to Tax Cuts and Jobs Act 2017 | $ 10 | |||
Provisional transition tax expense on deferred foreign earnings due to Tax Cuts and Job Act 2017 | $ 24 | $ 28 | 118 | |
Reduction of deferred tax assets due to Tax Cuts and Jobs Act 2017 | 25 | 72 | ||
Increase in unrecognized tax benefits included in the long-term income tax payable | 69 | |||
Reduction of short-term income taxes payable due to Tax Cuts and Jobs Act 2017 | 7 | |||
Reduction of long-term income taxes payable due to Tax Cuts and Jobs Act 2017 | $ 62 | 44 | ||
Provisional transition tax expense plus other ancillary effects recorded in the first fiscal quarter in 2018 due to the Tax Cuts and Jobs Act 2017 | 86 | |||
Provisional transition tax expense of long term income taxes payable due to the Tax Cuts and Jobs Act 2017 | 533 | |||
Reduction in deferred tax liability due to Tax Cuts and Jobs Act 2017 | $ 415 | |||
Reclassification of long term income taxes payable to short term income taxes payable due to Tax Cuts and Jobs Act 2017 | $ 39 |
Stock-Based Compensation (Detai
Stock-Based Compensation (Details) - shares shares in Thousands | 9 Months Ended | 12 Months Ended | ||
Aug. 31, 2018 | Dec. 01, 2017 | |||
Restricted Stock Unit | ||||
Shares Activity | ||||
Beginning outstanding balance | 9,304 | 8,316 | ||
Awarded, Shares | 3,742 | 5,018 | ||
Released, Shares | (3,686) | (3,859) | ||
Forfeited, Shares | (525) | (766) | ||
Increase due to acquisition | 0 | 595 | ||
Ending outstanding balance | 8,835 | 9,304 | ||
Performance Shares | Shares Granted | ||||
Shares Activity | ||||
Beginning outstanding balance | 1,534 | 1,630 | ||
Awarded, Shares | 837 | [1] | 1,082 | [2] |
Achieved | (1,050) | (1,135) | ||
Forfeited, Shares | (165) | (43) | ||
Ending outstanding balance | 1,156 | 1,534 | ||
Performance Shares | Maximum Shares Eligible to Receive | ||||
Shares Activity | ||||
Beginning outstanding balance | 3,068 | 3,261 | ||
Awarded, Shares | 628 | 1,040 | ||
Achieved | (1,053) | (1,147) | ||
Forfeited, Shares | (331) | (86) | ||
Ending outstanding balance | 2,312 | 3,068 | ||
Performance Shares | Program 2015 | ||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||
Actual Percentage Achieved | 200.00% | |||
Actual Shares Achieved | 1,000 | |||
Shares Activity | ||||
Awarded, Shares | 500 | |||
Performance Shares | Program 2014 | ||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||
Actual Percentage Achieved | 198.00% | |||
Actual Shares Achieved | 1,100 | |||
Shares Activity | ||||
Awarded, Shares | 600 | |||
[1] | Included in the 0.8 million shares awarded during the nine months ended August 31, 2018 were 0.5 million shares awarded for the final achievement of the 2015 Performance Share program. The remaining awarded shares were for the 2018 Performance Share Program. | |||
[2] | Included in the 1.1 million shares awarded during the fiscal year ended December 1, 2017 were 0.6 million shares awarded for the final achievement of the 2014 Performance Share program. The remaining awarded shares were for the 2017 Performance Share Program |
Stock-Based Compensation (Det50
Stock-Based Compensation (Details 1) - USD ($) $ / shares in Units, shares in Thousands, $ in Millions | 9 Months Ended | ||||
Aug. 31, 2018 | Sep. 01, 2017 | Dec. 01, 2017 | Dec. 02, 2016 | ||
Restricted stock units outstanding | |||||
Share Price | $ 263.51 | $ 155.06 | |||
Restricted Stock Unit | |||||
Restricted stock units outstanding | |||||
