Dell 2006 Annual Report Download - page 96

Table of Contents
DELL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
of $6.1 billion, $6.5 billion, and $5.6 billion during the fiscal years ended February 2, 2007, February 3, 2006, and
January 28, 2005, respectively.
On September 8, 2004, Dell and CIT executed an agreement that extended the term of the joint venture to January 29, 2010,
and modified certain terms of the relationship. In accordance with the extension agreement, net income and losses
generated by DFS are currently allocated 70% to Dell and 30% to CIT. At February 2, 2007 and February 3, 2006, CIT's
equity ownership in the net assets of DFS was $33 million and $14 million, respectively, which is recorded as minority
interest and included in other non-current liabilities.
The extension agreement provides Dell with the option to purchase CIT's 30% interest in DFS in February 2008, for a
purchase price ranging from approximately $100 million to $345 million. Dell currently expects that the purchase price will
likely be towards the upper end of that range. If Dell does not exercise this purchase option, Dell is obligated to purchase
CIT's 30% interest upon the occurrence of certain termination events, or upon the expiration of the joint venture on
January 29, 2010.
Dell is dependent upon DFS to facilitate financing for a significant number of customers who elect to finance products sold by
Dell. Dell also purchases loan and lease receivables facilitated by DFS on substantially the same terms and conditions as
CIT. Dell's purchase of these assets allows Dell to retain a greater portion of the assets' future earnings. During Fiscal 2007,
Dell funded approximately 35% of these financing transactions. The percentage of transactions that Dell will purchase under
the extension agreement is expected to be approximately 50% in Fiscal 2008.
DFS is a full service financial services entity; key activities include the origination, collection, and servicing of financing
receivables related to the purchase of Dell products. While DFS services CIT funded receivables, Dell's obligation related to
the performance of these receivables is limited to the cash funded reserves established at the time of funding.
Financing Receivables
The following table summarizes the components of Dell's financing receivables, net of the allowance for estimated
uncollectible amounts:
February 2, February 3,
2007 2006
As
Restated
(in millions)
Financing receivables, net:
Customer receivables:
Revolving loans, net $ 771 $ 1,025
Leases and loans, net 627 302
Customer receivables, net 1,398 1,327
Residual interest 296 274
Retained interest 159 90
Financing receivables, net $ 1,853 $ 1,691
Short-term $ 1,530 $ 1,366
Long-term 323 325
Financing receivables, net $ 1,853 $ 1,691
Financing receivables primarily consist of revolving loans and fixed-term leases and loans resulting from the sale of Dell
products. If customers desire revolving or term loan financing, Dell sells equipment directly
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