Salesforce.com 2014 Annual Report Download - page 26

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We expect to incur net GAAP losses in the future.
We have incurred net losses in each fiscal quarter except one since July 31, 2011. In addition, we expect our
costs to increase as a result of decisions made for our long-term benefit, such as equity awards and business
combinations. If our revenue does not grow to offset these expected increased costs, we will not be able to return
to profitability and we may continue to incur net losses, on a U.S. GAAP basis, in the future.
Our debt service obligations may adversely affect our financial condition and cash flows from operations.
We have a higher level of debt compared to historical periods, including our outstanding $575.0 million in
aggregate principal amount of 0.75% Senior Notes due January 15, 2015, $1.15 billion in aggregate principal
amount of 0.25% Senior Notes due April 1, 2018, $300.0 million term loan maturing in July 2016 with Bank of
America, N.A. and certain other lenders and capital lease arrangements in excess of $500.0 million. Our
maintenance of this indebtedness could have important consequences because:
• it may impair our ability to obtain additional financing in the future for working capital, capital
expenditures, acquisitions, general corporate or other purposes;
• an increased portion of our cash flows from operations may have to be dedicated towards repaying the
principal beginning in 2015 or earlier if necessary;
• it may make us more vulnerable to downturns in our business, our industry or the economy in general; and
• limitations within the term loan covenants may restrict our ability to incur additional indebtedness,
grant liens, merge or consolidate, dispose of assets, make investments, make acquisitions, enter into
transactions with affiliates, pay dividends or make distributions, repurchase stock and enter into
restrictive agreements, as defined in the credit agreement.
Our ability to meet our expenses and debt obligations will depend on our future performance, which will be
affected by financial, business, economic, regulatory and other factors. We will not be able to control many of these
factors, such as economic conditions and governmental regulations. Our operations may not generate sufficient cash
to enable us to service our debt. If we fail to make a payment on our debt, we could be in default on such debt. If we
are at any time unable to generate sufficient cash flows from operations to service our indebtedness when payment
is due, we may be required to attempt to renegotiate the terms of the instruments relating to the indebtedness, seek
to refinance all or a portion of the indebtedness or obtain additional financing. There can be no assurance that we
will be able to successfully renegotiate such terms, that any such refinancing would be possible or that any
additional financing could be obtained on terms that are favorable or acceptable to us.
A failure to comply with the covenants and other provisions of our outstanding debt could result in events of
default under such instruments, which could permit acceleration of all of our notes and the term loan. Any
required repayment of our notes and/or term loan as a result of a fundamental change or other acceleration would
lower our current cash on hand such that we would not have those funds available for use in our business.
We may not realize any benefits in connection with our purchase of undeveloped land in San Francisco.
If we do not realize any benefits, our financial performance may be negatively impacted.
In November 2010, we purchased approximately 14 acres of undeveloped real estate in San Francisco,
California, including entitlements and improvements associated with the land. We may not realize any benefits
with respect to the purchase of such real estate. During the first quarter of fiscal 2013, we suspended pre-
construction activity on the land. If we commence efforts to develop the real estate, we will be required to devote
substantial additional resources in the future, which may impact our liquidity and financial flexibility. In the
event that we decide to sell this property, the sale price may be less than the recorded value of the land on our
consolidated balance sheet, and our financial results may be negatively impacted.
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