UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported) January 30, 2019    

 

 

Microsoft Corporation

(Exact Name of Registrant as Specified in Its Charter)

 

 

Washington

(State or Other Jurisdiction

of Incorporation)

 

001-37845   91-1144442

(Commission

File Number)

 

(IRS Employer

Identification No.)

 

One Microsoft Way, Redmond, Washington   98052-6399
(Address of Principal Executive Offices)   (Zip Code)

(425) 882-8080

(Registrant’s Telephone Number, Including Area Code)

(Former Name or Former Address, if Changed Since Last Report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

 


Item 2.02. Results of Operations and Financial Condition

On January 30, 2019, Microsoft Corporation issued a press release announcing its financial results for the fiscal quarter ended December 31, 2018. A copy of the press release is furnished as Exhibit 99.1 to this report.

In accordance with General Instruction B.2 of Form 8-K, the information in this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Item 9.01. Financial Statements and Exhibits

(d) Exhibits:

 


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    MICROSOFT CORPORATION
  (Registrant)

Date: January 30, 2019

 

/ S / F RANK H. B ROD

  Frank H. Brod
 

Corporate Vice President, Finance and

Administration;

Chief Accounting Officer

Exhibit 99.1

Microsoft Cloud Strength Fuels Second Quarter Results

REDMOND, Wash. — January 30, 2019 Microsoft Corp. today announced the following results for the quarter ended December 31, 2018, as compared to the corresponding period of last fiscal year:

 

   

Revenue was $32.5 billion and increased 12%

   

Operating income was $10.3 billion and increased 18%

   

Net income was $8.4 billion GAAP and $8.6 billion non-GAAP

   

Diluted earnings per share was $1.08 GAAP and $1.10 non-GAAP

“Our strong commercial cloud results reflect our deep and growing partnerships with leading companies in every industry including retail, financial services, and healthcare,” said Satya Nadella, CEO of Microsoft. “We are delivering differentiated value across the cloud and edge as we work to earn customer trust every day.”

The following table reconciles our financial results reported in accordance with generally accepted accounting principles (GAAP) to non-GAAP financial results. Additional information regarding our non-GAAP definition is provided below. All growth comparisons relate to the corresponding period in the last fiscal year.

 

     

Three Months Ended December 31,

 

 

   ($ in millions, except per share amounts)

 

  

  Revenue  

 

    

  Operating  
  Income  

 

    

  Net Income  
  (Loss)  

 

    

  Diluted  
  Earnings  
  (Loss) per  
   Share  

 

 

  2017 As Reported (GAAP)

  

 

$28,918

 

  

 

$8,679

 

  

 

$(6,302)

 

  

 

$(0.82)

 

  Net TCJA Impact

  

 

-

 

  

 

-

 

  

 

13,800

 

  

 

1.78

 

  2017 As Adjusted for TCJA (non-GAAP)

  

 

$28,918

 

  

 

$8,679

 

  

 

$7,498

 

  

 

$0.96

 

  2018 As Reported (GAAP)

  

 

$32,471

 

  

 

$10,258

 

  

 

$8,420

 

  

 

$1.08

 

  Net TCJA Impact

  

 

-

 

  

 

-

 

  

 

157

 

  

 

0.02

 

  2018 As Adjusted for TCJA (non-GAAP)

  

 

$32,471

 

  

 

$10,258

 

  

 

$8,577

 

  

 

$1.10

 

  Percentage Change Y/Y (GAAP)

  

 

12%

 

  

 

18%

 

  

 

*

 

  

 

*

 

  Percentage Change Y/Y (non-GAAP)

  

 

12%

 

  

 

18%

 

  

 

14%

 

  

 

15%

 

  Percentage Change Y/Y (non-GAAP) Constant Currency

  

 

13%

 

  

 

18%

 

  

 

13%

 

  

 

14%

 

*

Not meaningful

GAAP results include net charges related to the Tax Cuts and Jobs Act (TCJA) of $157 million for the second quarter of fiscal year 2019 and $13.8 billion for the second quarter of fiscal year 2018. These net charges are excluded from our non-GAAP results.