Number of shares outstanding | 8,835 | 9,443 | 9,304 | 8,316 | |
Outstanding weighted average remaining contractual life (in years) | 1 year 2 months 23 days | 1 year 3 months 7 days | |||
Shares outstanding aggregate intrinsic value | [1] | $ 2,328.1 | $ 1,464.2 | ||
Number of shares vested and expected to vest | 8,104 | 8,636 | |||
Weighted Average Remaining Contractual Life Vested And Expected To Vest | 1 year 2 months 5 days | 1 year 2 months 19 days | |||
Vested and expected to vest aggregate intrinsic value | [1] | $ 2,135.7 | $ 1,339.1 | ||
[1] | The intrinsic value is calculated as the market value as of the end of the fiscal period. As reported by the NASDAQ Global Select Market, the market values as of August 31, 2018 and September 1, 2017 were $263.51 and $155.06, respectively. |
Stock-Based Compensation (Det51
Stock-Based Compensation (Details 2) - Employee Stock Purchase Plan | 3 Months Ended | 9 Months Ended | ||
Aug. 31, 2018 | Sep. 01, 2017 | Aug. 31, 2018 | Sep. 01, 2017 | |
Valuation Assumptions Volatility Range | ||||
From | 29.00% | 25.00% | 26.00% | 22.00% |
To | 29.00% | 27.00% | 29.00% | 27.00% |
Valuation Assumptions Risk Free Interest Rate Range | ||||
From | 2.09% | 1.12% | 1.54% | 0.62% |
To | 2.52% | 1.41% | 2.52% | 1.41% |
From | ||||
Valuation Assumptions Expected Life (In Years) | ||||
Expected life (in years) | 6 months | 6 months | 6 months | 6 months |
To | ||||
Valuation Assumptions Expected Life (In Years) | ||||
Expected life (in years) | 2 years | 2 years | 2 years | 2 years |
Stock-Based Compensation (Det52
Stock-Based Compensation (Details 3) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Aug. 31, 2018 | Sep. 01, 2017 | Aug. 31, 2018 | Sep. 01, 2017 | |
Option Grants and Stock Purchase Rights | ||||
Total stock-based compensation costs | ||||
Stock-based compensation costs | $ 19,694 | $ 12,660 | $ 49,097 | $ 37,088 |
Restricted Stock Units and Performance Share Awards | ||||
Total stock-based compensation costs | ||||
Stock-based compensation costs | 139,344 | 104,382 | 390,844 | 297,640 |
Cost of Subscription Revenue | Option Grants and Stock Purchase Rights | ||||
Total stock-based compensation costs | ||||
Stock-based compensation costs | 934 | 628 | 2,431 | 1,899 |
Cost of Subscription Revenue | Restricted Stock Units and Performance Share Awards | ||||
Total stock-based compensation costs | ||||
Stock-based compensation costs | 4,509 | 3,633 | 12,979 | 10,467 |
Cost of Service and Support Revenue | Option Grants and Stock Purchase Rights | ||||
Total stock-based compensation costs | ||||
Stock-based compensation costs | 1,930 | 1,626 | 5,593 | 4,850 |
Cost of Service and Support Revenue | Restricted Stock Units and Performance Share Awards | ||||
Total stock-based compensation costs | ||||
Stock-based compensation costs | 2,789 | 2,409 | 8,455 | 7,151 |
Research and Development Expense | Option Grants and Stock Purchase Rights | ||||
Total stock-based compensation costs | ||||
Stock-based compensation costs | 6,347 | 4,608 | 16,997 | 12,884 |
Research and Development Expense | Restricted Stock Units and Performance Share Awards | ||||
Total stock-based compensation costs | ||||
Stock-based compensation costs | 66,308 | 43,243 | 183,989 | 119,068 |
Sales and Marketing | Option Grants and Stock Purchase Rights | ||||
Total stock-based compensation costs | ||||
Stock-based compensation costs | 7,551 | 4,658 | 18,314 | 13,832 |
