Microsoft 2007 Annual Report Download - page 57

Download and view the complete annual report

Please find page 57 of the 2007 Microsoft annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 69

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69

PAGE 56
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
stock awards, and shared performance stock awards. The components of basic and diluted earnings per share
are as follows:
(In millions, except earnings per share)
Y
ear Ended June 30 2007 2006 2005
Net income available for common shareholders (A) $14,065
$12,599 $12,254
Weighted average outstanding shares of common stock (B) 9,742
10,438 10,839
Dilutive effect of employee stock options and awards 144
93 67
Common stock and common stock equivalents (C) 9,886
10,531 10,906
Earnings per share:
Basic (A/B) $ 1.44 $ 1.21 $ 1.13
Diluted (A/C) $ 1.42 $ 1.20 $ 1.12
For the years ended June 30, 2007, 2006, and 2005, 199 million, 649 million, and 854 million shares,
respectively, were attributable to outstanding stock options and were excluded from the calculation of diluted
earnings per share because the exercise prices of the stock options were greater than or equal to the average
price of the common shares, and therefore their inclusion would have been anti-dilutive. For the year ended
June 30, 2007, 4 million shared performance stock awards, out of the 14 million targeted amount outstanding,
have been excluded from the calculation of diluted earnings per share because the number of shares ultimately
issued is contingent on our performance against metrics established for the performance period, as discussed in
Note 14 – Employee Stock and Savings Plans.
NOTE 16 COMMITMENTS AND GUARANTEES
We have committed $821 million for constructing new buildings.
We have operating leases for most U.S. and international sales and support offices and certain equipment.
Rental expense for operating leases was $326 million, $276 million, and $299 million, in fiscal years 2007, 2006,
and 2005, respectively. Future minimum rental commitments under noncancellable leases are as follows:
(In millions)
Y
ear Ended June 30 Amount
2008 $ 349
2009 242
2010 202
2011 174
2012 and thereafter 374
$1,341
In connection with various operating leases, we issued residual value guarantees, which provide that if we do not
purchase the leased property from the lessor at the end of the lease term, then we are liable to the lessor for an
amount equal to the shortage (if any) between the proceeds from the sale of the property and an agreed value. As
of June 30, 2006, the maximum amount of the residual value guarantees was approximately $271 million. During
2007, we exercised a provision in the operating lease agreements to purchase the outstanding portion of certain
operating leases for approximately $41 million and are no longer subject to the residual value guarantees.
We provide indemnifications of varying scope and size to certain customers against claims of intellectual
property infringement made by third parties arising from the use of our products. In addition, we also provide
indemnification against credit risk in several geographical locations to our volume license resellers in case the