Oracle 2009 Annual Report Download - page 209

COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES
(USD $)
12 Months Ended
05/31/2010
COMMITMENTS AND CONTINGENCIES 12. COMMITMENTS AND CONTINGENCIES
Lease Commitments
We lease certain facilities, furniture and equipment under operating leases. As of May 31, 2010, future minimum
annual operating lease payments and future minimum payments to be received from non-cancelable subleases
were as follows:
(in millions)
Fiscal 2011 $ 511
Fiscal 2012 376
Fiscal 2013 257
Fiscal 2014 157
Fiscal 2015 103
Thereafter 293
Future minimum operating lease payments 1,697
Less: minimum payments to be received from non-cancelable
subleases
(214)
Total future minimum operating lease payments, net $ 1,483
Lease commitments include future minimum rent payments for facilities that we have vacated pursuant to our
restructuring and merger integration activities, as discussed in Note 9. We have approximately $386 million in
facility obligations, net of estimated sublease income and other costs, in accrued restructuring for these locations
in our consolidated balance sheet at May 31, 2010.
Rent expense was $318 million, $293 million and $276 million for fiscal 2010, 2009 and 2008, respectively, net
of sublease income of approximately $73 million, $69 million and $57 million, respectively. Certain lease
agreements contain renewal options providing for an extension of the lease term.
Unconditional Purchase Obligations
In the ordinary course of business, we enter into certain unconditional purchase obligations with our suppliers,
which are 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. As a result of our acquisition of Sun, we utilize several external manufacturers to manufacture
sub-assemblies for our products and to perform final assembly and testing of finished products. We also obtain
individual components for our products from a variety of individual suppliers based on projected demand
information. Such purchase commitments are based on our forecasted component and manufacturing
requirements and typically provide for fulfillment within agreed upon lead-times and/or commercially standard
lead-times for the particular part or product and have been included in this amount. Routine arrangements for
other materials and goods that are not related to our external manufacturers and certain other suppliers and that
are entered into in the ordinary course of business are not included in the amounts below as they are generally
entered into in order to secure pricing or other negotiated terms and are difficult to quantify in a meaningful way.
As of May 31, 2010, our unconditional purchase obligations approximate to $684 million for fiscal 2011, $27
million for fiscal 2012, $19 million for fiscal 2013, $6 million for fiscal 2014, $3 million for fiscal 2015 and $3
million thereafter.
As described in Note 2, we also have a commitment to acquire certain companies for cash consideration that we
expect to pay upon the closing of these acquisitions. As described in Note 8, we have notes payable and other
borrowings outstanding of $14.7 billion that mature at various future dates.
Guarantees
Our software and hardware systems product sales agreements generally include certain provisions for
indemnifying customers against liabilities if our products infringe a third party's intellectual property rights. To
date, we have not incurred any material costs as a result of such indemnifications and have not accrued any
liabilities related to such obligations in our consolidated financial statements. Certain of our product sales
agreements also include provisions indemnifying customers against liabilities in the event we breach
confidentiality or service level requirements. It is not possible to determine the maximum potential amount under
these indemnification agreements due to our limited and infrequent history of prior indemnification claims and the
unique facts and circumstances involved in each particular agreement.
Our software license and hardware systems products agreements also generally include a warranty that our
products will substantially operate as described in the applicable program documentation for a period of one year
after delivery. We also warrant that services we perform will be provided in a manner consistent with industry
standards for a period of 90 days from performance of the service.
We occasionally are required, for various reasons, to enter into financial guarantees with third parties in the
ordinary course of our business including, among others, guarantees related to foreign exchange trades, taxes,
import licenses and letters of credit on behalf of parties we conduct business with. Such agreements have not had
a material effect on our results of operations, financial position or cash flows.
Source: ORACLE CORP, 10-K, July 01, 2010 Powered by Morningstar® Document Research℠