Adobe 2011 Annual Report Download - page 65

65
Interest Expense
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”). On
February 1, 2010, we repaid the outstanding balance under our $1.0 billion credit facility with a portion of the proceeds from our
Notes.
The increase in interest expense during fiscal 2011 as compared to fiscal 2010 was primarily due to interest associated with
higher borrowings resulting from the issuance of the Notes. The increase in interest expense during fiscal 2010 as compared to
fiscal 2009 was primarily due to interest associated with higher borrowings resulting from the issuance of the Notes as well as an
increase in our average borrowing rate due to the Notes. Interest expense for fiscal 2009 primarily represents interest associated
with the then outstanding balance under our credit facility. Interest due on any outstanding balance under the credit facility was
paid upon expiration of the London interbank offered rate (LIBOR) contract or at a minimum, quarterly.
Investment Gains (Losses), Net
Investment gains (losses), net consists principally of realized gains or losses from the sale of marketable equity investments,
other-than-temporary declines in the value of marketable and non-marketable equity securities and unrealized holding gains and
losses associated with our deferred compensation plan assets (classified as trading securities) and gains and losses associated with
our direct and indirect investments in privately held companies.
Investment gains and (losses), net fluctuated due to the following (in millions):
Net gains (losses) related to our direct and indirect investments in privately
held companies
Gains from sale of marketable equity securities
Write-downs due to other-than-temporary declines in value of our
marketable equity securities
Net gains related to our trading securities
Total investment gains (losses), net
Fiscal
2011
$ 5.3
0.8
(0.2)
—
$ 5.9
Fiscal
2010
(11.3)
4.0
—
1.2
(6.1)
Fiscal
2009
(18.7)
—
(0.3)
2.0
(17.0)
During fiscal 2011, total investment gains (losses), net improved to net gains primarily due to unrealized losses related to
our indirect investments in privately held companies in fiscal 2010 that did not recur during fiscal 2011. This was offset in part
by a decrease in net realized gains from the sale of marketable equity securities during fiscal 2011 due to less sales of these
investments.
During fiscal 2010, net losses on our investments improved primarily due to a decrease in net unrealized losses incurred
on certain of our direct investments in privately held companies during fiscal 2009 offset in part by an increase in net realized
losses from our portfolio of indirect investments in privately held companies in fiscal 2010.
Provision for Income Taxes (dollars in millions)
Provision
Percentage of total revenue
Effective tax rate
Fiscal
2011
$ 202.4
5%
20%
Fiscal
2010
$ 168.5
4%
18%
Fiscal
2009
$ 315.0
11%
45%
% Change
2011-2010
20%
% Change
2010-2009
(47)%
Our effective tax rate increased by approximately two percentage points during fiscal 2011 as compared to fiscal 2010. The
increase was primarily due to the one-time tax costs of licensing acquired company assets to Adobe's trading companies. These
costs were partially offset by tax benefits related to a favorable state income tax ruling and the reinstatement of the federal research
and development tax credit.
Our effective tax rate decreased approximately twenty-seven percentage points during fiscal 2010 as compared to fiscal
2009. The decrease was primarily due to tax benefits recognized as a result of the completion in the fourth quarter of fiscal 2010
of a U.S. income tax examination covering fiscal years 2005 through 2007 and stronger international profits, partially offset by
the expiration of the research and development credit on December 31, 2009.
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