Microsoft returned $9.6 billion to shareholders in the form of share repurchases and dividends in the second quarter of fiscal year 2019.

“Our solid execution delivered another strong quarter, with commercial cloud revenue growing 48% year-over-year to $9.0 billion,” said Amy Hood, executive vice president and chief financial officer of Microsoft. “We continue to make strategic investments to capture expanding market opportunities to drive growth across our businesses.”


Revenue in Productivity and Business Processes was $10.1 billion and increased 13% (up 13% in constant currency), with the following business highlights:

 

   

Office Commercial products and cloud services revenue increased 11% (up 11% in constant currency) driven by Office 365 Commercial revenue growth of 34% (up 33% in constant currency)

   

Office Consumer products and cloud services revenue increased 1% (up 2% in constant currency) with growth in Office 365 Consumer subscribers to 33.3 million

   

LinkedIn revenue increased 29% (up 30% in constant currency) with record levels of engagement highlighted by LinkedIn sessions growth of 30%

   

Dynamics products and cloud services revenue increased 17% (up 17% in constant currency) driven by Dynamics 365 revenue growth of 51% (up 50% in constant currency)

Revenue in Intelligent Cloud was $9.4 billion and increased 20% (up 21% in constant currency), with the following business highlights:

 

   

Server products and cloud services revenue increased 24% (up 24% in constant currency) driven by Azure revenue growth of 76% (up 76% in constant currency)

   

Enterprise Services revenue increased 6% (up 7% in constant currency)

Revenue in More Personal Computing was $13.0 billion and increased 7% (up 7% in constant currency), with the following business highlights:

 

   

Windows OEM revenue declined 5% (down 5% in constant currency)

   

Windows Commercial products and cloud services revenue increased 13% (up 14% in constant currency)

   

Surface revenue increased 39% (up 41% in constant currency)

   

Gaming revenue increased 8% (up 9% in constant currency) with Xbox software and services revenue growth of 31% (up 32% in constant currency)

   

Search advertising revenue excluding traffic acquisition costs increased 14% (up 14% in constant currency)

Business Outlook

Microsoft will provide forward-looking guidance in connection with this quarterly earnings announcement on its earnings conference call and webcast.

Quarterly Highlights, Product Releases, and Enhancements

Every quarter Microsoft delivers hundreds of products, either as new releases, services, or enhancements to current products and services. These releases are a result of significant research and development investments, made over multiple years, designed to help customers be more productive and secure and to deliver differentiated value across the cloud and the edge.

Here are the major product releases and other highlights for the quarter, organized by product categories, to help illustrate how we are accelerating innovation across our businesses while expanding our market opportunities.

Webcast Details

Satya Nadella, chief executive officer, Amy Hood, executive vice president and chief financial officer, Frank Brod, chief accounting officer, Carolyn Frantz, deputy general counsel and corporate secretary, and Michael Spencer, general manager of investor relations, will host a conference call and webcast at 2:30 p.m. Pacific time (5:30 p.m. Eastern time) today to discuss details of the company’s performance for the quarter and certain forward-looking information. The session may be accessed at http://www.microsoft.com/en-us/investor . The webcast will be available for replay through the close of business on January 30, 2020.


Non-GAAP Definition

TCJA Impact. We recorded a net charge of $157 million during the three months ended December 31, 2018 and a net charge of $13.8 billion during the three months ended December 31, 2017 related to TCJA. As of December 31, 2018, the U.S. Treasury Department and the Internal Revenue Service (IRS) are still in the process of issuing various TCJA regulations. Accordingly, future adjustments to the financial statements may be necessary as regulations are issued and when we file our fiscal year 2018 tax returns with the IRS and foreign tax authorities in the current fiscal year.

We have provided non-GAAP financial measures related to TCJA to aid investors in better understanding our performance. We believe these non-GAAP measures aid investors by providing additional insight into our operational performance and help clarify trends affecting our business. For comparability of reporting, management considers non-GAAP measures in conjunction with GAAP financial results in evaluating business performance. The non-GAAP financial measures presented in this release should not be considered as a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP.

