Microsoft 2006 Annual Report Download - page 36

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tender offer which was completed on August 17, 2006, and an additional $20 billion ongoing share repurchase program with an
expiration of June 30, 2011. Under the tender offer, we repurchased approximately 155 million shares of our common stock, or
approximately 1.5% of the common shares outstanding, for approximately $3.8 billion at a price per share of $24.75. On August
18, 2006, we announced that the authorization for the ongoing share repurchase program, previously announced on July 20,
2006, had been increased by approximately $16.2 billion. As a result, the company is authorized to repurchase additional
shares in an amount up to $36.2 billion through June 30, 2011.
We believe existing cash and short-term investments, together with funds generated from operations should be sufficient to
meet operating requirements, quarterly dividends and planned share repurchases. Our philosophy regarding the maintenance
of a balance sheet with a large component of cash and short-term investments, and equity and other investments, reflects our
views on potential future capital requirements relating to research and development, creation and expansion of sales
distribution channels, investments and acquisitions, share dilution management, legal risks, and challenges to our business
model. We regularly assess our investment management approach in view of our current and potential future needs.
Off-Balance Sheet Arrangements and Contractual Obligations
Off-Balance Sheet Arrangements
We provide indemnifications of varying scope and amount to certain customers against claims of intellectual property
infringement made by third parties arising from the use of our products. We evaluate estimated losses for such indemnifications
under SFAS No. 5, Accounting for Contingencies, as interpreted by FASB Interpretation No. (“FIN”) 45, Guarantor’s Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. We consider factors
such as the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of
loss. To date, we have not encountered material costs as a result of such obligations and have not accrued any material
liabilities related to such indemnifications in our financial statements.
Contractual Obligations
The following table summarizes our outstanding contractual obligations as of June 30, 2006:
(In millions)(1)
Payments due by period
Fiscal Years 2007 2008-2010 2011-2013
2014 and
thereafter Total
Lon
g
-
t
erm debt $– $– $–
$–
$ –
Construction commitments(2)(4)
234 – – – 234
Lease obligations:
Capital leases – – – – –
Operating leases(3)
250 436 158 41 885
Purchase commitments(4)
2,219 9 – – 2,228
Other lon
g
-
t
erm liabilities(5) 4 66 1 – 71
Total contractual obligations $2,707 $511 $159 $41 $ 3,418
(1) We have excluded the $970 million long-term contingent liability related to the antitrust and unfair competition class
action lawsuits referred to in Note 17 – Contingencies of the Notes to Financial Statements as the timing and amount to
be resolved in cash versus vouchers is subject to uncertainty.
(2) We have certain commitments for the construction of buildings. We expect to fund these commitments with existing cash
and cash flows from operations.
(3) Our future minimum rental commitments under noncancellable leases comprise the majority of the operating lease
obligations presented above. We expect to fund these commitments with existing cash and cash flows from operations.
(4) The amount presented above as purchase and construction commitments includes all known open purchase orders and
all known contracts that are take-or-pay contracts. We expect to fund these commitments with existing cash and our cash
flows from operations.
(5) We have excluded other obligations of $5.22 billion from other long-term liabilities presented above as the amount that
will be settled in cash is not known. We have also excluded unearned revenue of $1.76 billion.