Close

Form 8-K MICROSOFT CORP For: Jan 26

January 26, 2015 4:11 PM EST

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�26, 2015

Microsoft Corporation

(Exact Name of Registrant as Specified in Its Charter)

Washington

(State or Other Jurisdiction

of Incorporation)

0-14278 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))


Item�2.02. Results of Operations and Financial Condition

On January�26, 2015, Microsoft Corporation issued a press release announcing its financial results for the fiscal quarter ended December�31, 2014. 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:

99.1 Press release, dated January�26, 2015, issued by Microsoft Corporation


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 26, 2015

/S/ FRANK H. BROD

Frank H. Brod

Corporate Vice President, Finance and

Administration;

Chief Accounting Officer


INDEX TO EXHIBITS

Exhibit

No.

��

Description

99.1 �� Press release dated January 26, 2015

Exhibit 99.1

Microsoft Cloud and Devices Momentum Highlights Second Quarter Results

Commercial cloud revenue grows triple-digits for the sixth consecutive quarter, reaching an annualized revenue run rate of $5.5 billion

REDMOND, Wash. � January�26, 2015 � Microsoft Corp. today announced revenue of $26.5 billion for the quarter ended December�31, 2014. Gross margin, operating income, and diluted earnings per share (�EPS�) for the quarter were $16.3 billion, $7.8 billion, and $0.71 per share, respectively.

These financial results include $243 million of integration and restructuring expenses, or a $0.02 per share negative impact, related to both Microsoft�s restructuring plan announced in July 2014 and the ongoing integration of the Nokia Devices and Services (�NDS�) business. There is also a $0.04 per share negative impact related to income tax expense resulting from an IRS audit adjustment.

Microsoft also announced its intention to complete the existing $40 billion share repurchase authorization by December�31, 2016.

The following table notes the impact of the integration and restructuring expenses on the company�s financial performance (�Noted Items�). This financial information is provided to aid investors in better understanding the company�s performance. 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 �� Gross�Margin �� Operating
Income
�� Diluted�EPS

2013 As Reported (GAAP)

��

$24,519

��

��

$16,197

��

��

$7,969

��

��

$0.78

2014 As Reported (GAAP)

��

$26,470

��

��

$16,334

��

��

$7,776

��

��

$0.71

%Y/Y (GAAP)

��

8%

��

��

1%

��

��

(2)%

��

��

(9)%

2014 Impact of Noted Items

��

-

��

��

-

��

��

$(243)

��

��

$(0.02)

�Microsoft is continuing to transform, executing against our strategic priorities and extending our cloud leadership,� said Satya Nadella, chief executive officer of Microsoft.��We are taking bold steps forward across our business, and specifically with Windows 10, to deliver new experiences, new categories, and new opportunities to our customers.�

�We remain disciplined in our approach to operational and execution excellence, balanced with investments that drive meaningful growth for the business while increasing capital return to shareholders,� said Amy Hood, executive vice president and chief financial officer of Microsoft.

Devices and Consumer revenue grew 8% to $12.9 billion, with the following business highlights:

Surface revenue of $1.1 billion, up 24%, driven by Surface Pro 3 and accessories

Office 365 Home and Personal subscribers increased to over 9.2�million, up 30% sequentially over prior quarter

Search advertising revenue grew 23%, with Bing U.S. market share at 19.7%, up 150 basis points over prior year

Xbox console sales totaled 6.6�million units, with strong holiday season performance

Phone Hardware revenue of $2.3 billion, with 10.5�million Lumia units sold driven by growth in affordable smartphones


Windows OEM Pro revenue declined 13%; revenue was impacted by the business PC market and Pro mix returning to pre-Windows XP end of support levels and by new lower-priced licenses for devices sold to academic customers

Windows OEM non-Pro revenue declined 13%, with license growth from opening price point devices

Commercial revenue grew 5% to $13.3 billion, with the following business highlights:

Commercial cloud revenue grew 114% driven by Office 365, Azure and Dynamic CRM Online, and is now on an annualized revenue run rate of $5.5 billion

Office Commercial products and services revenue declined 1%; transactional revenue was impacted by the continued transition to Office 365 and declines in commercial PCs following the XP refresh cycle

Server products and services revenue grew 9%, with double-digit growth of SQL Server and System Center

Windows volume licensing revenue increased by 3%, with annuity revenue growth partially offset by declining transactional revenue

�We again saw enthusiasm and demand around our cloud offerings like Office 365, Dynamics CRM Online and Azure, as well as Surface Pro 3,� said Kevin Turner, chief operating officer at Microsoft. �Our sales engagement worldwide continues to focus on helping customers and partners transition to the cloud and navigate the shifting product mix related to our services and solutions.�

Business Outlook

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

Webcast Details

Satya Nadella, chief executive officer, Amy Hood, executive vice president and chief financial officer, Frank Brod, chief accounting officer, John Seethoff, deputy general counsel, and Chris Suh, general manager of Investor Relations, will host a conference call and webcast at 2:30 p.m. PST (5:30 p.m. EST) 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/investor. The webcast will be available for replay through the close of business on January�26, 2016.

