Oracle 2009 Annual Report Download - page 73

Table of Contents
Fiscal 2010 Compared to Fiscal 2009: Net cash provided by financing activities in fiscal 2010 increased compared to cash used by financing activities in fiscal
2009 due to our issuance of $4.5 billion of senior notes, our issuances of $2.8 billion of commercial paper notes, net of repayments, and a reduction in our
common stock repurchases. These increases were partially offset by additional cash used for dividend payments and the repayment of $700 million of Sun’s
legacy convertible notes shortly after the closing of the Sun acquisition.
Fiscal 2009 Compared to Fiscal 2008: Net cash used for financing activities in fiscal 2009 increased in comparison to cash provided by financing activities in
fiscal 2008 due to increased stock repurchases and dividend payments and decreased proceeds from the exercise of employee stock options during fiscal 2009. In
addition, financing activities provided cash in fiscal 2008 as a result of our issuance of $5.0 billion of long-term senior notes in April 2008 and certain
commercial paper issuances, net of repayments.
Free cash flow: To supplement our statements of cash flows presented on a GAAP basis, we use non-GAAP measures of cash flows on a trailing 4-quarter
basis to analyze cash flows generated from our operations. We believe free cash flow is also useful as one of the bases for comparing our performance with our
competitors. The presentation of non-GAAP free cash flow is not meant to be considered in isolation or as an alternative to net income as an indicator of our
performance, or as an alternative to cash flows from operating activities as a measure of liquidity. We calculate free cash flows as follows:
Year Ended May 31,
(Dollars in millions) 2010 Change 2009 Change 2008
Cash provided by operating activities $ 8,681 5% $ 8,255 12% $ 7,402
Capital expenditures(1) (230) -57% (529) 118% (243)
Free cash flow $ 8,451 9% $ 7,726 8% $ 7,159
Net income $ 6,135 10% $ 5,593 1% $ 5,521
Free cash flow as a percent of net income 138% 138% 130%
(1) Represents capital expenditures as reported in cash flows from investing activities in our consolidated statements of cash flows presented in accordance with U.S. generally accepted
accounting principles.
Long-Term Customer Financing: We offer certain of our customers the option to acquire our software products and services 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 2010, 2009 and 2008, $1.2 billion, $1.4 billion and $1.1 billion or approximately 16%, 19% and 15%, respectively, of our new software license revenues
were financed through our financing division.
Recent Financing Activities
Senior Notes
Oracle Senior Notes: As of May 31, 2010, we had $13.8 billion of senior notes outstanding including $2.2 billion of senior notes that mature in January 2011.
We repaid $1.0 billion of senior notes that matured in May 2010 and $1.0 billion of senior notes that matured in May 2009. In July 2009, we issued $4.5 billion
of fixed rate senior notes comprised of $1.5 billion of 3.75% notes due July 2014 (2014 Notes), $1.75 billion of 5.00% notes due July 2019 and $1.25 billion of
6.125% notes due July 2039. We issued these senior notes for general corporate purposes and to finance a portion of the purchase price for our acquisition of
Sun. In September 2009, we entered into certain interest rate swap agreements related to our 2014 Notes that have the economic effect of modifying the fixed
interest obligations associated with our 2014 Notes so that the interest obligations became variable based upon a LIBOR-based index. We are accounting for
these interest rate swap agreements as fair value hedges pursuant to ASC 815, Derivatives and Hedging. Additional details regarding our senior notes and related
interest rate swap agreements are included in Note 8 and Note 11 of Notes to Consolidated Financial Statements included elsewhere in this Annual Report.
Sun Convertible Notes: Shortly after the closing of our acquisition of Sun, we repaid, in full, $700 million of Sun’s legacy convertible notes during the third
quarter of fiscal 2010.
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Source: ORACLE CORP, 10-K, July 01, 2010 Powered by Morningstar® Document Research℠