Adobe 2013 Annual Report Download - page 27

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• inadequate local infrastructure and difficulties in managing and staffing international operations;
• delays resulting from difficulty in obtaining export licenses for certain technology, tariffs, quotas and other trade barriers
and restrictions;
• the imposition of governmental economic sanctions on countries in which we do business or where we plan to expand
our business;
• transportation delays;
• operating in locations with a higher incidence of corruption and fraudulent business practices; and
• other factors beyond our control, including terrorism, war, natural disasters and pandemics.
If sales to any of our customers outside of the Americas are delayed or canceled because of any of the above factors, our
revenues may decline.
In addition, approximately 50% of our employees are located outside the U.S. Accordingly, we are exposed to changes in
laws governing our employee relationships in various U.S. and foreign jurisdictions, including laws and regulations regarding
wage and hour requirements, fair labor standards, employee data privacy, unemployment tax rates, workers' compensation rates,
citizenship requirements and payroll and other taxes, which likely would have a direct impact on our operating costs. We may
continue to expand our international operations and international sales and marketing activities. Expansion in international markets
has required, and will continue to require, significant management attention and resources. We may be unable to scale our
infrastructure effectively or as quickly as our competitors in these markets, and our revenues may not increase to offset these
expected increases in costs and operating expenses, which would cause our results to suffer.
We may incur losses associated with currency fluctuations and may not be able to effectively hedge our exposure.
Our operating results are subject to fluctuations in foreign currency exchange rates. We attempt to mitigate a portion of
these risks through foreign currency hedging, based on our judgment of the appropriate trade-offs among risk, opportunity and
expense. We have established a hedging program to partially hedge our exposure to foreign currency exchange rate fluctuations
for various currencies. If the foreign currency hedging markets are negatively affected by clearing and trade execution regulations
imposed by the Dodd-Frank Wall Street Reform and Consumer Protection Act, the cost of hedging our foreign exchange exposure
could increase.
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, as well as the potential costs associated with a refinancing of our debt. 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
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