Noted Items Definition

Integration and restructuring expenses were $243 million during the three months ended December�31, 2014. Integration and restructuring expenses include employee severance expenses and costs associated with the consolidation of facilities and manufacturing operations, including asset write-downs and contract termination costs, resulting from Microsoft�s restructuring plan. Integration and restructuring expenses also include systems consolidation and other business integration expenses, as well as transaction fees and direct acquisition costs, associated with the acquisition of NDS.

About Microsoft

Founded in 1975, Microsoft (Nasdaq �MSFT�) is the worldwide leader in software, services, devices, and solutions that help people and businesses realize their full potential.


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 Microsoft�s markets;

increasing focus on services presents execution and competitive risks;

significant investments in new products and services that may not be profitable;

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

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

Microsoft�s continued ability to protect and earn revenues from its intellectual property rights;

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

the possibility of unauthorized disclosure of significant portions of Microsoft�s source code;

cyber-attacks and security vulnerabilities in Microsoft products and services that could reduce revenue or lead to liability;

disclosure of personal data that could cause liability and harm to Microsoft�s reputation;

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

government litigation and regulation that may limit how Microsoft designs and markets its products;

potential liability under trade protection and anti-corruption laws resulting from our international operations;

Microsoft�s ability to attract and retain talented employees;

adverse results in legal disputes;

unanticipated tax liabilities;

Microsoft�s hardware and software products may experience quality or supply problems;

exposure to increased economic and operational uncertainties from operating a global business;

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

adverse economic or market conditions may harm our business.

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/investor.

All information in this release is as of January�26, 2015. 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:

Rapid Response Team, Waggener Edstrom Worldwide, (503)�443-7070, [email protected]

For more information, financial analysts and investors only:

Chris Suh, 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. PST conference call with investors and analysts, is available at http://www.microsoft.com/investor.


MICROSOFT CORPORATION

INCOME STATEMENTS

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

Three�Months�Ended

December�31,

Six�Months�Ended

December�31,

2014 2013 2014 2013

Revenue

����$ 26,470 �� ����$ 24,519 �� ����$ 49,671 �� ����$ 43,048 ��

Cost of revenue

10,136 �� 8,322 �� 18,409 �� 13,467 ��

��

��

��

Gross margin

16,334 �� 16,197 �� 31,262 �� 29,581 ��

Research and development

2,903 �� 2,748 �� 5,968 �� 5,515 ��

Sales and marketing

4,315 �� 4,283 �� 8,043 �� 7,587 ��

General and administrative

1,097 �� 1,197 �� 2,248 �� 2,176 ��

Integration and restructuring

243 �� 0 �� 1,383 �� 0 ��

��

��

��

Operating income

7,776 �� 7,969 �� 13,620 �� 14,303 ��

Other income (expense), net

74 �� (91) �� 126 �� (17) ��

��

��

��

Income before income taxes

7,850 �� 7,878 �� 13,746 �� 14,286 ��

Provision for income taxes

1,987 �� 1,320 �� 3,343 �� 2,484 ��

��

��

��

Net income

����$ ��������5,863 �� ����$ ����6,558 �� ����$ ��������10,403 �� ����$ ����11,802 ��
��

��

��

��

Earnings per share:

Basic

����$ 0.71 �� ����$ 0.79 �� ����$ 1.26 �� ����$ 1.42 ��

Diluted

����$ 0.71 �� ����$ 0.78 �� ����$ 1.25 �� ����$ 1.40 ��

Weighted average shares outstanding:

Basic

8,228 �� 8,326 �� 8,238 �� 8,333 ��

Diluted

8,297 �� 8,395 �� 8,321 �� 8,423 ��

Cash dividends declared per common share

����$ 0.31 �� ����$ 0.28 �� ����$ 0.62 �� ����$ 0.56 ��


MICROSOFT CORPORATION

COMPREHENSIVE INCOME STATEMENTS

(In millions)(Unaudited)

Three�Months�Ended
December 31,
Six�Months�Ended
December 31,
2014 2013 2014 2013

Net income

����$ 5,863 �� ����$ 6,558 �� ����$ 10,403 �� ����$ 11,802 ��

Other comprehensive income (loss):

Net unrealized gains on derivatives (net of
tax effects of $6, $1, $10 and $(2))

247 �� 43 �� 566 �� 17 ��

Net unrealized gains (losses) on investments (net of tax effects of $(124), $245, $(226) and $737)

