Google 2008 Annual Report Download - page 71

Cash provided by operating activities consisted of net income adjusted for certain non-cash items, including
depreciation, amortization, stock-based compensation expense, excess tax benefits from stock-based award
activity, deferred income taxes and impairment charges of equity investments, if any, as well as the effect of
changes in working capital and other activities. Cash provided by operating activities in 2008 was $7,852.9 million
and consisted of net income of $4,226.9 million, adjustments for non-cash items of $3,298.8 million and cash
provided by working capital and other activities of $327.2 million. Adjustments for non-cash items primarily
consisted of $1,212.2 million of depreciation and amortization expense on property and equipment, $1,119.8 million
of stock-based compensation and $1,094.8 million of impairment charges of equity investments, partially offset
by $224.6 million of deferred income taxes on earnings and $159.1 million of excess tax benefits from stock-based
award activity. In addition, changes in working capital activities primarily consisted of a net increase in income
taxes payable and deferred income taxes of $626.0 million (which includes the same $159.1 million of excess tax
benefits from stock-based awards included under adjustments for non-cash items) and an increase in accrued
expenses and other liabilities of $338.9 million. The increases in accrued expenses are a direct result of the growth
of our business and increases in headcount. These increases to working capital activities were partially offset by an
increase of $334.5 million in accounts receivable due to the growth in fees billed to our advertisers, a decrease of
$211.5 million in accounts payable due to the timing of invoice processing and payments and an increase of $147.1
million in prepaid revenue shares, expenses and other assets.
Cash provided by operating activities in 2007 was $5,775.4 million and consisted of net income of $4,203.7
million, adjustments for non-cash items of $1,253.1 million and cash provided by working capital and other
activities of $318.6 million. Adjustments for non-cash items primarily consisted of $868.6 million of stock-based
compensation and $807.7 million of depreciation and amortization expense on property and equipment, partially
offset by $379.2 million of excess tax benefits from stock-based award activity. In addition, changes in working
capital activities primarily consisted of a net increase in income taxes payable and deferred income taxes of
$744.8 million (which includes the same $379.2 million of excess tax benefits from stock-based awards included
under adjustments for non-cash items), an increase in accrued expenses and other liabilities of $418.9 million, an
increase in accrued revenue share of $150.3 million, an increase in accounts payable of $70.1 million and an
increase in deferred revenue of $70.3 million. The increases in accounts payable and accrued expenses are a
direct result of the growth of our business and increases in headcount. These increases to working capital
activities were partially offset by an increase of $837.2 million in accounts receivable due to the growth in fees
billed to our advertisers and an increase of $298.7 million in prepaid revenue shares, expenses and other assets.
Cash provided by operating activities in 2006 was $3,580.5 million and consisted of net income of $3,077.4
million, adjustments for non-cash items of $362.3 million and cash provided by working capital and other activities
of $140.8 million. Adjustments for non-cash items primarily consisted of $494.4 million of depreciation and
amortization expense on property and equipment and $458.1 million of stock-based compensation, partially offset
by $581.7 million of excess tax benefits from stock-based award activity. In addition, working capital activities
primarily consisted of a net increase in income taxes payable and deferred income taxes of $496.9 million
primarily comprised of the same $581.7 million of excess tax benefits from stock-based award activity included
under adjustments for non-cash items, an increase of $386.9 million in accounts payable and accrued expenses
due to the increase in purchases of property and equipment and other general expenditures, partially offset by an
increase of $624.0 million in accounts receivable due to the growth in fees billed to our advertisers, as well as a net
increase of $149.9 million in prepaid revenue share, expenses and other assets and accrued revenue share
primarily resulted from prepayments associated with AdSense and distribution arrangements.
As we expand our business internationally, we have offered payment terms to certain advertisers that are
standard in their locales, but longer than terms we would generally offer to our domestic advertisers. This may
increase our working capital requirements and may have a negative effect on cash provided by our operating
activities.
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