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“Ok Google, what’s my day like…”

Table of contents

  • Page 1
    "Ok Google, what's my day like..."

  • Page 2

  • Page 3
    ... the closing sale price of such shares on the Nasdaq Global Select Market on June 28, 2013) was $214,573,249,181. As of January 30, 2014, there were 279,883,488 shares of the registrant's Class A common stock outstanding and 56,167,343 shares of the registrant's Class B common stock outstanding...

  • Page 4

  • Page 5
    ... of Financial Condition and Results of Operations 24 Quantitative and Qualitative Disclosures About Market Risk 40 Financial Statements and Supplementary Data 42 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 77 Controls and Procedures 77 Other Information...

  • Page 6
    ï' ïƒ... contents 

  • Page 7
    ... exposure to fluctuations in foreign currency exchange rates; the expected increase of costs related to hedging activities under our foreign exchange risk management program; our expectation that our cost of revenues, research and development expenses, sales and marketing expenses, and general and...

  • Page 8
    ... in the world. Our Google segment generates revenues primarily by delivering relevant, cost-effective online advertising. Businesses use our AdWords program and AdSense program to promote their products and services with advertising on both Google-owned properties and publishers' sites across...

  • Page 9
    ... a user clicks on one of its ads. We also offer AdWords on a cost-per-impression basis that enables advertisers to pay us based on the number of times their ads appear on our websites and our Google Network Members' websites as specified by the advertiser. Our AdSense program enables websites that...

  • Page 10
    ... active users across our Google properties. Google Play Google Play is our digital entertainment store for apps, music, books and movies. We also launched our All Access music service this year which allows users to listen to our vast music library. This year we brought Google Play to more platforms...

  • Page 11
    ...across vertical markets. We bring businesses into our advertising network through direct, remote, and online sales channels, using technology and automation wherever possible to improve our customers' experience and to grow our business cost-effectively. Our direct advertising and sales teams focus...

  • Page 12
    ..., for ad dollars. Our advertisers typically advertise in multiple media, both online and offline. Mobile applications on iPhone and Android devices, which allow users to access information directly from a publisher without using search engines. Providers of online products and services. A number of...

  • Page 13
    ...sequential revenue growth rates. Available Information Our website is located at www.google.com, and our investor relations website is located at http://investor.google.com. The following filings are available through our investor relations website after we file them with the SEC: Annual Reports on...

  • Page 14
    ...Established companies have longer operating histories and more established relationships with customers and users, and they can use their experience and resources in ways that could affect our competitive position, including by making acquisitions, investing aggressively in research and development...

  • Page 15
    ... The revenue growth rate of our Motorola Mobile segment will also depend on a number of factors, including the success of our new products, our reliance on several large customers, the absence of long-term exclusivity arrangements with such customers, our ability to gain significant market share in...

  • Page 16
    ... of controls, procedures, and policies at the acquired company. Integration of the acquired company's accounting, human resource, and other administrative systems, and coordination of product, engineering, and sales and marketing functions. Transition of operations, users, and customers onto our...

  • Page 17
    ... to expanding our base of users, advertisers, Google Network Members, and other partners. We believe that the importance of brand recognition will increase due to the relatively low barriers to entry in the internet market. Our brand may be negatively impacted by a number of factors, including data...

  • Page 18
    ... property infringement claims are successful, they may have an adverse effect on our business, consolidated financial position, results of operations, or cash flows. Our intellectual property rights are valuable, and any inability to protect them could reduce the value of our products, services...

  • Page 19
    ... disclose sensitive information in order to gain access to our data or our users' or customers' data. Any such breach or unauthorized access could result in significant legal and financial exposure, damage to our reputation, and a loss of confidence in the security of our products and services that...

  • Page 20
    ... income, and we plan to further expand internationally. International revenues accounted for approximately 55% of our consolidated revenues in 2013, and more than half of our user traffic has been coming from outside the U.S. In certain international markets, we have limited operating experience...

  • Page 21
    ...our Google Network Members' websites. Revenue fluctuations caused by changes in property mix, platform mix and geographical mix. The amount of revenues and expenses generated and incurred in currencies other than U.S. dollars, and our ability to manage the resulting risk through our foreign exchange...

  • Page 22
    ... to be volatile. For example, from January 1, 2013 through December 31, 2013, the closing price of our Class A common stock ranged from $702.87 per share to $1,120.71 per share. The trading price of our Class A common stock may fluctuate widely in response to various factors, some of which are...

  • Page 23
    ... market price for the shares of Class A common stock will generally reflect the effect of a two-for-one stock split once the dividend is distributed. Although we plan to list the Class C capital stock on The Nasdaq Stock Market, we cannot predict whether, or to what extent, a liquid trading market...

