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ITEM 8.       FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
                                                                INCOME STATEMENTS

In millions, except earnings per share

Year Ended June 30                                                                      2000        2001         2002

Revenue                                                                             $ 22,956    $ 25,296     $ 28,365
Operating expenses:
      Cost of revenue                                                                 3,002       3,455        5,191
      Research and development                                                        3,772       4,379        4,307
      Sales and marketing                                                             4,126       4,885        5,407
      General and administrative                                                      1,050         857        1,550
         Total operating expenses                                                    11,950      13,576       16,455
Operating income                                                                     11,006      11,720       11,910
Losses on equity investees and other                                                    (57)       (159)         (92)
Investment income/(loss)                                                              3,326         (36)        (305)
Income before income taxes                                                           14,275      11,525       11,513
Provision for income taxes                                                            4,854       3,804        3,684
Income before accounting change                                                       9,421       7,721        7,829
Cumulative effect of accounting change (net of income taxes of $185)                      –        (375)           –
Net income                                                                          $ 9,421     $ 7,346      $ 7,829

Basic earnings per share:
     Before accounting change                                                       $    1.81   $    1.45    $    1.45
     Cumulative effect of accounting change                                                 –       (0.07)           –
                                                                                    $    1.81   $    1.38    $    1.45

Diluted earnings per share:
      Before accounting change                                                      $    1.70   $    1.38    $    1.41
      Cumulative effect of accounting change                                                –       (0.06)           –
                                                                                    $    1.70   $    1.32    $    1.41

Weighted average shares outstanding:
    Basic                                                                               5,189       5,341        5,406
    Diluted                                                                             5,536       5,574        5,553

See accompanying notes.




16 / MSFT                                                                                             2002 FORM 10-K

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Income Statements

  • 1. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INCOME STATEMENTS In millions, except earnings per share Year Ended June 30 2000 2001 2002 Revenue $ 22,956 $ 25,296 $ 28,365 Operating expenses: Cost of revenue 3,002 3,455 5,191 Research and development 3,772 4,379 4,307 Sales and marketing 4,126 4,885 5,407 General and administrative 1,050 857 1,550 Total operating expenses 11,950 13,576 16,455 Operating income 11,006 11,720 11,910 Losses on equity investees and other (57) (159) (92) Investment income/(loss) 3,326 (36) (305) Income before income taxes 14,275 11,525 11,513 Provision for income taxes 4,854 3,804 3,684 Income before accounting change 9,421 7,721 7,829 Cumulative effect of accounting change (net of income taxes of $185) – (375) – Net income $ 9,421 $ 7,346 $ 7,829 Basic earnings per share: Before accounting change $ 1.81 $ 1.45 $ 1.45 Cumulative effect of accounting change – (0.07) – $ 1.81 $ 1.38 $ 1.45 Diluted earnings per share: Before accounting change $ 1.70 $ 1.38 $ 1.41 Cumulative effect of accounting change – (0.06) – $ 1.70 $ 1.32 $ 1.41 Weighted average shares outstanding: Basic 5,189 5,341 5,406 Diluted 5,536 5,574 5,553 See accompanying notes. 16 / MSFT 2002 FORM 10-K