(231) �� 482 �� (420) �� 1,434 ��

Translation adjustments and other (net of tax effects of $(211), $11, $(258) and $44)

(390) �� 21 �� (471) �� 83 ��

��

��

��

��Other comprehensive income (loss)

(374) �� 546 �� (325) �� 1,534 ��

��

��

��

Comprehensive income

����$ ��������5,489 �� ����$ ����7,104 �� ����$ ��������10,078 �� ����$ ����13,336 ��
��

��

��

��


MICROSOFT CORPORATION

BALANCE SHEETS

(In millions)(Unaudited)

December�31,
2014
June 30,
2014

Assets

Current assets:

Cash and cash equivalents

����$ 6,426 �� ����$ 8,669 ��

Short-term investments (including securities
loaned of $414 and $541)

83,823 �� 77,040 ��

��

Total cash, cash equivalents, and short-term
investments

90,249 �� 85,709 ��

Accounts receivable, net of allowance for doubtful
accounts of $288 and $301

16,186 �� 19,544 ��

Inventories

2,053 �� 2,660 ��

Deferred income taxes

1,701 �� 1,941 ��

Other

6,173 �� 4,392 ��

��

Total current assets

116,362 �� 114,246 ��

Property and equipment, net of accumulated
depreciation of $16,192 and $14,793

13,607 �� 13,011 ��

Equity and other investments

12,665 �� 14,597 ��

Goodwill

21,855 �� 20,127 ��

Intangible assets, net

7,299 �� 6,981 ��

Other long-term assets

3,060 �� 3,422 ��

��

Total assets

����$ ��174,848 �� ����$ ��172,384 ��
��

��

Liabilities and stockholders� equity

Current liabilities:

Accounts payable

����$ 6,932 �� ����$ 7,432 ��

Short-term debt

8,299 �� 2,000 ��

Current portion of long-term debt

1,749 �� 0 ��

Accrued compensation

3,479 �� 4,797 ��

Income taxes

711 �� 782 ��

Short-term unearned revenue

19,192 �� 23,150 ��

Securities lending payable

430 �� 558 ��

Other

6,623 �� 6,906 ��

��

Total current liabilities

47,415 �� 45,625 ��

Long-term debt

18,260 �� 20,645 ��

Long-term unearned revenue

2,051 �� 2,008 ��

Deferred income taxes

2,820 �� 2,728 ��

Other long-term liabilities

12,423 �� 11,594 ��

��

Total liabilities

82,969 �� 82,600 ��

��

Commitments and contingencies

Stockholders� equity:

Common stock and paid-in capital - shares
authorized 24,000; outstanding 8,218 and 8,239

68,765 �� 68,366 ��

Retained earnings

19,731 �� 17,710 ��

Accumulated other comprehensive income

3,383 �� 3,708 ��

��

Total stockholders� equity

91,879 �� 89,784 ��

��

Total liabilities and stockholders� equity

����$ 174,848 �� ����$ 172,384 ��
��

��


MICROSOFT CORPORATION

CASH FLOWS STATEMENTS

(In millions)(Unaudited)

��

Three�Months�Ended

December�31,

�� Six�Months�Ended
December 31,
�� 2014 �� 2013 �� 2014 �� 2013

Operations

�� �� �� ��

Net income

�� ����$ 5,863 �� �� ����$ 6,558 �� �� ����$ 10,403 �� �� ����$ 11,802 ��

Adjustments to reconcile net income
to net cash from operations:

�� �� �� ��

Depreciation, amortization, and
other

�� 1,521 �� �� 1,261 �� �� 2,949 �� �� 2,215 ��

Stock-based compensation
expense

�� 633 �� �� 591 �� �� 1,279 �� �� 1,226 ��

Net recognized losses (gains) on
investments and derivatives

�� (179) �� �� 47 �� �� (124) �� �� 140 ��

Excess tax benefits from
stock-based compensation

�� (22) �� �� (20) �� �� (524) �� �� (225) ��

Deferred income taxes

�� 314 �� �� (176) �� �� 615 �� �� 228 ��

Deferral of unearned revenue

�� 10,200 �� �� 9,845 �� �� 18,222 �� �� 17,281 ��

Recognition of unearned revenue

�� (11,495) �� �� (10,578) �� �� (22,138) �� �� (20,255) ��

Changes in operating assets and
liabilities:

