Adobe 2012 Annual Report Download - page 47

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We regularly review our hedging program and make adjustments as necessary based on the judgment factors discussed
above. Our hedging activities may not offset more than a portion of the adverse financial impact resulting from unfavorable
movement in foreign currency exchange rates, which could adversely affect our financial condition or results of operations.
We have issued $1.5 billion of notes in a debt offering and may incur other debt in the future, which may adversely affect our
financial condition and future financial results.
In the first quarter of fiscal 2010, we issued $1.5 billion in senior unsecured notes. We also have a $1.0 billion revolving
credit facility, which is currently undrawn. Although we have no current plans to request any advances under this credit facility,
we may use the proceeds of any future borrowing for general corporate purposes, or for future acquisitions or expansion of our
business.
This debt may adversely affect our financial condition and future financial results by, among other things:
• requiring the dedication of a portion of our expected cash from operations to service our indebtedness, thereby reducing
the amount of expected cash flow available for other purposes, including capital expenditures and acquisitions; and
• limiting our flexibility in planning for, or reacting to, changes in our business and our industry.
Our senior unsecured notes and revolving credit facility impose restrictions on us and require us to maintain compliance
with specified covenants. Our ability to comply with these covenants may be affected by events beyond our control. If we breach
any of the covenants and do not obtain a waiver from the lenders or noteholders, then, subject to applicable cure periods, any
outstanding indebtedness may be declared immediately due and payable.
In addition, changes by any rating agency to our credit rating may negatively impact the value and liquidity of both our
debt and equity securities. Under certain circumstances, if our credit ratings are downgraded or other negative action is taken, the
interest rate payable by us under our revolving credit facility could increase. Downgrades in our credit ratings could also restrict
our ability to obtain additional financing in the future and could affect the terms of any such financing.
Changes in, or interpretations of, accounting principles could have a significant impact on our financial position and results of
operations.
We prepare our Consolidated Financial Statements in accordance with accounting principles generally accepted in the
United States of America (“GAAP”). These principles are subject to interpretation by the SEC and various bodies formed to
interpret and create appropriate accounting principles. A change in these principles can have a significant effect on our reported
results and may even retroactively affect previously reported transactions.
For example, the U.S.-based Financial Accounting Standards Board (“FASB”) is currently working together with the
International Accounting Standards Board (“IASB”) on several projects to further align accounting principles and facilitate more
comparable financial reporting between companies who are required to follow GAAP under SEC regulations and those who are
required to follow International Financial Reporting Standards outside of the U.S. These efforts by the FASB and IASB may result
in different accounting principles under GAAP that may result in materially different financial results for us in areas including,
but not limited to, principles for recognizing revenue and lease accounting.
If our goodwill or amortizable intangible assets become impaired we may be required to record a significant charge to earnings.
Under GAAP, we review our goodwill and amortizable intangible assets for impairment when events or changes in
circumstances indicate the carrying value may not be recoverable. GAAP requires us to test for goodwill impairment at least
annually. Factors that may be considered a change in circumstances indicating that the carrying value of our goodwill or amortizable
intangible assets may not be recoverable include a decline in stock price and market capitalization, future cash flows and slower
growth rates in our industry. We may be required to record a significant charge to earnings in our financial statements during the
period in which any impairment of our goodwill or amortizable intangible assets is determined, resulting in an impact on our
results of operations.
Changes in, or interpretations of, tax rules and regulations may adversely affect our effective tax rates.
We are a United States-based multinational company subject to tax in multiple U.S. and foreign tax jurisdictions. A significant
portion of our foreign earnings for the current fiscal year were earned by our Irish subsidiaries. In addition to providing for U.S.
income taxes on earnings from the United States, we provide for U.S. income taxes on the earnings of foreign subsidiaries unless
the subsidiaries' earnings are considered permanently reinvested outside the United States. While we do not anticipate changing
our intention regarding permanently reinvested earnings, if certain foreign earnings previously treated as permanently reinvested
are repatriated, the related U.S. tax liability may be reduced by any foreign income taxes paid on these earnings.
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