Oracle 2005 Annual Report Download - page 57

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Table of Contents
The following table includes the United States dollar equivalent of cash, cash equivalents and marketable securities denominated in foreign currencies. See
discussion of our foreign currency risk below for a description of how we hedge net assets of certain international subsidiaries from foreign currency exposure.
(in millions)
Amortized
Principal
Amount at
May 31, 2006
Japanese Yen $ 748
Euro 384
Chinese Renminbi 303
British Pound 304
Canadian Dollar 231
Australian Dollar 125
South African Rand 119
Other currencies 929
Total cash, cash equivalents and marketable securities denominated in foreign currencies $ 3,143
Interest Expense Rate Risk. Borrowings as of May 31, 2006 were $5.9 billion, consisting of $4.3 billion of fixed rate borrowings and $1.6 billion of variable
rate borrowings. Interest expense for fiscal 2006 was $169 million. Based on effective interest rates at May 31, 2006, a 50 basis point increase in interest rates on
our borrowings subject to variable interest rate fluctuations would increase our interest expense by approximately $8 million annually.
(Dollars in millions) Borrowings Effective Interest Rate
Floating rate senior notes due January 2009(1)
$ 1,500 5.28%
6.91% senior notes due February 2007 and related interest rate swap(2) 150 7.30%
Total borrowings subject to variable interest rate fluctuations $ 1,650
(1) The 2009 Notes bear interest at a floating rate equal to three-month LIBOR plus 0.23% per year.
(2) We entered into an interest-rate swap agreement that has the economic effect of modifying the interest obligations associated with our 6.91% senior notes so
that the interest payable on the senior notes effectively becomes variable based on the three month LIBOR set quarterly until maturity.
Foreign Currency Transaction Risk. We transact business in various foreign currencies and have established a program that primarily utilizes foreign currency
forward contracts to offset the risk associated with the effects of certain foreign currency exposures. Under this program, increases or decreases in our foreign
currency exposures are offset by gains or losses on the forward contracts, to mitigate the possibility of foreign currency transaction gains or losses. These foreign
currency exposures typically arise from intercompany sublicense fees and other intercompany transactions. Our forward contracts generally have terms of 90
days or less. We do not use forward contracts for trading purposes. All outstanding foreign currency forward contracts (excluding our Yen equity hedge
described below) are marked to market at the end of the period with unrealized gains and losses included in non-operating income, net. Our ultimate realized gain
or loss with respect to currency fluctuations will depend on the currency exchange rates and other factors in effect as the contracts mature. Net foreign exchange
transaction gains (losses) included in non-operating income, net in the accompanying consolidated statements of operations were $15 million, $(27) million and
$(21) million in fiscal 2006, 2005 and 2004, respectively. The fair values of foreign currency forward contracts were not significant individually and
approximated $(0.3) million and $0.2 million as of May 31, 2006 and 2005.
54
Source: ORACLE CORP, 10-K, July 21, 2006 Powered by Morningstar® Document Research℠