Constant Currency

Microsoft presents constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars using the average exchange rates from the comparative period rather than the actual exchange rates in effect during the respective periods. All growth comparisons relate to the corresponding period in the last fiscal year. Microsoft has provided this non-GAAP financial information to aid investors in better understanding our performance. The non-GAAP financial measures presented in this release should not be considered as a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP.


Financial Performance Constant Currency Reconciliation

 

     

Three Months Ended December 31,

 

 

   ($ in millions, except per share amounts)

 

  

  Revenue  

 

    

  Operating  
  Income  

 

    

  Net Income  
  (Loss)  

 

    

  Diluted  
  Earnings  
  (Loss) per  
   Share  

 

 

  2017 As Reported (GAAP)

  

 

$28,918

 

  

 

$8,679

 

  

 

$(6,302)

 

  

 

$(0.82)

 

  2017 As Adjusted (non-GAAP)

  

 

$28,918

 

  

 

$8,679

 

  

 

$7,498

 

  

 

$0.96

 

  2018 As Reported

  

 

$32,471

 

  

 

$10,258

 

  

 

$8,420

 

  

 

$1.08

 

  2018 As Adjusted (non-GAAP)

  

 

$32,471

 

  

 

$10,258

 

  

 

$8,577

 

  

 

$1.10

 

  Percentage Change Y/Y (GAAP)

  

 

12%

 

  

 

18%

 

  

 

*

 

  

 

*

 

  Percentage Change Y/Y (non-GAAP)

  

 

12%

 

  

 

18%

 

  

 

14%

 

  

 

15%

 

  Constant Currency Impact

  

 

$(83)

 

  

 

$43

 

  

 

$71

 

  

 

$0.01

 

  Percentage Change Y/Y (non-GAAP) Constant Currency

  

 

13%

 

  

 

18%

 

  

 

13%

 

  

 

14%

 

*

Not meaningful

Segment Revenue Constant Currency Reconciliation

 

    

Three Months Ended December 31,

 

 

   ($ in millions)

 

  

Productivity and
Business Processes

 

    

Intelligent Cloud

 

    

More Personal
      Computing      

 

 

  2017 As Reported

  

 

$8,953

 

  

 

$7,795

 

  

 

$12,170

 

  2018 As Reported

  

 

$10,100

 

  

 

$9,378

 

  

 

$12,993

 

  Percentage Change Y/Y

  

 

13%

 

  

 

20%

 

  

 

7%

 

  Constant Currency Impact

  

 

$-

 

  

 

$(20)

 

  

 

$(63)

 

  Percentage Change Y/Y Constant Currency

  

 

13%

 

  

 

21%

 

  

 

7%

 

Selected Product and Service Revenue Constant Currency Reconciliation    

 

     

Three Months Ended December 31, 2018

 

 
     

Percentage Change
Y/Y (GAAP)

 

    

Constant Currency
Impact

 

    

Percentage Change
Y/Y Constant

Currency

 

 

  Office Commercial products and cloud services

  

 

11%

 

  

 

0%

 

  

 

11%

 

  Office 365 Commercial

  

 

34%

 

  

 

(1)%

 

  

 

33%

 

  Office Consumer products and cloud services

  

 

1%

 

  

 

1%

 

  

 

2%

 

  LinkedIn

  

 

29%

 

  

 

1%

 

  

 

30%

 

  Dynamics products and cloud services

  

 

17%

 

  

 

0%

 

  

 

17%

 

  Dynamics 365

  

 

51%

 

  

 

(1)%

 

  

 

50%

 

  Server products and cloud services

  

 

24%

 

  

 

0%

 

  

 

24%

 

  Azure

  

 

76%

 

  

 

0%

 

  

 

76%

 

  Enterprise Services

  

 

6%

 

  

 

1%

 

  

 

7%

 

  Windows OEM

  

 

(5)%

 

  

 

0%

 

  

 

(5)%

 

  Windows Commercial products and cloud services

  

 

13%

 

  

 

1%

 

  

 

14%

 

  Search advertising excluding traffic acquisition costs

  

 

14%

 

  

 

0%

 

  

 

14%

 

  Surface

  

 

39%

 

  

 

2%

 

  

 

41%

 

  Gaming

  

 

8%

 

  

 

1%

 

  

 

9%

 

  Xbox software and services

  

 

31%

 

  

 

1%

 

  

 

32%

 


About Microsoft

Microsoft (Nasdaq “MSFT” @microsoft) enables digital transformation for the era of an intelligent cloud and an intelligent edge. Its mission is to empower every person and every organization on the planet to achieve more.