  • Page 24
    ... contents  ITEM 1A. Risk Factors stockholders may view as beneficial. As noted above, the issuance of the Class C capital stock could have the effect of prolonging the influence of Larry, Sergey, and Eric. • Our board of directors has the right to elect directors to fill a vacancy created by...

  • Page 25
    ... from the Securities and Exchange Commission (SEC) related to various issues with respect to our public filings, including discussions of advertising and Motorola revenues in Management's Discussion and Analysis of Financial Condition and Results of Operations of our 2012 Annual Report on Form...

  • Page 26
    ...and low sales prices per share for our Class A common stock on the Nasdaq Global Select Market. Fiscal Year 2013 Quarters Ended: March 31, 2013 June 30, 2013 September 30, 2013 December 31, 2013 Fiscal Year 2012 Quarters Ended: March 31, 2012 June 30, 2012 September 30, 2012 December 31, 2012 High...

  • Page 27
    ...  Stock Performance Graph ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities PaRt II This performance graph shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange...

  • Page 28
    ... table provides information with respect to sales by our executive officers of TSOs for the period from October 1, 2013 to November 29, 2013, which is the date the TSO program was discontinued: Aggregate Amounts Number of Shares Sale Price Underlying TSOs Sold of TSOs Sold Executive Officer Patrick...

  • Page 29
    ... our consolidated financial statements and the related notes appearing in Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K. The consolidated statements of income data for the years ended December 31, 2011, 2012, and 2013 and the consolidated balance sheet data...

  • Page 30
    ... in the world. Our Google segment generates revenues primarily by delivering relevant, cost-effective online advertising. Businesses use our AdWords program and AdSense program to promote their products and services with advertising on both Google-owned properties and publishers' sites across...

  • Page 31
    ...monetization or generation of revenues from traffic on our websites and our Google Network Members' websites. As we expand our advertising programs and other products to international markets, we continue to increase our exposure to fluctuations in foreign currency to U.S. dollar exchange rates. We...

  • Page 32
    ...: Cost of revenues-Google (advertising and other) Cost of revenues-Motorola Mobile (hardware and other) Research and development Sales and marketing General and administrative Charge related to the resolution of Department of Justice investigation Total costs and expenses Income from operations...

  • Page 33
    ... a more engaging user shopping experience by enhancing search ads to include richer product information, such as product image, price, and merchant name. We believe that the increase in the number of paid clicks on Google websites and Google Network Members' websites is substantially the result of...

  • Page 34
    ...consolidated revenues, determined based on the billing addresses of our customers for our Google segment, and ship-to addresses of our customers for our Motorola Mobile segment: Year Ended December 31, 2011 2012 46% 47% 11% 10% 43% 43% 2013 45% 9% 46% United States United Kingdom Rest of the world...

  • Page 35
    ..., and revenue share payments to mobile carriers and original equipment manufacturers (OEMs). The decrease in traffic acquisition costs as a percentage of advertising revenues was primarily as a result of a shift of mix between Google website revenue and Google Network Members' websites. GOOGlE InC...

  • Page 36
    ... Google Network Members' W websites. The relative growth rates of expenses associated with distribution arrangements and the related revenues generated, including whether we share with certain existing and new distribution partners proportionately more of the aggregate advertising fees that we earn...

  • Page 37
    ... of total revenues in 2014 and future periods, as we expand our business globally, increase advertising and promotional expenditures in connection with new and existing products, and increase the level of service we provide to our advertisers, Google Network Members, and other partners. GOOGlE InC...

  • Page 38
    ... cost of revenues, research and development, sales and marketing, and general and administrative expenses. Restructuring and related charges decreased $450 million from 2012 to 2013 because we completed the majority of our restructuring and related activities related to Motorola in 2012. 32 GOOGLE...

  • Page 39
    ...prices of the contracts, as well as the volatility of the foreign exchange rates. As we expand our international business, we believe costs related to hedging activities under our foreign exchange risk management program may increase in dollar amount in 2014 and future periods. Provision for Income...

  • Page 40
    ... statutory income tax rate to our effective tax rate is set forth in Note 14 of Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. Net Income (Loss) from Discontinued Operations On April 17, 2013, we completed the disposition of the Motorola Home...

  • Page 41
    ...sequential revenue growth rates. Mar 31, 2012 Jun 30, 2012 Quarter Ended Sep 30, Dec 31, Mar 31, Jun 30, 2012 2012 2013 2013 (In millions, except per share amounts) (unaudited) Sep 30, 2013 Dec 31, 2013 Consolidated Statements of Income Data: Revenues: Google (advertising and other) Motorola Mobile...