Sales and Marketing | Restricted Stock Units and Performance Share Awards | ||||
Total stock-based compensation costs | ||||
Stock-based compensation costs | 47,885 | 36,064 | 129,480 | 103,982 |
General and Administrative | Option Grants and Stock Purchase Rights | ||||
Total stock-based compensation costs | ||||
Stock-based compensation costs | 2,932 | 1,140 | 5,762 | 3,623 |
General and Administrative | Restricted Stock Units and Performance Share Awards | ||||
Total stock-based compensation costs | ||||
Stock-based compensation costs | $ 17,853 | $ 19,033 | $ 55,941 | $ 56,972 |
Stock-Based Compensation (Det53
Stock-Based Compensation (Details Numeric) - USD ($) $ / shares in Units, $ in Millions | 9 Months Ended | 12 Months Ended | |
Aug. 31, 2018 | Sep. 01, 2017 | Dec. 01, 2017 | |
Share-based Compensation Arrangement by Share-based Payment Award | |||
Share Price | $ 263.51 | $ 155.06 | |
Stock Based Compensation (Numeric) | |||
Unrecognized compensation cost, non-vested awards | $ 1,090 | ||
Period for recognition, unrecognized compensation cost | 1 year 11 months 1 day | ||
Performance Shares | |||
Stock Based Compensation (Numeric) | |||
Maximum Target Percentage Allowed Under Program | 200.00% | ||
Stock Options | |||
Stock Based Compensation (Numeric) | |||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number | 328,000 | 333,000 | |
Employee Stock Purchase Plan | |||
Stock Based Compensation (Numeric) | |||
Shares Purchased, ESPP | 1,800,000 | 1,900,000 | |
Average purchase price of shares, ESPP | $ 104.94 | $ 77.63 | |
Total Intrinsic Value Of Shares Purchased | $ 198.9 | $ 97.7 | |
Program 2015 | Performance Shares | |||
Stock Based Compensation (Numeric) | |||
Actual Percentage Achieved | 200.00% | ||
Actual Shares Achieved | 1,000,000 | ||
Program 2014 | Performance Shares | |||
Stock Based Compensation (Numeric) | |||
Actual Percentage Achieved | 198.00% | ||
Actual Shares Achieved | 1,100,000 |
Stockholders' Equity (Details)
Stockholders' Equity (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Aug. 31, 2018 | Sep. 01, 2017 | Aug. 31, 2018 | Sep. 01, 2017 | ||
Changes in retained earnings | |||||
Beginning Balance | [1] | $ 9,573,870 | |||
Net income | $ 666,291 | $ 419,569 | 1,912,534 | $ 1,192,405 | |
Re-issuance of treasury stock | (348,729) | ||||
Adjustments to equity as a result of the Tax Act | 318 | ||||
Ending Balance | $ 11,137,357 | $ 11,137,357 | |||
[1] | The condensed consolidated balance sheet as of December 1, 2017 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. |
Stockholders' Equity (Details 1
Stockholders' Equity (Details 1) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||||
Aug. 31, 2018 | Sep. 01, 2017 | Aug. 31, 2018 | Sep. 01, 2017 | |||
Gross unrealized gains, available-for-sale securities | ||||||
Beginning balance, unrealized gains on available-for-sale securities | $ 2,704 | |||||
Gross unrealized gains on available for sale securities, increase or decrease | (1,836) | |||||
Gross unrealized gains on available for sale securities, reclassification adjustments | (252) | |||||
Ending balance, unrealized gains on available-for-sale securities | $ 616 | 616 | ||||
Gross unrealized losses, available-for-sale securities | ||||||
Beginning balance, unrealized losses on available-for-sale securities | (14,220) | |||||
Gross unrealized losses on available for sale securities increase or decrease | (17,184) | |||||
