Adobe 2001 Annual Report Download - page 31

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the acquisition of PointCast, Inc., a former investee of Adobe, by idealab!’s Launchpad Technologies, Inc.
(‘‘idealab!’’). In connection with the acquisition, we exchanged our shares of PointCast, Inc. for
approximately 542,000 shares of idealab! (which has since become InfoGate, Inc.). Additionally, we
recorded a net gain totaling $0.5 million related to mark-to-market adjustments of various other Adobe
Ventures investments.
We are uncertain of future investment gains or losses as they are primarily dependent upon the
operations of the underlying investee companies and market valuations.
Interest and Other Income
2001 Change 2000 Change 1999
Interest and other income ............. $21.9 3% $21.3 (17)% $25.7
Percentage of total revenue ............ 1.8% 1.7% 2.5%
Interest and other income consists principally of interest earned on cash, cash equivalents, and
short-term investments, as well as foreign exchange transaction gains and losses and realized gains or losses
on the disposal of assets.
Interest and other income increased $0.6 million, or 3%, in fiscal 2001 compared to fiscal 2000
primarily due to realized gains resulting from the sale of fixed income investments. Interest and other
income also increased in fiscal 2001 compared to fiscal 2000 due to higher average cash balances. The
increase in interest and other income in fiscal 2001 compared to fiscal 2000 was partially offset by foreign
currency losses. These foreign currency losses resulted from the implementation of Statement of Financial
Accounting Standards No. 133 (‘‘SFAS 133’’), ‘‘Accounting for Derivative Instruments and Hedging
Activities’’ and subsequent recording of the cost of hedging foreign currency exposures in interest and
other income.
Interest and other income decreased $4.4 million, or 17%, in fiscal 2000 compared to fiscal 1999 as a
result of more investments being made in tax-exempt securities, resulting in lower interest income on a
comparative pretax basis. In fiscal 2000, we also recorded foreign exchange transaction losses compared to
foreign exchange transaction gains in fiscal 1999. In addition, other income was lower in fiscal 2000, as
fiscal 1999 included a $5.7 million gain related to the sale of a corporate facility in Edinburgh, Scotland, in
connection with the restructuring program announced in the second quarter of fiscal 1999.
We expect interest and other income to decrease slightly to approximately $3.0-$4.0 million per
quarter in fiscal 2002 due to a lower interest rate environment. We also believe that any increases in
interest income may be offset by the cost of foreign currency purchased options as well as market price
volatility under our implementation of SFAS 133. Further, we believe that our cash balances could also be
reduced in fiscal 2002 due to the strategic purchase of companies, products, or technologies and our
ongoing stock repurchase programs.
Income Tax Provision
2001 Change 2000 Change 1999
Income tax provision .............. $101.3 (35)% $155.9 14% $136.7
Percentage of total revenue ......... 8.2% 12.3% 13.5%
Effective tax rate ................. 33.0% 35.1% 36.5%
Our effective tax rate decreased in fiscal 2001 from fiscal 2000 and from fiscal 1999 to fiscal 2000, due
to tax benefits associated with the restructuring of our international operations.
As communicated on December 13, 2001, we have targeted our effective tax rate to decrease in fiscal
2002 to approximately 32%.
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