Forward-Looking Statements

Statements in this release that are “forward-looking statements” are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially because of factors such as:

 

   

intense competition in all of our markets that may lead to lower revenue or operating margins;

 

   

increasing focus on cloud-based services presenting execution and competitive risks;

 

   

significant investments in new products and services that may not achieve expected returns;

 

   

acquisitions, joint ventures, and strategic alliances that may have an adverse effect on our business;

 

   

impairment of goodwill or amortizable intangible assets causing a significant charge to earnings;

 

   

legal changes, our evolving business model, piracy, and other factors may decrease the value of our intellectual property;

 

   

claims that Microsoft has infringed the intellectual property rights of others;

 

   

the possibility that we may fail to protect our source code;

 

   

cyberattacks and security vulnerabilities that could lead to reduced revenue, increased costs, liability claims, or harm to our reputation or competitive position;

 

   

disclosure and misuse of personal data that could cause liability and harm to our reputation;

 

   

the possibility that we may not be able to protect information stored in our products and services from use by others;

 

   

abuse of our advertising or social platforms that may harm our reputation or user engagement;

 

   

excessive outages, data losses, and disruptions of our online services if we fail to maintain an adequate operations infrastructure;

 

   

government litigation and regulatory activity relating to competition rules that may limit how we design and market our products;

 

   

potential liability under trade protection, anti-corruption, and other laws resulting from our global operations;

 

   

laws and regulations relating to the handling of personal data that may impede the adoption of our services or result in increased costs, legal claims, fines, or reputational damage;

 

   

the dependence of our business on our ability to attract and retain talented employees;


   

claims against us that may result in adverse outcomes in legal disputes;

 

   

additional tax liabilities;

 

   

quality or supply problems;

 

   

exposure to increased economic and operational uncertainties from operating a global business, including the effects of foreign currency exchange;

 

   

catastrophic events or geo-political conditions that may disrupt our business;

 

   

adverse economic or market conditions that may harm our business;

 

   

changes in our sales organization that may impact revenues;

 

   

the development of the internet of things presenting security, privacy, and execution risks;

 

   

issues about the use of artificial intelligence in our offerings that may result in competitive harm, legal liability, or reputational harm; and

 

   

damage to our reputation or our brands that may harm our business and operating results.

For more information about risks and uncertainties associated with Microsoft’s business, please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections of Microsoft’s SEC filings, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained by contacting Microsoft’s Investor Relations department at (800) 285-7772 or at Microsoft’s Investor Relations website at http://www.microsoft.com/en-us/investor .

All information in this release is as of December 31, 2018. The company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company’s expectations.

For more information, press only:

Microsoft Media Relations, WE Communications for Microsoft, (425) 638-7777, rrt@we-worldwide.com

For more information, financial analysts and investors only:

Michael Spencer, General Manager, Investor Relations, (425) 706-4400

Note to editors: For more information, news and perspectives from Microsoft, please visit the Microsoft News Center at http://www.microsoft.com/news . Web links, telephone numbers, and titles were correct at time of publication, but may since have changed. Shareholder and financial information, as well as today’s 2:30 p.m. Pacific time conference call with investors and analysts, is available at http://www.microsoft.com/en-us/investor .


