Microsoft 2014 Annual Report Download - page 35

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Off-Balance Sheet Arrangements
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 and certain other matters. In evaluating estimated
losses on these indemnifications, we consider factors such as the degree of probability of an unfavorable outcome and
our ability to make a reasonable estimate of the amount of loss. These obligations did not have a material impact on our
consolidated financial statements during the periods presented.
Contractual Obligations
The following table summarizes the payments due by fiscal year for our outstanding contractual obligations as of June 30,
2014:
(In millions) 2015 2016-2017 2018-2019 Thereafter Total
Long-term debt: (a)
Principal payments $ 0 $ 2,500 $ 3,300 $ 14,945 $ 20,745
Interest payments 566 1,069 1,015 6,110 8,760
Construction commitments (b) 880 0 0 0 880
Operating leases (c) 878 1,419 1,054 1,063 4,414
Purchase commitments (d) 12,995 969 657 153 14,774
Other long-term liabilities (e) 0 354 80 393 827
Total contractual obligations $ 15,319 $ 6,311 $ 6,106 $ 22,664 $ 50,400
(a) See Note 12 – Debt of the Notes to Financial Statements.
(b) These amounts represent commitments for the construction of buildings, building improvements, and leasehold
improvements.
(c) These amounts represent undiscounted future minimum rental commitments under noncancellable facilities leases.
(d) These amounts represent purchase commitments, including all open purchase orders and all contracts that are take-
or-pay contracts that are not presented as construction commitments above.
(e) We have excluded long-term tax contingencies, other tax liabilities, and deferred income taxes of $13.3 billion from
the amounts presented. We have also excluded unearned revenue and non-cash items.
Other Planned Uses of Capital
We will continue to invest in sales, marketing, product support infrastructure, and existing and advanced areas of
technology. Additions to property and equipment will continue, including new facilities, data centers, and computer
systems for research and development, sales and marketing, support, and administrative staff. We expect capital
expenditures to increase in coming years in support of our cloud and devices strategy. We have operating leases for most
U.S. and international sales and support offices and certain equipment. We have not engaged in any related party
transactions or arrangements with unconsolidated entities or other persons that are reasonably likely to materially affect
liquidity or the availability of capital resources.
Liquidity
We earn a significant amount of our operating income outside the U.S., which is deemed to be permanently reinvested in
foreign jurisdictions. As a result, as discussed above under Cash, Cash Equivalents, and Investments, the majority of our
cash, cash equivalents, and short-term investments are held by foreign subsidiaries. We currently do not intend nor
foresee a need to repatriate these funds. We expect existing domestic cash, cash equivalents, short-term investments,
and cash flows from operations to continue to be sufficient to fund our domestic operating activities and cash
commitments for investing and financing activities, such as regular quarterly dividends, debt repayment schedules, and
material capital expenditures, for at least the next 12 months and thereafter for the foreseeable future. In addition, we
expect existing foreign cash, cash equivalents, short-term investments, and cash flows from operations to continue to be
sufficient to fund our foreign operating activities and cash commitments for investing activities, such as material capital
expenditures, for at least the next 12 months and thereafter for the foreseeable future.