Adobe 2002 Annual Report Download - page 83

Download and view the complete annual report

Please find page 83 of the 2002 Adobe annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 147

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147

52
Commitments
Our principal commitments as of November 29, 2002, consist of obligations under operating leases, a real
estate financing agreement, venture investing activities, royalty agreements, and various service agreements. We
expect to fulfill all of the below commitments from our working capital.
Lease Commitments
We lease certain of our facilities and some of our equipment under noncancelable operating lease arrangements
that expire at various dates through 2091. Rent expense, net of sublease income, for these leases aggregated $26.6
million, $22.0 million, and $25.6 million during fiscal 2002, 2001, and 2000, respectively.
As of November 29, 2002, future minimum lease payments under noncancelable operating leases, net of sublease
income, and future minimum sublease income under noncancelable subleases are as follows:
Year Future minimum lease payments Future minimum sublease income
(in millions) (in millions)
2003 $19.5 $6.8
2004 $17.4 $6.9
2005 $12.9 $6.8
2006 $10.9 $5.5
2007 $ 7.9 $3.1
2008 and after $34.7 $3.4
In September 2001, we entered into a real estate development agreement for the construction of an additional
office building for our corporate headquarters in downtown San Jose, California. Under the agreement, the lessor
will finance up to $117.0 million over a two-year period, toward the construction and associated costs of the
building. As part of the agreement, we entered into a five-year lease beginning upon completion of the building. We
have the option to purchase the building at any time during the term for an amount equal to the lease balance. The
agreement and lease are subject to standard covenants including liquidity, leverage and profitability ratios that are
reported to the lessor quarterly. As of November 29, 2002, we were in compliance with all covenants. In the case of
a default, the lessor may terminate all remaining commitments (if any remain) and they may demand we purchase
the building for an amount equal to the current lease balance, or require that we remarket or relinquish the building.
The agreement qualifies for operating lease accounting treatment under SFAS No. 13, and, as such, the building and
the related obligation are not included on our balance sheet, but the lease payments are reflected in the schedule of
future minimum lease payments. At the end of the lease term, we can either purchase the building for the lease
balance, which will be approximately $117.0 million, remarket, or relinquish the building. If we choose to remarket
or are required to do so upon relinquishing the building, we are bound to arrange the sale of the building to an
unrelated party and will be required to pay the lessor any shortfall between the net remarketing proceeds and the
lease balance, up to the maximum recourse amount of $103.0 million.
In August 1999, Adobe entered into a five-year lease agreement for our corporate headquarters office buildings
in San Jose, California. Under the agreement, we have the option to purchase the buildings at any time during the
lease term for the lease balance, which is approximately $142.5 million. The lease is subject to standard covenants
including liquidity, leverage and profitability ratios that are reported to the lessor quarterly. As of November 29,
2002, we were in compliance with all covenants. In the case of a default the lessor may demand we purchase the
building for an amount equal to the lease balance, or require that we remarket or relinquish the building. The
agreement qualifies for operating lease accounting treatment under SFAS No. 13, and, as such, the building and the
related obligation are not included on our balance sheet, but the lease payments are reflected in the schedule of
future minimum lease payments. At the end of the lease term, we can either purchase the building for the lease
balance, remarket, or relinquish the building. If we choose to remarket or are required to do so upon relinquishing
the building, we are bound to arrange the sale of the building to an unrelated party and will be required to pay the
lessor any shortfall between the net remarketing proceeds and the lease balance, up to the maximum recourse
amount of $132.6 million.