Oracle 2007 Annual Report Download - page 57

Table of Contents
Long-Term Customer Financing
We offer our customers the option to acquire our software products and service offerings through separate
long-term payment contracts. We generally sell contracts that we have financed on a non-recourse basis to
financial institutions. We record the transfers of amounts due from customers to financial institutions as sales
of financial assets because we are considered to have surrendered control of these financial assets. In fiscal
2008, 2007 and 2006, $1.1 billion, $891 million and $618 million or approximately 15%, 15% and 13%,
respectively, of our new software license revenues were financed through our financing division.
Contractual Obligations
The contractual obligations presented in the table below represent our estimates of future payments under
fixed contractual obligations and commitments. Changes in our business needs, cancellation provisions,
changing interest rates and other factors may result in actual payments differing from these estimates. We
cannot provide certainty regarding the timing and amounts of payments. We have presented below a summary
of the most significant assumptions used in our information within the context of our consolidated financial
position, results of operations and cash flows. The following is a summary of our contractual obligations as of
May 31, 2008:
Year Ending May 31,
(Dollars in millions) Total 2009 2010 2011 2012 2013 Thereafter
Principal payments on
borrowings(1) $ 11,250 $ 1,000 $ 1,000 $ 2,250 $ — $ 1,250 $ 5,750
Capital leases(2) 2 1 1 — — — —
Interest payments on
borrowings(1) 5,509 602 552 506 392 392 3,065
Operating leases(3) 1,713 432 370 259 187 124 341
Purchase obligations(4) 432 395 17 4 3 3 10
Funding commitments(5) 3 3 — — — — —
Total contractual obligations $ 18,909 $ 2,433 $ 1,940 $ 3,019 $ 582 $ 1,769 $ 9,166
(1) Our borrowings (excluding capital leases) consist of the following as of May 31, 2008:
Principal Balance
Floating rate senior notes due May 2009 $ 1,000
Floating rate senior notes due May 2010 1,000
5.00% senior notes due January 2011, net of discount of $4 2,246
4.95% senior notes due April 2013 1,250
5.25% senior notes due January 2016, net of discount of $9 1,991
5.75% senior notes due April 2018, net of discount of $1 2,499
6.50% senior notes due April 2038, net of discount of $2 1,248
Total borrowings $ 11,234
Our floating rate senior notes due May 2009 and May 2010 bore interest at a rate of 2.70% and 2.74%, respectively, as of May 31,
2008. In September 2007, we entered into two interest-rate swap agreements that have the economic effect of modifying the variable
interest obligations associated with our floating rate senior notes due May 2009 and May 2010 so that the interest payable on the
senior notes effectively became fixed at a rate of 4.62% and 4.59%, respectively. Interest payments were calculated based on terms
of the related agreements and include estimates based on the effective interest rates as of May 31, 2008 for variable rate borrowings
after consideration of the aforementioned interest rate swap agreements.
(2) Represents remaining payments under capital leases assumed from acquisitions.
(3) Primarily represents leases of facilities and includes future minimum rent payments for facilities that we have vacated pursuant to our
restructuring and merger integration activities. We have approximately $355 million in facility obligations, net of estimated sublease
income, in accrued restructuring for these locations in our consolidated balance sheet at May 31, 2008.
(4) Represents amounts associated with agreements that are enforceable, legally binding and specify terms, including: fixed or minimum
quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the payment.
(5) Represents the maximum additional capital we may need to contribute toward our venture fund investments, which are payable upon
demand.
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Source: ORACLE CORP, 10-K, July 02, 2008 Powered by Morningstar® Document Research℠