Gross unrealized losses on available for sale securities, reclassification adjustments | 10,094 | |||||
Ending balance, unrealized losses on available-for-sale securities | (21,310) | (21,310) | ||||
Net unrealized gains on available-for-sale securities | ||||||
Beginning Balance, net unrealized gains on available-for-sale securities | (11,516) | |||||
Net unrealized gains on available for sale securities, increase or decrease | 5,849 | $ 3,545 | (19,020) | $ 13,234 | ||
Net unrealized gains on available for sale securities, reclassification adjustments | 9,645 | (488) | 9,842 | [1] | (894) | |
Ending Balance, net unrealized gains on available-for-sale securities | (20,694) | (20,694) | ||||
Net unrealized gains on derivatives designated as hedging instruments | ||||||
Beginning balance, net unrealized gains on derivative instruments designated as hedging instruments | (3,367) | |||||
Net unrealized gains on derivative instruments designated as hedging instruments, increase or decrease | 17,524 | 1,483 | 47,290 | 3,613 | ||
Net unrealized gains on derivative instruments designated as hedging instruments, reclassification adjustments | (16,494) | 30 | (18,671) | [2] | (31,219) | |
Ending balance, net unrealized gains on derivative instruments designated as hedging instruments | 25,252 | 25,252 | ||||
Cumulative foreign currency translation adjustments | ||||||
Beginning balance, cumulative foreign currency translation adjustments | (96,938) | |||||
Cumulative foreign currency translation adjustment, increase or decrease | (15,341) | $ 43,552 | (35,668) | $ 90,238 | ||
Cumulative foreign currency translation adjustment, reclassification adjustments | 0 | |||||
Ending balance, cumulative foreign currency translation adjustments | (132,606) | (132,606) | ||||
Accumulated other comprehensive income totals | ||||||
Beginning balance, total accumulated other comprehensive income, net of taxes | [3] | (111,821) | ||||
Accumulated other comprehensive income, increase or decrease | (7,398) | |||||
Accumulated other comprehensive income, reclassification adjustments | (8,829) | |||||
Ending balance, total accumulated other comprehensive income, net of taxes | $ (128,048) | $ (128,048) | ||||
[1] | Reclassification adjustments for gains / losses on available-for-sale securities are classified in interest and other income (expense), net. | |||||
[2] | Reclassification adjustments for gains / losses on derivative instruments are classified in revenue. | |||||
[3] | The condensed consolidated balance sheet as of December 1, 2017 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. |
Stockholders' Equity (Details 2
Stockholders' Equity (Details 2) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Aug. 31, 2018 | Sep. 01, 2017 | Aug. 31, 2018 | Sep. 01, 2017 | |
Tax, Available-for-sale Securities | ||||
Unrealized gains / losses | $ 0 | $ 235 | $ 0 | $ 523 |
Reclassification adjustments | 0 | (214) | 0 | (323) |
Subtotal, available-for-sale securities | 0 | 21 | 0 | 200 |
Tax, Derivatives Designated as Hedging Instruments | ||||
Reclassification adjustments on derivative instruments | (101) | (149) | (1,726) | (582) |
Foreign currency translation adjustments | 0 | 1,434 | (1,742) | 3,081 |
Total taxes, other comprehensive income | $ (101) | $ 1,306 | $ (3,468) | $ 2,699 |
Stockholders' Equity (Details N
