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98
requirements and whether to accrue for such claims in our financial statements. This determination is then reviewed and discussed
with our Audit Committee and our independent registered public accounting firm.
We make a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can
be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations,
settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. Unless otherwise
specifically disclosed here or in our Notes to Consolidated Financial Statements, we have determined that no provision for liability
nor disclosure is required related to any claim against us because: (a) there is not a reasonable possibility that a loss exceeding
amounts already recognized (if any) may be incurred with respect to such claim; (b) a reasonably possible loss or range of loss
cannot be estimated; or (c) such estimate is immaterial.
All legal costs associated with litigation are expensed as incurred. Litigation is inherently unpredictable. However, we
believe that we have valid defenses with respect to the legal matters pending against us. It is possible, nevertheless, that our
consolidated financial position, cash flows or results of operations could be negatively affected by an unfavorable resolution of
one or more of such proceedings, claims or investigations.
In connection with our anti-piracy efforts, conducted both internally and through organizations such as the Business Software
Alliance, from time to time we undertake litigation against alleged copyright infringers. Such lawsuits may lead to counter-claims
alleging improper use of litigation or violation of other laws. We believe we have valid defenses with respect to such counter-
claims; however, it is possible that our consolidated financial position, cash flows or results of operations could be affected in any
particular period by the resolution of one or more of these counter-claims.
NOTE 16. DEBT
Our debt as of November 29, 2013 and November 30, 2012 consisted of the following (in thousands):
2013 2012
Notes $ 1,496,028 $ 1,495,312
Capital lease obligations 17,945 12,843
Total debt and capital lease obligations 1,513,973 1,508,155
Less: current portion 14,676 11,217
Debt and capital lease obligations $ 1,499,297 $ 1,496,938
Notes
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”). Our
proceeds were approximately $1.5 billion and were net of an issuance discount of $6.6 million. The Notes rank equally with our
other unsecured and unsubordinated indebtedness. In addition, we incurred issuance costs of approximately $10.7 million. Both
the discount and issuance costs are being amortized to interest expense over the respective terms of the Notes using the effective
interest method. The effective interest rate including the discount and issuance costs is 3.45% for the 2015 Notes and 4.92% for
the 2020 Notes. Interest is payable semi-annually, in arrears, on February 1 and August 1, commencing on August 1, 2010. During
fiscal 2013 interest payments on our Notes totaled $62.3 million. Based on quoted prices in inactive markets, the fair value of the
Notes was approximately $1.6 billion.
We may redeem the Notes at any time, subject to a make whole premium. In addition, upon the occurrence of certain change
of control triggering events, we may be required to repurchase the Notes, at a price equal to 101% of their principal amount, plus
accrued and unpaid interest to the date of repurchase. The Notes also include covenants that limit our ability to grant liens on assets
and to enter into sale and leaseback transactions, subject to significant allowances. As of November 29, 2013, we were in compliance
with all of the covenants.
Credit Agreement
On March 2, 2012, we entered into a five-year $1.0 billion senior unsecured revolving credit agreement (the “Credit
Agreement”), providing for loans to us and certain of our subsidiaries. Pursuant to the terms of the Credit Agreement, we may,
Table of Contents
ADOBE SYSTEMS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)