Long-Term Obligations and Commitments

12 Months Ended

Jul. 31, 2018

Long-Term Obligations and Commitments [Abstract]

9. Long-Term Obligations and Commitments

Long-Term Debt

On February 1, 2016 we entered into a master credit agreement with certain institutional lenders for a five-year credit facility in an aggregate principal amount of $1.5 billion, which includes a $500 million unsecured term loan. Under the master credit agreement we may, subject to certain customary conditions, on one or more occasions increase commitments under the term loan in an amount not to exceed $500 million in the aggregate. The term loan accrues interest at rates that are equal to, at our election, either Bank of America's alternate base rate plus a margin that ranges from 0.125% to 0.875% or LIBOR plus a margin that ranges from 1.125% to 1.875%. Actual margins under either election will be based on our senior debt credit ratings. The master credit agreement includes customary affirmative and negative covenants. See Note 8, “Current Liabilities – Unsecured Revolving Credit Facility,” for more information. The term loan is subject to quarterly principal payments of 2.5% of the loan amount which began in July 2017, with the balance payable on February 1, 2021. At July 31, 2018, $438 million was outstanding under the term loan, of which $50 million was classified as short-term debt. The carrying value of the term loan

approximates its fair value. Interest on the term loan is payable monthly. We paid $13 million for interest on the term loan during the twelve months ended July 31, 2018, $11 million during the twelve months ended July 31, 2017, and $4 million during the twelve months ended July 31, 2016.

Other Long-Term Obligations

Other long-term obligations were as follows at the dates indicated:



	July 31,
(In millions)	2018			2017
Long-term income tax liabilities	$	61		$	53
Total deferred rent	47			49
Total license fee payable	9			18
Total dividend payable	14			13
Long-term deferred income tax liabilities	7			7
Other	12			16
Total long-term obligations	150			156
Less current portion (included in other current liabilities)	(27		)	(26		)
Long-term obligations due after one year	$	123		$	130

In May 2009 we entered into an agreement to license certain technology for $20 million in cash and $100 million payable over ten fiscal years. The total present value of the arrangement at inception was approximately $89 million. The total license fee payable in the table above includes imputed interest through the dates indicated.

Operating Lease Commitments and Unconditional Purchase Obligations

We lease office facilities and equipment under non-cancellable operating lease arrangements. Our facilities leases generally provide for periodic rent increases and many contain escalation clauses and renewal options. The leases for our corporate headquarters campus in Mountain View, California expire in 2024 and 2026, with options to extend the lease terms for an additional ten years at rates to be determined in accordance with the agreements.

In the ordinary course of business we enter into certain unconditional purchase obligations with our suppliers. These are agreements to purchase products and services that are enforceable, legally binding, and specify terms that include fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the payments.

Annual minimum commitments under purchase obligations and operating leases at July 31, 2018 were as shown in the table below.



(In millions)	Purchase Obligations		Operating Lease Commitments		Sublease Income		Net Operating Lease Commitments
Fiscal year ending July 31,
2019	$	175	$	66	$	24	$	42
2020	121		61		22		39
2021	125		59		19		40
2022	73		51		8		43
2023	—		49		—		49
Thereafter	—		113		—		113
Total commitments	$	494	$	399	$	73	$	326

Rent expense net of sublease income for continuing operations totaled $38 million for the twelve months ended July 31, 2018, $34 million for the twelve months ended July 31, 2017, and $36 million for the twelve months ended July 31, 2016. Rent expense includes base contractual rent and contractual variable expenses such as building maintenance, utilities, property taxes and insurance. Sublease income for continuing operations totaled $23 million for the twelve months ended July 31, 2018, $22 million for the twelve months ended July 31, 2017, and $10 million for the twelve months ended July 31, 2016.