Stockholders' Equity (Details Numeric) - USD ($) $ / shares in Units, $ in Thousands, shares in Millions | 9 Months Ended | |||
Aug. 31, 2018 | Sep. 01, 2017 | May 21, 2018 | Jan. 20, 2017 | |
Payments for Repurchase of Common Stock | $ 1,750,000 | $ 800,000 | ||
Repurchased Shares | 7.1 | 6.3 | ||
Repurchased Shares, Average Price | $ 225.15 | $ 126.58 | ||
Up-Front Payments Remaining | $ 247,300 | |||
Stock repurchase authority 2018 | ||||
Stock Repurchase Program, Authorized Amount | $ 8,000,000 | |||
Stock repurchase program 2017 | ||||
Stock Repurchase Program, Authorized Amount | $ 2,500,000 | |||
Stock Repurchase Program, Remaining Authorized Repurchase Amount | $ 150,000 |
Net Income Per Share (Details)
Net Income Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Aug. 31, 2018 | Sep. 01, 2017 | Aug. 31, 2018 | Sep. 01, 2017 | |
Earnings Per Share [Abstract] | ||||
Net income | $ 666,291 | $ 419,569 | $ 1,912,534 | $ 1,192,405 |
Shares used to compute basic net income per share | 490,025 | 493,426 | 491,336 | 494,138 |
Dilutive potential common shares: | ||||
Unvested restricted stock and performance share awards | 6,716 | 6,664 | 7,109 | 6,574 |
Stock options | 125 | 308 | 142 | 348 |
Shares used to compute diluted net income per share | 496,866 | 500,398 | 498,587 | 501,060 |
Basic net income per share | $ 1.36 | $ 0.85 | $ 3.89 | $ 2.41 |
Diluted net income per share | $ 1.34 | $ 0.84 | $ 3.84 | $ 2.38 |
Debt (Details)
Debt (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | |||||
Jan. 21, 2015 | Feb. 28, 2010 | Aug. 31, 2018 | Mar. 02, 2012 | Dec. 01, 2017 | [1] | Jun. 13, 2014 | |
Debt Instrument [Line Items] | |||||||
Long-term Debt | $ 1,874,654 | $ 1,881,421 | |||||
Line of Credit Facility | |||||||
Total senior unsecured revolving credit facility | $ 1,000,000 | ||||||
Option to request additional commitments on credit facility | 500,000 | ||||||
Maximum aggregate, credit facility | $ 1,500,000 | ||||||
Line of Credit Facility, Amount Outstanding | 0 | ||||||
From | |||||||
Line of Credit Facility | |||||||
Line of Credit Facility, Commitment Fee Percentage | 0.08% | ||||||
To | |||||||
Line of Credit Facility | |||||||
Line of Credit Facility, Commitment Fee Percentage | 0.20% | ||||||
Notes 2020 and 2025 | |||||||
Debt Instrument [Line Items] | |||||||
Debt Instrument, Periodic Payment, Interest | 37,600 | ||||||
Fair value of the Notes | $ 1,910,000 | ||||||
Repurchase notes at price of their principal amount, plus accrued and unpaid interest | 101.00% | ||||||
Notes 2,020 | |||||||
Debt Instrument [Line Items] | |||||||
Senior notes, issued | $ 900,000 | ||||||
Senior notes, interest rate | 4.75% | ||||||
Proceeds from debt issuance | $ 900,000 | ||||||
Issuance discount | 5,500 | ||||||
Issuance cost | $ 6,400 | ||||||
Effective Interest rate | 4.92% | ||||||
Notes 2,025 | |||||||
Debt Instrument [Line Items] | |||||||
Senior notes, issued | $ 1,000,000 | ||||||
Senior notes, interest rate | 3.25% | ||||||
Proceeds from Issuance of Debt | $ 989,300 | ||||||
Issuance discount | 10,700 | ||||||
Issuance cost | $ 7,900 | ||||||
Effective Interest rate | 3.67% | ||||||
Scenario i | Line of Credit | From | |||||||
Line of Credit Facility | |||||||
Debt Instrument, Basis Spread on Variable Rate | 0.795% | ||||||
Scenario i | Line of Credit | To | |||||||
Line of Credit Facility | |||||||
Debt Instrument, Basis Spread on Variable Rate | 1.30% | ||||||
Scenario ii | Line of Credit | |||||||