�� �� �� ��

Accounts receivable

�� (3,378) �� �� (4,875) �� �� 3,249 �� �� 1,742 ��

Inventories

�� 1,070 �� �� 1,029 �� �� 587 �� �� 362 ��

Other current assets

�� (159) �� �� (95) �� �� (439) �� �� (651) ��

Other long-term assets

�� 170 �� �� (315) �� �� 449 �� �� (396) ��

Accounts payable

�� 137 �� �� 602 �� �� (522) �� �� 326 ��

Other current liabilities

�� (986) �� �� 388 �� �� (2,152) �� �� (867) ��

Other long-term liabilities

�� 651 �� �� 151 �� �� 840 �� �� (310) ��

��

��

��

Net cash from operations

�� 4,340 �� �� 4,413 �� �� 12,694 �� �� 12,618 ��

��

��

��

Financing

�� �� �� ��

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

�� 4,798 �� �� (712) �� �� 7,797 �� �� 0 ��

Proceeds from issuance of debt

�� 0 �� �� 8,262 �� �� 0 �� �� 8,850 ��

Repayments of debt

�� 0 �� �� (588) �� �� (1,500) �� �� (1,588) ��

Common stock issued

�� 121 �� �� 117 �� �� 337 �� �� 320 ��

Common stock repurchased

�� (2,145) �� �� (2,113) �� �� (5,033) �� �� (4,301) ��

Common stock cash dividends paid

�� (2,547) �� �� (2,332) �� �� (4,854) �� �� (4,248) ��

Excess tax benefits from
stock-based compensation

�� 22 �� �� 20 �� �� 524 �� �� 225 ��

Other

�� 285 �� �� (39) �� �� 285 �� �� (39) ��

��

��

��

Net cash from (used in) financing

�� 534 �� �� 2,615 �� �� (2,444) �� �� (781) ��

��

��

��

Investing

�� �� �� ��

Additions to property and equipment

�� (1,490) �� �� (1,732) �� �� (2,772) �� �� (2,963) ��

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

�� (2,794) �� �� (139) �� �� (2,935) �� �� (154) ��

Purchases of investments

�� (19,167) �� �� (13,126) �� �� (43,252) �� �� (27,894) ��

Maturities of investments

�� 2,389 �� �� 1,451 �� �� 4,082 �� �� 1,798 ��

Sales of investments

�� 16,108 �� �� 12,354 �� �� 32,553 �� �� 23,471 ��

Securities lending payable

�� 238 �� �� 167 �� �� (129) �� �� 103 ��

��

��

��

Net cash used in investing

�� (4,716) �� �� (1,025) �� �� (12,453) �� �� (5,639) ��

��

��

��

Effect of exchange rates on cash
and cash equivalents

�� (34) �� �� 33 �� �� (40) �� �� 57 ��

��

��

��

Net change in cash and cash
equivalents

�� 124 �� �� 6,036 �� �� (2,243) �� �� 6,255 ��

Cash and cash equivalents,
beginning of period

�� 6,302 �� �� 4,023 �� �� 8,669 �� �� 3,804 ��

��

��

��

Cash and cash equivalents, end of
period

�� ����$ ��������6,426 �� �� ����$ ����10,059 �� �� ����$ ��������6,426 �� �� ����$ ����10,059 ��
��

��

��

��


MICROSOFT CORPORATION

SEGMENT REVENUE AND GROSS MARGIN

(In millions)(Unaudited)

Three�Months�Ended

December�31,

Six�Months�Ended

December�31,

2014 2013 2014 2013

Revenue

Devices and Consumer Licensing

����$ 4,167 �� ����$ 5,544 �� ����$ 8,260 �� ����$ 10,028 ��

Computing and Gaming Hardware

3,997 �� 4,470 �� 6,450 �� 5,879 ��

Phone Hardware

2,284 �� 0 �� 4,893 �� 0 ��

Devices and Consumer Other

2,436 �� 1,874 �� 4,245 �� 3,428 ��

Commercial Licensing

10,679 �� 10,906 �� 20,552 �� 20,517 ��

Commercial Other

2,593 �� 1,780 �� 5,000 �� 3,382 ��

Corporate and Other

314 �� (55) �� 271 �� (186) ��

��

��

��

Total revenue

����$ 26,470 �� ����$ 24,519 �� ����$ 49,671 �� ����$ 43,048 ��
��

��

��

��

Gross Margin

Devices and Consumer Licensing

����$ 3,876 �� ����$ 4,981 �� ����$ 7,694 �� ����$ 8,901 ��

Computing and Gaming Hardware

460 �� 411 �� 939 �� 616 ��

Phone Hardware

331 �� 0 �� 809 �� 0 ��

Devices and Consumer Other

550 �� 387 �� 862 �� 711 ��

Commercial Licensing

9,926 �� 10,080 �� 19,026 �� 18,885 ��

Commercial Other

900 �� 415 �� 1,705 �� 689 ��

Corporate and Other

291 �� (77) �� 227 �� (221) ��

��

��

��

Total gross margin

����$ ��������16,334 �� ����$ ����16,197 �� ����$ ��������31,262 �� ����$ ����29,581 ��
��

��

��

��



Serious News for Serious Traders! Try StreetInsider.com Premium Free!

You May Also Be Interested In





Related Categories

SEC Filings