MICROSOFT CORPORATION

INCOME STATEMENTS

(In millions, except per share amounts)(Unaudited)

 

    

Three Months Ended
December 31,

    

Six Months Ended
December 31,

 
    

     2018

    

      2017

    

     2018

    

     2017

 

 

 
           

 Revenue:

           

 Product

  

 

$16,219 

 

  

 

$17,926 

 

  

 

$33,518 

 

  

 

$32,224 

 

 Service and other

  

 

16,252 

 

  

 

10,992 

 

  

 

28,037 

 

  

 

21,232 

 

 

    

 

 

    

 

 

    

 

 

 

 Total revenue

  

 

32,471 

 

  

 

28,918 

 

  

 

61,555 

 

  

 

53,456 

 

 

    

 

 

    

 

 

    

 

 

 

 Cost of revenue:

           

 Product

  

 

5,885 

 

  

 

5,498 

 

  

 

9,534 

 

  

 

8,478 

 

 Service and other

  

 

6,538 

 

  

 

5,566 

 

  

 

12,794 

 

  

 

10,864 

 

 

    

 

 

    

 

 

    

 

 

 

 Total cost of revenue

  

 

12,423 

 

  

 

11,064 

 

  

 

22,328 

 

  

 

19,342 

 

 

    

 

 

    

 

 

    

 

 

 

 Gross margin

  

 

20,048 

 

  

 

17,854 

 

  

 

39,227 

 

  

 

34,114 

 

 Research and development

  

 

4,070 

 

  

 

3,504 

 

  

 

8,047 

 

  

 

7,078 

 

 Sales and marketing

  

 

4,588 

 

  

 

4,562 

 

  

 

8,686 

 

  

 

8,374 

 

 General and administrative

  

 

1,132 

 

  

 

1,109 

 

  

 

2,281 

 

  

 

2,275 

 

 

    

 

 

    

 

 

    

 

 

 

 Operating income

  

 

10,258 

 

  

 

8,679 

 

  

 

20,213 

 

  

 

16,387 

 

 Other income, net

  

 

127 

 

  

 

490 

 

  

 

393 

 

  

 

766 

 

 

    

 

 

    

 

 

    

 

 

 

 Income before income taxes

  

 

10,385 

 

  

 

9,169 

 

  

 

20,606 

 

  

 

17,153 

 

 Provision for income taxes

  

 

1,965 

 

  

 

15,471 

 

  

 

3,362 

 

  

 

16,879 

 

 

    

 

 

    

 

 

    

 

 

 

 Net income (loss)

  

 

$8,420 

 

  

 

$(6,302) 

 

  

 

$17,244 

 

  

 

$274 

 

  

 

 

    

 

 

    

 

 

    

 

 

 

 Earnings (loss) per share:

           

 Basic

  

 

$1.09 

 

  

 

$(0.82) 

 

  

 

$2.24 

 

  

 

$0.04 

 

 Diluted

  

 

$1.08 

 

  

 

$(0.82) 

 

  

 

$2.22 

 

  

 

$0.04 

 

 Weighted average shares outstanding:

           

 Basic

  

 

7,692 

 

  

 

7,710 

 

  

 

7,683 

 

  

 

7,709 

 

 Diluted

  

 

7,768 

 

  

 

7,710 

 

  

 

7,767 

 

  

 

7,799 

 

 

 


MICROSOFT CORPORATION

 

COMPREHENSIVE INCOME STATEMENTS

(In millions)(Unaudited)

 

    

Three Months Ended

December 31,

    

Six Months Ended
December 31,

 
    

     2018

    

     2017

    

     2018

    

     2017

 

 

 
           

 Net income (loss)

  

 

$8,420 

 

  

 

$(6,302) 

 

  

 

$17,244 

 

  

 

$274 

 

  

 

 

    

 

 

    

 

 

    

 

 

 

 Other comprehensive income (loss), net of tax:

           

 Net change related to derivatives

  

 

(15) 

 

  

 

(7) 

 

  

 

(60) 

 

  

 

(113) 

 

 Net change related to investments

  

 

881 

 

  

 

(878) 

 

  

 

620 

 

  

 

(1,166) 

 

 Translation adjustments and other

  

 

(264) 

 

  

 

(40) 

 

  

 

(319) 

 

  

 

253 

 

 

    

 

 

    

 

 

    

 

 

 

 Other comprehensive income (loss)

  

 

602 

 

  

 

(925) 