  • Page 42
    ... Total revenues Costs and expenses: Cost of revenues-Google (advertising and other) Cost of revenues-Motorola Mobile (hardware and other) Research and development Sales and marketing General and administrative Total costs and expenses Income from operations Interest and other income, net Income from...

  • Page 43
    ... or returned from our securities lending program. Cash used in investing activities increased from 2012 to 2013, primarily attributable to a net increase in purchases of marketable securities and an increase in capital expenditures primarily related to our production equipment, data centers, and...

  • Page 44
    ... 31, 2013. These contracts are primarily related to certain of our distribution arrangements, video and other content licensing revenue sharing arrangements, data center operations and facility build-outs, as well as purchase of inventory. Long-term Debt Obligations Long-term debt obligations...

  • Page 45
    ... effect on our financial condition, changes in our financial condition, revenues, or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors. Critical Accounting Policies and Estimates We prepare our consolidated financial statements...

  • Page 46
    ... estimates associated with the accounting for acquisitions may change as additional information becomes available regarding the assets acquired and liabilities assumed, as more fully discussed in Note 6 of Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form...

  • Page 47
    ...change of 100 basis points could be experienced in the near term. A hypothetical 1.00% (100 basis points) increase in interest rates would have resulted in a decrease in the fair values of our marketable securities of approximately $1.1 billion and $1.0 billion at December 31, 2012 and December 31...

  • Page 48
    ... Data ITEM 8. Financial Statements and Supplementary Data ItEm 8. Google Inc. Index to Consolidated Financial Statements Reports of Independent Registered Public accounting Firm 43 Financial Statements: Consolidated Balance Sheets 45 Consolidated Statements of Income 46 Consolidated Statements...

  • Page 49
    ... Accounting Firm The Board of Directors and Stockholders of Google Inc. ITEM 8. Financial Statements and Supplementary Data PaRt II We have audited the accompanying consolidated balance sheets of Google Inc. as of December 31, 2012 and 2013, and the related consolidated statements of income...

  • Page 50
    ...in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Google Inc. as of December 31, 2012 and 2013, and the related consolidated statements of income, comprehensive income, stockholders' equity, and cash flows for each...

  • Page 51
    ... share amounts) ITEM 8. Consolidated Balance Sheets PaRt II As of December 31, 2012 As of December 31, 2013 ASSETS Current assets: Cash and cash equivalents Marketable securities Total cash, cash equivalents, and marketable securities (including securities loaned of $3,160 and $5,059) Accounts...

  • Page 52
    ...revenues-Google (advertising and other)(1) Cost of revenues-Motorola Mobile (hardware and other)(1) Research and development(1) Sales and marketing(1) General and administrative(1) Charge related to the resolution of Department of Justice investigation Total costs and expenses Income from operations...

  • Page 53
    ï' ïƒ... contents  Google Inc. Consolidated Statements of Comprehensive Income (In millions) ITEM 8. Consolidated Statements of Comprehensive Income PaRt II Net income Other comprehensive income (loss): Change in foreign currency translation adjustment Available-for-sale investments: Change in...

  • Page 54
    ... Consolidated Statements of Stockholders' Equity Google Inc. Consolidated Statements of Stockholders' Equity Class A and Class B Common Stock and Additional Paid-In Capital (In millions, except for share amounts which are reflected in thousands) Balance at January 1, 2011 Common stock issued Stock...

  • Page 55
    ...paid for interest Non-cash investing and financing activities: Receipt of Arris shares in connection with divestiture of Motorola Home Fair value of stock-based awards assumed in connection with acquisition of Motorola Property under capital lease See accompanying notes. GOOGlE InC. | Form 10-K 49

  • Page 56
    ... by delivering relevant, cost-effective online advertising in our Google segment. To a lesser extent, we generate revenues primarily from sales of mobile devices in our Motorola Mobile segment. In April 2013, we completed the disposition of the Motorola Home segment to Arris Group, Inc. (Arris) and...

  • Page 57
    ... our websites or our Google Network Members' websites. We report our Google AdSense revenues on a gross basis principally because we are the primary obligor to our advertisers. For hardware product sales, where we sell directly to end customers or through distribution channels, revenue recognition...

  • Page 58
    ..., and asset-backed securities. Foreign exchange contracts are transacted with various financial institutions with high credit standing. Accounts receivable are typically unsecured and are derived from revenues earned from customers located around the world. In 2011, 2012, and 2013, we generated...

