Adobe 2004 Annual Report Download - page 42

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Our effective tax rate decreased in fiscal 2004 from fiscal 2003 and in fiscal 2003 from fiscal 2002 due to
higher international profits which are taxed at a lower statutory rate. In fiscal 2002, the effective tax rate included a
non-deductible goodwill impairment charge of approximately 0.8%.
On October 22, 2004, AJCA was signed into law. The AJCA introduced a limited time 85% dividends received
deduction on the repatriation of certain foreign earnings. This deduction would result in an approximate 5.25%
federal tax rate on the repatriated earnings. To qualify for the deduction, the earnings must be reinvested in the
United States pursuant to a domestic reinvestment plan established by a company’s chief executive officer and
approved by the company’s board of directors. Additionally, certain other criteria, as outlined in the AJCA, must
also be met.
We may elect to apply this provision to qualifying earnings repatriations in fiscal 2005. We have started an
evaluation of the effects of the repatriation provision. However, we do not expect to be able to complete this
evaluation until after Congress or the Treasury Department provides additional clarifying language on key elements
of the provision. In January 2005, the Treasury Department began to issue the first of a series of clarifying guidance
documents related to this provision. We expect to complete our evaluation of the effects of the repatriation provision
within the first two fiscal quarters of 2005.
The range of possible amounts that we are considering for repatriation under this provision is between zero and
$500 million. While we estimate that the related potential range of additional income tax is between zero and $50
million, this estimation is subject to change following technical correction legislation that we believe is forthcoming
from Congress. The amount of additional income tax would be reduced by the part of the eligible dividend that is
attributable to foreign earnings on which a deferred tax liability had been previously accrued.
FACTORS THAT MAY AFFECT FUTURE PERFORMANCE
As previously discussed, our actual results could differ materially from our forward looking statements. Factors
that might cause or contribute to such differences include, but are not limited to, those discussed below. These and
many other factors described in this report could adversely affect our operations, performance and financial
condition.
Adverse changes in general economic or political conditions in any of the major countries in which we do business
could adversely affect our operating results.
If the economy worsens in any geographic areas where we do business, it would likely cause our future results
to vary materially from our targets. A slower economy also may adversely affect our ability to grow. Political
instability in any of the major countries in which we do business also may adversely affect our business.
Delays in development or shipment of new products or major new versions of existing products could cause a
decline in our revenue.
Any delays or failures in developing and marketing our products, including upgrades of current products, may
have a harmful impact on our results of operations. Our inability to extend our core technologies into new
applications and new platforms and to anticipate or respond to technological changes could affect continued market
acceptance of our products and our ability to develop new products. A portion of our future revenue will come from
new applications. Delays in product or upgrade introductions could cause a decline in our revenue, earnings or stock
price. We cannot determine the ultimate effect these delays or the introduction of new products or upgrades will
have on our revenue or results of operations.
Introduction of new products by existing and new competitors, particularly Microsoft, could harm our competitive
position and results of operations.
The end markets for our software products are intensely and increasingly competitive, and are significantly
affected by product introductions and market activities of industry competitors. Microsoft has an electronic form
tool called InfoPath included as part of its latest professional Office product that competes with certain aspects of