 

  

 

241 

 

  

 

(1,026) 

 

 

    

 

 

    

 

 

    

 

 

 

 Comprehensive income (loss)

  

 

$9,022 

 

  

 

$(7,227) 

 

  

 

$17,485 

 

  

 

$(752) 

 

  

 

 

    

 

 

    

 

 

    

 

 

 


MICROSOFT CORPORATION

 

BALANCE SHEETS

(In millions)(Unaudited)

 

    

December 31,

2018 

     June 30,
2018 
 

 

 

 Assets

     

 Current assets:

     

 Cash and cash equivalents

  

 

$6,638 

 

  

 

$11,946 

 

 Short-term investments

  

 

121,024 

 

  

 

121,822 

 

 

    

 

 

 

 Total cash, cash equivalents, and short-term investments

  

 

127,662 

 

  

 

133,768 

 

 Accounts receivable, net of allowance for doubtful accounts of $354 and $377

  

 

19,680 

 

  

 

26,481 

 

 Inventories

  

 

1,961 

 

  

 

2,662 

 

 Other

  

 

7,571 

 

  

 

6,751 

 

 

    

 

 

 

 Total current assets

  

 

156,874 

 

  

 

169,662 

 

 Property and equipment, net of accumulated depreciation of $33,082 and $29,223

  

 

32,717 

 

  

 

29,460 

 

 Operating lease right-of-use assets

  

 

6,806 

 

  

 

6,686 

 

 Equity investments

  

 

2,274 

 

  

 

1,862 

 

 Goodwill

  

 

41,577 

 

  

 

35,683 

 

 Intangible assets, net

  

 

8,482 

 

  

 

8,053 

 

 Other long-term assets

  

 

10,129 

 

  

 

7,442 

 

 

    

 

 

 

 Total assets

  

 

$258,859 

 

  

 

$258,848 

 

  

 

 

    

 

 

 

 Liabilities and stockholders’ equity

     

 Current liabilities:

     

 Accounts payable

  

 

$7,563 

 

  

 

$8,617 

 

 Current portion of long-term debt

  

 

3,516 

 

  

 

3,998 

 

 Accrued compensation

  

 

4,624 

 

  

 

6,103 

 

 Short-term income taxes

  

 

2,033 

 

  

 

2,121 

 

 Short-term unearned revenue

  

 

24,285 

 

  

 

28,905 

 

 Other

  

 

8,297 

 

  

 

8,744 

 

 

    

 

 

 

 Total current liabilities

  

 

50,318 

 

  

 

58,488 

 

 Long-term debt

  

 

69,653 

 

  

 

72,242 

 

 Long-term income taxes

  

 

29,161 

 

  

 

30,265 

 

 Long-term unearned revenue

  

 

3,799 

 

  

 

3,815 

 

 Deferred income taxes

  

 

2,062 

 

  

 

541 

 

 Operating lease liabilities

  

 

5,683 

 

  

 

5,568 

 

 Other long-term liabilities

  

 

6,055 

 

  

 

5,211 

 

 

    

 

 

 

 Total liabilities

  

 

166,731 

 

  

 

176,130 

 

 

    

 

 

 

 Commitments and contingencies

     

 Stockholders’ equity:

     

 Common stock and paid-in capital — shares authorized 24,000; outstanding 7,683 and 7,677

  

 

77,556 

 

  

 

71,223 

 

 Retained earnings

  

 

16,585 

 

  

 

13,682 

 

 Accumulated other comprehensive loss

  

 

(2,013) 

 

  

 

(2,187) 

 

 

    

 

 

 

 Total stockholders’ equity

  

 

92,128 

 

  

 

82,718 

 

 

    

 

 

 

 Total liabilities and stockholders’ equity

  

 

            $258,859 

 

  

 

            $258,848 

 

  

 

 

    

 

 

 


MICROSOFT CORPORATION

 

CASH FLOWS STATEMENTS

(In millions)(Unaudited)

 

     Three Months Ended 
December 31, 
     Six Months Ended 
December 31, 
 
     2018      2017      2018       2017   

 

 
           

