Adobe 2014 Annual Report Download - page 100

ADOBE SYSTEMS INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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The following table summarizes our non-cancellable unconditional purchase obligations, operating leases and capital leases
for each of the next five years and thereafter as of November 28, 2014 (in thousands):
Operating Leases Capital Leases
Fiscal Year Purchase Obligations
Future
Minimum
Lease
Payments
Future
Minimum
Sublease
Income
Future
Minimum
Lease
Payments
2015.......................................................... $ 227,910 $ 44,769 $ 2,140 $ 3,280
2016.......................................................... 28,588 40,676 2,102 —
2017.......................................................... 13,641 30,943 2,068 —
2018.......................................................... 14,285 26,547 1,705 —
2019.......................................................... 4,492 23,774 1,776 —
Thereafter ................................................. — 48,644 2,966 —
Total....................................................... $ 288,916 $ 215,353 $ 12,757 $ 3,280
Less: interest............................................. (11)
Total....................................................... $ 3,269
The table above includes operating lease commitments related to our restructured facilities. See Note 10 for information
regarding our restructuring charges.
Guarantees
The Almaden Tower lease provides for a residual value guarantee as noted above. The fair value of a residual value guarantee
in lease agreements entered into after December 31, 2002, must be recognized as a liability on our Consolidated Balance Sheets.
As such, we recognized $3.0 million in liabilities, related to the extended Almaden Tower lease. This liability was recorded in
other long-term liabilities with the offsetting entry recorded as prepaid rent in other assets. The balance was amortized to our
Consolidated Statements of Income over the life of the original lease. As of November 28, 2014 there was no remaining balance
of the unamortized portion of the fair value of the residual value guarantee remaining on our Consolidated Balance Sheets.
Royalties
We have royalty commitments associated with the shipment and licensing of certain products. Royalty expense is generally
based on a dollar amount per unit shipped or a percentage of the underlying revenue. Royalty expense, which was recorded under
our cost of revenue on our Consolidated Statements of Income, was approximately $45.2 million, $40.2 million and $29.6 million
in fiscal 2014, 2013 and 2012, respectively.
Indemnifications
In the ordinary course of business, we provide indemnifications of varying scope to customers against claims of intellectual
property infringement made by third parties arising from the use of our products and from time to time, we are subject to claims
by our customers under these indemnification provisions. Historically, costs related to these indemnification provisions have not
been significant and we are unable to estimate the maximum potential impact of these indemnification provisions on our future
results of operations.
To the extent permitted under Delaware law, we have agreements whereby we indemnify our officers and directors for
certain events or occurrences while the officer or director is or was serving at our request in such capacity. The indemnification
period covers all pertinent events and occurrences during the officer’s or director’s lifetime. The maximum potential amount of
future payments we could be required to make under these indemnification agreements is unlimited; however, we have director
and officer insurance coverage that reduces our exposure and enables us to recover a portion of any future amounts paid. We
believe the estimated fair value of these indemnification agreements in excess of applicable insurance coverage is minimal.