Dell 2001 Annual Report Download - page 28

Table of Contents
Senior Notes and Senior Debentures, respectively. As a result of the interest rate swap agreements, the Company's effective interest rates for the Senior Notes
and Senior Debentures were 4.54% and 4.87%, respectively, for fiscal 2002.
The Company maintains a $250 million revolving credit facility, which expires in June 2002. At February 1, 2002 this facility was unused, and the Company
currently does not intend to renew the facility.
Lease Commitments, including Master Lease Facilities — The Company maintains master lease facilities providing the capacity to fund up to $1.1 billion.
The combined facilities provide for the ability of the Company to lease certain real property, buildings and equipment (collectively referred to as the
"Properties") to be constructed or acquired. The rental obligations for the Properties commence on various dates. At February 1, 2002, $634 million of the
combined facilities had been utilized, and the Company currently does not expect that additional future utilization of these combined facilities will be
material.
The leases have initial terms of five and seven years. Those with an initial term of five years contain an option to renew for two successive years, subject to
certain conditions. The leases expire between fiscal 2004 and 2008. The Company may, at its option, purchase the Properties during or at the end of the lease
term for 100% of the then outstanding amounts expended by the lessor to build, construct or acquire the Properties (approximately $634 million at February 1,
2002). Pursuant to the terms of the agreements associated with such leases, the Company guarantees a residual value for the properties (of up to
approximately $539 million at February 1, 2002), which must be paid to the lessor if the Company does not exercise its purchase option or renew the lease.
The Company periodically records an expense that over the lease term approximates the difference between the estimated fair value of the Properties at lease
expiration and the residual value guarantee. As of February 1, 2002, the Company had accrued approximately $78 million of such expenses. The leases are
classified as operating leases, and therefore, the leased assets and obligations (other than the aforementioned $78 million) are not reflected on the
accompanying Consolidated Statement of Financial Position included in "Item 8 — Financial Statements and Supplementary Data." Future minimum lease
payments under these leases as of February 1, 2002 are as follows: $4 million in fiscal 2003; $3 million in fiscal 2004; $3 million in fiscal 2005; $2 million in
fiscal 2006; $1 million in fiscal 2007; and $1 million thereafter. Residual value guarantees of up to $162 million, $306 million and $71 million are due in
fiscal 2004, 2006 and 2008, respectively.
As part of the above lease transactions, the Company restricted $90 million of its investment securities as collateral for specified lessor obligations under the
leases as of February 1, 2002. These investment securities are restricted as to withdrawal and are managed by third parties subject to certain limitations under
the Company's investment policy and are included in Investments on the accompanying Consolidated Statement of Financial Position included in "Item 8 —
Financial Statements and Supplementary Data." In addition, as part of these lease agreements the Company must meet certain financial covenant
requirements. The Company is in compliance with all such covenants.
The Company leases other property and equipment, manufacturing facilities and office space under non-cancelable leases. Certain leases obligate the
Company to pay taxes, maintenance and repair costs. Future minimum lease payments under all non-cancelable leases (excluding the master lease facilities
described above) as of February 1, 2002 are as follows: $36 million in fiscal 2003; $28 million in fiscal 2004; $25 million in fiscal 2005; $21 million in fiscal
2006; $14 million in fiscal 2007; and $72 million thereafter. Rent expense under all leases totaled $93 million, $95 million, and $81 million for fiscal 2002,
2001, and 2000, respectively.
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