 Operations

           

 Net income (loss)

  

 

        $8,420 

 

  

 

$(6,302) 

 

  

 

            $17,244 

 

  

 

$274 

 

 Adjustments to reconcile net income (loss) to net cash from operations:

           

 Depreciation, amortization, and other

  

 

2,995 

 

  

 

2,536 

 

  

 

5,832 

 

  

 

5,035 

 

 Stock-based compensation expense

  

 

1,183 

 

  

 

986 

 

  

 

2,290 

 

  

 

1,959 

 

 Net recognized gains on investments and derivatives

  

 

(135) 

 

  

 

(684) 

 

  

 

(375) 

 

  

 

(1,207) 

 

 Deferred income taxes

  

 

(173) 

 

  

 

(2,305) 

 

  

 

(420) 

 

  

 

(2,358) 

 

 Changes in operating assets and liabilities:

           

 Accounts receivable

  

 

(2,396) 

 

  

 

(3,908) 

 

  

 

6,798 

 

  

 

4,041 

 

 Inventories

  

 

1,654 

 

  

 

1,205 

 

  

 

698 

 

  

 

182 

 

 Other current assets

  

 

(173) 

 

  

 

354 

 

  

 

(850) 

 

  

 

36 

 

 Other long-term assets

  

 

(473) 

 

  

 

(344) 

 

  

 

(452) 

 

  

 

(622) 

 

 Accounts payable

  

 

(440) 

 

  

 

938 

 

  

 

(835) 

 

  

 

531 

 

 Unearned revenue

  

 

(2,122) 

 

  

 

(1,065) 

 

  

 

(4,563) 

 

  

 

(2,871) 

 

 Income taxes

  

 

(64) 

 

  

 

15,974 

 

  

 

(1,155) 

 

  

 

16,635 

 

 Other current liabilities

  

 

656 

 

  

 

643 

 

  

 

(1,666) 

 

  

 

(1,521) 

 

 Other long-term liabilities

  

 

(32) 

 

  

 

(153) 

 

  

 

11 

 

  

 

201 

 

 

    

 

 

    

 

 

    

 

 

 

 Net cash from operations

  

 

8,900 

 

  

 

7,875 

 

  

 

22,557 

 

  

 

20,315 

 

 

    

 

 

    

 

 

    

 

 

 

 Financing

           

 Proceeds from issuance of short-term debt, maturities of 90 days or less, net

  

 

 

  

 

3,759 

 

  

 

 

  

 

49 

 

 Proceeds from issuance of debt

  

 

 

  

 

3,229 

 

  

 

 

  

 

7,183 

 

 Repayments of debt

  

 

(3,000) 

 

  

 

(3,327) 

 

  

 

(3,000) 

 

  

 

(4,496) 

 

 Common stock issued

  

 

200 

 

  

 

189 

 

  

 

560 

 

  

 

496 

 

 Common stock repurchased

  

 

(6,413) 

 

  

 

(2,008) 

 

  

 

(10,157) 

 

  

 

(4,578) 

 

 Common stock cash dividends paid

  

 

(3,544) 

 

  

 

(3,238) 

 

  

 

(6,764) 

 

  

 

(6,241) 

 

 Other, net

  

 

(459) 

 

  

 

(156) 

 

  

 

(1,239) 

 

  

 

(306) 

 

 

    

 

 

    

 

 

    

 

 

 

 Net cash used in financing

  

 

(13,216) 

 

  

 

(1,552) 

 

  

 

(20,600) 

 

  

 

(7,893) 

 

 

    

 

 

    

 

 

    

 

 

 

 Investing

           

 Additions to property and equipment

  

 

(3,707) 

 

  

 

(2,586) 

 

  

 

(7,309) 

 

  

 

(4,718) 

 

 Acquisition of companies, net of cash acquired, and purchases of intangible and other assets

  

 

(1,593) 

 

  

 

(27) 

 

  

 

(1,838) 

 

  

 

(206) 

 

 Purchases of investments

  

 

(16,858) 

 

  

 

(45,154) 

 

  

 

(36,409) 

 

  

 

