Adobe 2010 Annual Report Download - page 122

ADOBE SYSTEMS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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Notes
In February 2010, we issued $600.0 million of 3.25% senior notes due February 1, 2015 (the “2015 Notes”) and $900.0
million of 4.75% senior notes due February 1, 2020 (the “2020 Notes” and, together with the 2015 Notes, the “Notes”). Our
proceeds were approximately $1.5 billion and were net of an issuance discount of $6.6 million. The Notes rank equally with
our other unsecured and unsubordinated indebtedness. In addition, we incurred issuance costs of approximately $10.7
million. Both the discount and issuance costs are being amortized to interest expense over the respective terms of the Notes
using the effective interest method. The effective interest rate including the discount and issuance costs is 3.45% for the 2015
Notes and 4.92% for the 2020 Notes. Interest is payable semi-annually, in arrears, on February 1 and August 1, commencing
on August 1, 2010. In August 2010, we made our first semi-annual payment of $31.1 million. The proceeds from the Notes
are available for general corporate purposes, including repayment of any balance outstanding on our credit facility. Based on
quoted market prices, the fair value of the Notes was approximately $1.6 billion as of December 3, 2010.
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 December 3,
2010, we were in compliance with all of the covenants.
Credit Agreement
In August 2007, we entered into an Amendment to our Credit Agreement dated February 2007 (the “Amendment”),
which increased the total senior unsecured revolving facility from $500.0 million to $1.0 billion. The Amendment also
permits us to request one-year extensions effective on each anniversary of the closing date of the original agreement, subject
to the majority consent of the lenders. We also retain an option to request an additional $500.0 million in commitments, for a
maximum aggregate facility of $1.5 billion.
In February 2008, we entered into a Second Amendment to the Credit Agreement dated February 26, 2008, which
extended the maturity date of the facility by one year to February 16, 2013. The facility would terminate at this date if no
additional extensions have been requested and granted. All other terms and conditions remain the same.
The facility contains a financial covenant requiring us not to exceed a certain maximum leverage ratio. At our option,
borrowings under the facility accrue interest based on either the London interbank offered rate (“LIBOR”) for one, two, three
or six months, or longer periods with bank consent, plus a margin according to a pricing grid tied to this financial covenant,
or a base rate. The margin is set at rates between 0.20% and 0.475%. Commitment fees are payable on the facility at rates
between 0.05% and 0.15% per year based on the same pricing grid. The facility is available to provide loans to us and certain
of our subsidiaries for general corporate purposes. At November 27, 2009, the amount outstanding under the credit facility
was $1.0 billion, which approximated fair value. On February 1, 2010, we paid the outstanding balance on our credit facility
and the entire $1.0 billion credit line under this facility remains available for borrowing.
Capital Lease Obligation
In June 2010, we entered into a sale-leaseback agreement to sell equipment totaling $32.2 million and leaseback the
same equipment over a period of 43 months. This transaction was classified as a capital lease obligation and recorded at fair
value. As of December 3, 2010, our capital lease obligations of $28.5 million includes $8.8 million of current debt.