Google 2010 Annual Report Download - page 52

On July 1, 2010, we signed a definitive agreement to acquire ITA Software, Inc., a privately-held flight
information software company, for $700 million in cash, subject to adjustments. The completion of this
transaction is subject to customary closing conditions. We expect this transaction to close in the first half of 2011.
On July 15, 2010, we announced a debt financing program of up to $3.0 billion through the issuance of
commercial paper. Net proceeds from the commercial paper program are used for general corporate purposes. As
of December 31, 2010, we had $3.0 billion of commercial paper outstanding recorded as short-term debt, with a
weighted-average interest rate of 0.3% that matures at various dates through November 2011. Average
commercial paper borrowings during the quarter were $2.3 billion, and the maximum amount of commercial paper
borrowings outstanding during the quarter was $3.0 billion. In conjunction with this program, we established a
$3.0 billion revolving credit facility expiring on June 30, 2013. Interest rate for the credit facility is determined
based on a formula using certain market rates. As of December 31, 2010, we were in compliance with the financial
covenant in the credit facility. No amounts were outstanding under the credit facility as of December 31, 2010.
In December 2010, we issued a secured promissory note in the amount of $468 million with an interest rate
of 1.0% that matures in one year. Proceeds were used for the acquisition of an office building in New York City.
Cash provided by operating activities consisted of net income adjusted for certain non-cash items, including
amortization, depreciation, deferred income taxes, excess tax benefits from stock-based award activities, stock-
based compensation expense, and the effect of changes in working capital and other activities. Cash provided by
operating activities in 2010 was $11,081 million, and consisted of net income of $8,505 million, adjustments for
non-cash items of $2,675 million, and cash used in working capital and other activities of $99 million. Adjustments
for non-cash items primarily consisted of $1,376 million of stock-based compensation expense, $1,067 million of
depreciation and amortization expense on property and equipment, and $329 million of amortization of intangible
and other assets, partially offset by $94 million of excess tax benefits from stock-based award activities. In
addition, the decrease in cash from changes in working capital activities primarily consisted of an increase of
$1,129 million in accounts receivable due to the growth in fees billed to our advertisers and an increase of $414
million in prepaid revenue share, expenses and other assets. These increases were partially offset by an increase in
accrued expenses and other liabilities of $745 million, an increase in accounts payable of $272 million, an increase
in accrued revenue share of $214 million, an increase in deferred revenue of $111 million, and a net increase in
income tax payable and deferred income taxes of $102 million, which includes the same $94 million of excess tax
benefits from stock-based award activities included under adjustments for non-cash items. The increase in
accrued expense and other liabilities, accounts payable, accrued revenue share, and deferred revenues are
primarily a result of the growth in our business and headcount. The increase in net income taxes payable and
deferred income taxes was primarily a result of additional tax obligations accrued, partially offset by the release of
certain tax reserves as a result of the settlement of our tax audits for our 2005 and 2006 tax years.
Cash provided by operating activities in 2009 was $9,316 million, and consisted of net income of $6,520
million, adjustments for non-cash items of $2,310 million, and cash provided by working capital and other activities
of $486 million. Adjustments for non-cash items primarily consisted of $1,240 million of depreciation and
amortization expense on property and equipment, $1,164 million of stock-based compensation expense, and $284
million of amortization of intangible and other assets, partially offset by $268 million of deferred income taxes on
earnings and $90 million of excess tax benefits from stock-based award activities. In addition, changes in working
capital activities primarily consisted of a decrease of $262 million in prepaid revenue share, expenses, and other
assets, an increase in accrued expenses and other liabilities of $243 million which is a direct result of the growth of
our business, and a net increase in income taxes payable and deferred income taxes of $217 million, which includes
the same $90 million of excess tax benefits from stock-based award activities included under adjustments for
non-cash items, and an increase in accrued revenue share of $158 million. These increases were partially offset by
an increase of $504 million in accounts receivable due to the growth in fees billed to our advertisers. The increase
in net income taxes payable and deferred income taxes was primarily a result of additional tax obligations accrued,
partially offset by an increase in the amount of estimated income taxes we paid during the year. The increase in
accrued revenue share was due to the growth in our AdSense and distribution programs and the timing of
payments made to our partners.
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