(78,115) 

 

 Maturities of investments

  

 

3,782 

 

  

 

6,352 

 

  

 

8,996 

 

  

 

11,578 

 

 Sales of investments

  

 

14,176 

 

  

 

41,261 

 

  

 

29,407 

 

  

 

64,297 

 

 Securities lending payable

  

 

 

  

 

(177) 

 

  

 

 

  

 

(71) 

 

 

    

 

 

    

 

 

    

 

 

 

 Net cash used in investing

  

 

(4,200) 

 

  

 

(331) 

 

  

 

(7,153) 

 

  

 

(7,235) 

 

 

    

 

 

    

 

 

    

 

 

 

 Effect of foreign exchange rates on cash and cash equivalents

  

 

17 

 

  

 

(17) 

 

  

 

(112) 

 

  

 

 

 

    

 

 

    

 

 

    

 

 

 

 Net change in cash and cash equivalents

  

 

(8,499) 

 

  

 

5,975

 

  

 

(5,308) 

 

  

 

5,196 

 

 Cash and cash equivalents, beginning of period

  

 

15,137 

 

  

 

6,884 

 

  

 

11,946 

 

  

 

7,663 

 

 

    

 

 

    

 

 

    

 

 

 

 Cash and cash equivalents, end of period

  

 

$6,638 

 

  

 

$12,859 

 

  

 

$6,638 

 

  

 

$12,859 

 

  

 

 

    

 

 

    

 

 

    

 

 

 


MICROSOFT CORPORATION

 

SEGMENT REVENUE AND OPERATING INCOME

(In millions)(Unaudited)

 

     Three Months Ended
December 31,
     Six Months Ended
December 31,
 
     2018       2017       2018       2017   

 

 
           

 Revenue

           

 

 Productivity and Business Processes

 

  

 

 

 

 

$10,100 

 

 

 

 

  

 

 

 

 

$8,953 

 

 

 

 

  

 

 

 

 

$19,871 

 

 

 

 

  

 

 

 

 

$17,191 

 

 

 

 

 

 Intelligent Cloud

 

  

 

 

 

 

9,378 

 

 

 

 

  

 

 

 

 

7,795 

 

 

 

 

  

 

 

 

 

17,945 

 

 

 

 

  

 

 

 

 

14,717 

 

 

 

 

 

 More Personal Computing

 

  

 

 

 

 

12,993 

 

 

 

 

  

 

 

 

 

12,170 

 

 

 

 

  

 

 

 

 

23,739 

 

 

 

 

  

 

 

 

 

21,548 

 

 

 

 

 

    

 

 

    

 

 

    

 

 

 

 

 Total

 

  

 

 

 

 

            $32,471 

 

 

 

 

  

 

 

 

 

$28,918 

 

 

 

 

  

 

 

 

 

$61,555 

 

 

 

 

  

 

 

 

 

$53,456 

 

 

 

 

  

 

 

    

 

 

    

 

 

    

 

 

 

 

 Operating Income

 

           

 

 Productivity and Business Processes

 

  

 

 

 

 

$4,015 

 

 

 

 

  

 

 

 

 

$3,337 

 

 

 

 

  

 

 

 

 

$7,896 

 

 

 

 

  

 

 

 

 

$6,343 

 

 

 

 

 

 Intelligent Cloud

 

  

 

 

 

 

3,279 

 

 

 

 

  

 

 

 

 

2,832 

 

 

 

 

  

 

 

 

 

6,210 

 

 

 

 

  

 

 

 

 

4,969 

 

 

 

 

 

 More Personal Computing

 

  

 

 

 

 

2,964 

 

 

 

 

  

 

 

 

 

2,510 

 

 

 

 

  

 

 

 

 

6,107 

 

 

 

 

  

 

 

 

 

5,075 

 

 

 

 

 

    

 

 

    

 

 

    

 

 

 

 

 Total

 

  

 

 

 

 

$10,258 

 

 

 

 

  

 

 

 

 

$8,679 

 

 

 

 

  

 

 

 

 

$20,213 

 

 

 

 

  

 

 

 

 

$16,387