Adobe 2010 Annual Report Download - page 120

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ADOBE SYSTEMS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
120
The following table summarizes our non-cancellable unconditional purchase obligations, operating leases and capital
leases for each of the next five years and thereafter as of December 3, 2010 (in thousands):
Operating Leases
Capital Leases
Fiscal Year
Purchase
Obligations
Future
Minimum
Lease
Payments
Future
Minimum
Sublease
Income
Future
Minimum
Lease
Payments
2011 ...................................................
$
175,131
$
65,786
$
4,040
$
9,937
2012 ...................................................
10,241
50,146
2,870
9,925
2013 ...................................................
5,717
39,560
1,209
9,925
2014 ...................................................
2,234
26,322
307
827
2015 ...................................................
6,045
19,776
321
—
Thereafter ...........................................
15,146
82,614
1,682
—
Total ...............................................
$
214,514
$
284,204
$
10,429
$
30,614
Less: interest ......................................
(2,122
)
Total ...............................................
$
28,492
The table above includes operating lease commitments related to our restructured facilities. See Note 11 for information
regarding our restructuring charges.
Guarantees
The lease agreements for our corporate headquarters provide for residual value guarantees as noted above. The fair value
of a residual value guarantee in lease agreements entered into after December 31, 2002, must be recognized as a liability on
our Consolidated Balance Sheets. As such, we recognized $5.2 million and $3.0 million in liabilities, related to the extended
East and West Towers and Almaden Tower leases, respectively. These liabilities are recorded in other long-term liabilities
with the offsetting entry recorded as prepaid rent in other assets. The balance will be amortized to the income statement over
the life of the leases. As of December 3, 2010 and November 27, 2009, the unamortized portion of the fair value of the
residual value guarantees, for both leases, remaining in other long-term liabilities and prepaid rent was $0.7 million and $1.3
million, respectively.
Royalties
We have royalty commitments associated with the shipment and licensing of certain products. Royalty expense is
generally based on a dollar amount per unit shipped or a percentage of the underlying revenue. Royalty expense, which was
recorded under our cost of products revenue on our Consolidated Statements of Income, was approximately $34.1 million,
$43.0 million and $47.8 million in fiscal 2010, 2009 and 2008, respectively.
Indemnifications
In the ordinary course of business, we provide indemnifications of varying scope to customers against claims of
intellectual property infringement made by third-parties arising from the use of our products. 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.
During fiscal 2010, our limited partnership interest in Adobe Ventures was dissolved and all remaining assets were
distributed to the partners. As part of this limited partnership interest, we provided a general indemnification to Granite
Ventures, an independent venture capital firm and sole general partner of Adobe Ventures, for certain events or occurrences
while Granite Ventures was serving at our request in such capacity provided that Granite Ventures acted in good faith on
behalf of the partnership.