Adobe 2012 Annual Report Download - page 48

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Our income tax expense has differed from the tax computed at the U.S. federal statutory income tax rate due primarily to
discrete items and to earnings considered as permanently reinvested in foreign operations. Unanticipated changes in our tax rates
could affect our future results of operations. Our future effective tax rates could be unfavorably affected by changes in the tax
rates in jurisdictions where our income is earned, by changes in, or our interpretation of, tax rules and regulations in the jurisdictions
in which we do business, by unanticipated decreases in the amount of earnings in countries with low statutory tax rates, by lapses
of the availability of the U.S. research and development tax credit, or by changes in the valuation of our deferred tax assets and
liabilities.
In addition, we are subject to the continual examination of our income tax returns by the Internal Revenue Service (“IRS”)
and other domestic and foreign tax authorities, including a current examination by the IRS of our fiscal 2008 and 2009 tax returns.
These examinations are expected to focus on our intercompany transfer pricing practices as well as other matters. We regularly
assess the likelihood of outcomes resulting from these examinations to determine the adequacy of our provision for income taxes
and have reserved for potential adjustments that may result from the current examinations. We believe such estimates to be
reasonable; however, there can be no assurance that the final determination of any of these examinations will not have an adverse
effect on our operating results and financial position.
If we are unable to recruit and retain key personnel our business may be harmed.
Much of our future success depends on the continued service and availability of our senior management. These individuals
have acquired specialized knowledge and skills with respect to Adobe. The loss of any of these individuals could harm our business.
Our business is also dependent on our ability to retain, hire and motivate talented, highly skilled personnel across all levels of our
organization. Experienced personnel in the information technology industry are in high demand and competition for their talents
is intense in many areas where our employees are located. If we are unable to continue to successfully attract and retain key
personnel, our business may be harmed. Effective succession planning is also a key factor for our long-term success. Our failure
to enable the effective transfer of knowledge and facilitate smooth transitions with regards to our key employees could adversely
affect our long-term strategic planning and execution.
We believe that a critical contributor to our success to date has been our corporate culture, which we have built to foster
innovation and teamwork. As we grow, including from the integration of employees and businesses acquired in connection with
our previous or future acquisitions, we may find it difficult to maintain important aspects of our corporate culture which could
negatively affect our ability to retain and recruit personnel and otherwise adversely affect our future success.
Our investment portfolio may become impaired by deterioration of the capital markets.
Our cash equivalent and short-term investment portfolio as of November 30, 2012 consisted of corporate bonds and
commercial paper, foreign government securities, money market mutual funds and repurchase agreements, municipal securities,
time deposits, U.S. agency securities and U.S. Treasury securities. We follow an established investment policy and set of guidelines
to monitor and help mitigate our exposure to interest rate and credit risk. The policy sets forth credit quality standards and limits
our exposure to any one issuer, as well as our maximum exposure to various asset classes.
Should financial market conditions worsen in the future, investments in some financial instruments may pose risks arising
from market liquidity and credit concerns. In addition, any deterioration of the capital markets could cause our other income and
expense to vary from expectations. As of November 30, 2012, we had no material impairment charges associated with our short-
term investment portfolio, and although we believe our current investment portfolio has little risk of material impairment, we
cannot predict future market conditions or market liquidity, or credit availability, and can provide no assurance that our investment
portfolio will remain materially unimpaired.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
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