UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2003
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From to
Commission File Number 0-14278
MICROSOFT CORPORATION
(Exact name of registrant as specified in its charter)
| Washington |
91-1144442 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
One Microsoft Way, Redmond, Washington 98052-6399
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (425) 882-8080
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes x No ¨
The number of shares outstanding of the registrant’s common stock as of April 30, 2003 was 10,736,261,053.
MICROSOFT CORPORATION
FORM 10-Q
For the Quarter Ended March 31, 2003
Part I. Financial Information
Part I. Financial Information
Item 1. Financial Statements
MICROSOFT CORPORATION
(In millions, except earnings per share)(Unaudited)
| Three Months Ended Mar. 31 |
Nine Months Ended Mar. 31 |
|||||||||||||||
| 2002 |
2003 |
2002 |
2003 |
|||||||||||||
| Revenue |
$ |
7,245 |
|
$ |
7,835 |
|
$ |
21,112 |
|
$ |
24,122 |
| ||||
| Operating expenses: |
||||||||||||||||
| Cost of revenue |
|
1,395 |
|
|
1,215 |
|
|
3,823 |
|
|
4,448 |
| ||||
| Research and development |
|
1,066 |
|
|
1,111 |
|
|
3,123 |
|
|
3,323 |
| ||||
| Sales and marketing |
|
1,240 |
|
|
1,494 |
|
|
3,864 |
|
|
4,417 |
| ||||
| General and administrative |
|
246 |
|
|
300 |
|
|
1,266 |
|
|
910 |
| ||||
| Total operating expenses |
|
3,947 |
|
|
4,120 |
|
|
12,076 |
|
|
13,098 |
| ||||
| Operating income |
|
3,298 |
|
|
3,715 |
|
|
9,036 |
|
|
11,024 |
| ||||
| Losses on equity investees and other |
|
(11 |
) |
|
(19 |
) |
|
(78 |
) |
|
(53 |
) | ||||
| Investment income |
|
739 |
|
|
472 |
|
|
312 |
|
|
888 |
| ||||
| Income before income taxes |
|
4,026 |
|
|
4,168 |
|
|
9,270 |
|
|
11,859 |
| ||||
| Provision for income taxes |
|
1,288 |
|
|
1,374 |
|
|
2,966 |
|
|
3,787 |
| ||||
| Net income |
$ |
2,738 |
|
$ |
2,794 |
|
$ |
6,304 |
|
$ |
8,072 |
| ||||
| Earnings per share (1): |
||||||||||||||||
| Basic |
$ |
0.25 |
|
$ |
0.26 |
|
$ |
0.58 |
|
$ |
0.75 |
| ||||
| Diluted |
$ |
0.25 |
|
$ |
0.26 |
|
$ |
0.57 |
|
$ |
0.74 |
| ||||
| Weighted average shares outstanding (1): |
||||||||||||||||
| Basic |
|
10,830 |
|
|
10,715 |
|
|
10,805 |
|
|
10,720 |
| ||||
| Diluted |
|
11,129 |
|
|
10,864 |
|
|
11,125 |
|
|
10,889 |
| ||||
| (1) | Earnings per share and weighted average shares outstanding for the three and nine months ended March 31, 2002 have been restated to reflect a two-for-one stock split in February 2003. |
See accompanying notes.
1
MICROSOFT CORPORATION
(In millions)(Unaudited)
| June 30 2002(1) |
Mar. 31 2003 | |||||
| Assets |
||||||
| Current assets: |
||||||
| Cash and equivalents |
$ |
3,016 |
$ |
4,300 | ||
| Short-term investments |
|
35,636 |
|
41,878 | ||
| Total cash and short-term investments |
|
38,652 |
|
46,178 | ||
| Accounts receivable, net of allowance for doubtful accounts of $209 and $206 |
|
5,129 |
|
4,075 | ||
| Inventories |
|
673 |
|
604 | ||
| Deferred income taxes |
|
2,112 |
|
2,257 | ||
| Other |
|
2,010 |
|
1,558 | ||
| Total current assets |
|
48,576 |
|
54,672 | ||
| Property and equipment, net |
|
2,268 |
|
2,208 | ||
| Equity and other investments |
|
14,191 |
|
13,052 | ||
| Goodwill |
|
1,426 |
|
2,782 | ||
| Intangible assets, net |
|
243 |
|
575 | ||
| Other long-term assets |
|
942 |
|
1,193 | ||
| Total assets |
$ |
67,646 |
$ |
74,482 | ||
| Liabilities and stockholders’ equity |
||||||
| Current liabilities: |
||||||
| Accounts payable |
$ |
1,208 |
$ |
1,310 | ||
| Accrued compensation |
|
1,145 |
|
1,129 | ||
| Income taxes |
|
2,022 |
|
2,546 | ||
| Short-term unearned revenue |
|
5,920 |
|
6,798 | ||
| Other |
|
2,449 |
|
1,378 | ||
| Total current liabilities |
|
12,744 |
|
13,161 | ||
| Long-term unearned revenue |
|
1,823 |
|
1,734 | ||
| Deferred income taxes |
|
398 |
|
369 | ||
| Other long-term liabilities |
|
501 |
|
936 | ||
| Commitments and contingencies |
||||||
| Stockholders’ equity: |
||||||
| Common stock and paid-in capital—shares authorized 24,000; outstanding 10,718 and 10,722 |
|
31,647 |
|
34,332 | ||
| Retained earnings, including accumulated other comprehensive income of $583 and $975 |
|
20,533 |
|
23,950 | ||
| Total stockholders’ equity |
|
52,180 |
|
58,282 | ||
| Total liabilities and stockholders’ equity |
$ |
67,646 |
$ |
74,482 | ||
| (1) | June 30, 2002 balances were obtained from audited financial statements. |
See accompanying notes.
2
MICROSOFT CORPORATION
(In millions)(Unaudited)
| Nine Months Ended Mar. 31 |
||||||||
| 2002 |
2003 |
|||||||
| Operations |
||||||||
| Net income |
$ |
6,304 |
|
$ |
8,072 |
| ||
| Depreciation, amortization, and other noncash items |
|
725 |
|
|
967 |
| ||
| Net recognized losses on investments |
|
1,252 |
|
|
598 |
| ||
| Stock option income tax benefits |
|
1,097 |
|
|
1,001 |
| ||
| Deferred income taxes |
|
(717 |
) |
|
(349 |
) | ||
| Unearned revenue |
|
7,311 |
|
|
9,056 |
| ||
| Recognition of unearned revenue |
|
(5,917 |
) |
|
(8,308 |
) | ||
| Accounts receivable |
|
(745 |
) |
|
1,225 |
| ||
| Other current assets |
|
(208 |
) |
|
418 |
| ||
| Other long-term assets |
|
(37 |
) |
|
(31 |
) | ||
| Other current liabilities |
|
1,731 |
|
|
38 |
| ||
| Other long-term liabilities |
|
279 |
|
|||||