Line of Credit Facility | |||||||
Percentage Added to Federal Funds Effective Rate in Determining Interest Rate | 0.50% | ||||||
Percentage Added to LIBOR in Determining Interest Rate | 1.00% | ||||||
Scenario ii | Line of Credit | From | |||||||
Line of Credit Facility | |||||||
Margin Added to LIBOR in Determining Interest Rate | 0.00% | ||||||
Scenario ii | Line of Credit | To | |||||||
Line of Credit Facility | |||||||
Margin Added to LIBOR in Determining Interest Rate | 0.30% | ||||||
Fair Value Hedging | |||||||
Debt Instrument [Line Items] | |||||||
Derivative, Notional Amount | $ 900,000 | ||||||
Derivative, Fixed Interest Rate | 4.75% | ||||||
[1] | The condensed consolidated balance sheet as of December 1, 2017 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. |
Non-Operating Income (Expense60
Non-Operating Income (Expense) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Aug. 31, 2018 | Sep. 01, 2017 | Aug. 31, 2018 | Sep. 01, 2017 | |
Interest and other income (expense), net: | ||||
Interest income | $ 21,561 | $ 17,180 | $ 69,962 | $ 46,553 |
Foreign exchange gains (losses) | (10,349) | (4,140) | (30,460) | (21,620) |
Realized gains on fixed income investment | 63 | 574 | 253 | 1,224 |
Realized losses on fixed income investment | (9,708) | (86) | (10,094) | (330) |
Other interest and other income (expense), net | 41 | 11 | 218 | 72 |
Interest and other income (expense), net | 1,608 | 13,539 | 29,879 | 25,899 |
Interest expense | (21,107) | (18,809) | (61,369) | (55,286) |
Investment gains (losses), net: | ||||
Realized investment gains | 836 | 681 | 5,333 | 3,071 |
Unrealized investment gains | 1,415 | 294 | 993 | 2,190 |
Investment gains (losses), net | 2,251 | 975 | 6,326 | 5,261 |
Non-operating income (expense), net | $ (17,248) | $ (4,295) | $ (25,164) | $ (24,126) |
Segments (Details)
Segments (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Aug. 31, 2018 | Sep. 01, 2017 | Aug. 31, 2018 | Sep. 01, 2017 | |
Segment Reporting [Abstract] | ||||
Revenue | $ 2,291,076 | $ 1,841,074 | $ 6,565,383 | $ 5,294,910 |
Cost of revenue | (295,492) | (262,922) | (835,738) | (739,619) |
Gross profit | $ 1,995,584 | $ 1,578,152 | $ 5,729,645 | $ 4,555,291 |
Gross profit as a percentage of revenue | 87.00% | 86.00% | 87.00% | 86.00% |
Digital Media | ||||
Segment Reporting [Abstract] | ||||
Revenue | $ 1,608,875 | $ 1,270,215 | $ 4,615,860 | $ 3,620,282 |
Cost of revenue | (61,417) | (69,533) | (171,646) | (182,935) |
Gross profit | $ 1,547,458 | $ 1,200,682 | $ 4,444,214 | $ 3,437,347 |
Gross profit as a percentage of revenue | 96.00% | 95.00% | 96.00% | 95.00% |
Digital Experience | ||||
Segment Reporting [Abstract] | ||||
Revenue | $ 613,983 | $ 507,764 | $ 1,754,042 | $ 1,480,451 |
Cost of revenue | (227,731) | (187,647) | (647,219) | (539,574) |
Gross profit | $ 386,252 | $ 320,117 | $ 1,106,823 | $ 940,877 |
Gross profit as a percentage of revenue | 63.00% | 63.00% | 63.00% | 64.00% |
Publishing | ||||
Segment Reporting [Abstract] | ||||
Revenue | $ 68,218 | $ 63,095 | $ 195,481 | $ 194,177 |
Cost of revenue | (6,344) | (5,742) | (16,873) | (17,110) |
Gross profit | $ 61,874 | $ 57,353 | $ 178,608 | $ 177,067 |
Gross profit as a percentage of revenue | 91.00% | 91.00% | 91.00% | 91.00% |
Segments Details Numeric (Detai
Segments Details Numeric (Details) | 9 Months Ended |
Aug. 31, 2018positions | |
Segment Reporting [Abstract] | |
Number of Reportable Segments | 3 |