  • Page 59
    ... as available to support current operations, we classify securities with maturities beyond 12 months as current assets under the caption marketable securities in the accompanying Consolidated Balance Sheets. We carry these securities at fair value, and report the unrealized gains and losses...

  • Page 60
    ... date. Foreign Currency Generally, the functional currency of our international subsidiaries is the local currency. We translate the financial statements of these subsidiaries to U.S. dollars using month-end rates of exchange for assets and liabilities, and average rates of exchange for revenues...

  • Page 61
    ...shares outstanding Employee stock options, including warrants issued under Transferable Stock Option program Restricted stock units Number of shares used in per share computation Diluted net income (loss) per share: Continuing operations Discontinued operations Diluted net income per share Class...

  • Page 62
    ...Financial Statements nOtE 3. Fair Value Measurements We measure our cash equivalents, marketable securities, and foreign currency and interest rate derivative contracts at fair value on a recurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset...

  • Page 63
    ...net, in the accompanying Consolidated Statements of Income. The following table summarizes the estimated fair value of our investments in marketable debt securities, accounted for as available-for-sale securities and classified by the contractual maturity date of the securities (in millions): As of...

  • Page 64
    ... 8. Notes to Consolidated Financial Statements U.S. government notes U.S. government agencies Foreign government bonds Municipal securities Corporate debt securities Agency residential mortgage-backed securities Asset-backed securities Total Less than 12 Months Fair Value Unrealized loss $ 4,404...

  • Page 65
    ... Instruments Balance Sheet location Derivative Assets: Level 2: Foreign exchange contracts Interest rate contracts Total Derivative Liabilities: Level 2: Foreign exchange contracts Total Fair Value Prepaid revenue share, expenses and other assets, current and non-current Prepaid revenue share...

  • Page 66
    ... 8. Notes to Consolidated Financial Statements Balance Sheet location Derivative Assets: Level 2: Foreign exchange contracts Interest rate contracts Total Derivative Liabilities: Level 2: Foreign exchange contracts Total Fair Value Prepaid revenue share, expenses and other assets, current and...

  • Page 67
    ..., securities lending and reverse repurchase agreements at gross fair values in the Consolidated Balance Sheets. However, our master netting and other similar arrangements allow net settlements under certain conditions. As of December 31, 2012 and December 31, 2013, information related to...

  • Page 68
    ...357) $19 ITEM 8. Notes to Consolidated Financial Statements Description Derivatives Securities lending agreements Total Gross Amounts of Recognized Liabilities $ 4 1,374 $ 1,378 (3) The balances at December 31, 2012 and December 31, 2013 were related to derivative assets which are allowed to be...

  • Page 69
    ... to Consolidated Financial Statements PaRt II In August 2013, we entered into a capital lease obligation on certain property expiring in 2028 with an option to purchase the property in 2016. The effective rate of the capital lease obligation approximates the market rate. The estimated fair value...

  • Page 70
    ..., information and entertainment experiences. The acquisition is expected to protect and advance our Android ecosystem and enhance competition in mobile computing. Under the transaction, we acquired all outstanding common shares of Motorola for $40 per share and all vested Motorola stock options...

  • Page 71
    ...31, 2012 Goodwill acquired Goodwill disposed Goodwill adjustment Balance as of December 31, 2013 $ 10,537 1,079 (64) (60) $ 11,492 As of December 31, 2013, the amount of goodwill related to the Motorola Mobile segment was not material. Information regarding our acquisition-related intangible assets...

  • Page 72
    ... from discontinued operations in the Consolidated Statements of Income for the year ended December 31, 2013. The Motorola Home segment results have been presented as a discontinued operation for the years ended December 31, 2012 and 2013. The following table provides the financial results included...

  • Page 73
    ... and 2013, restructuring charges were included in costs and expenses as follows (in millions): Year Ended December 31, 2012 Severance and Related Cost of revenues- Motorola Mobile Research and development Sales and marketing General and administrative Net income (loss) from discontinued operations...

  • Page 74
    ..., video and other content licensing revenue sharing arrangements, data center operations and facility build-outs, as well as purchase of inventory. Letters of Credit At December 31, 2013, we had unused letters of credit for $173 million, of which $69 million related to our Motorola Mobile segment...

  • Page 75
    ... of our products, services, and technologies, including Android, Google Search, Google AdWords, Google AdSense, Google Books, Google News, Google Image Search, Google Chrome, Google Talk, Google Voice, Motorola devices and YouTube, infringe the intellectual property rights of others. Adverse...

  • Page 76
    ... $0.001 par value of the Class C capital stock that is issued. We will give retroactive effect to prior period share and per share amounts in our consolidated financial statements for the effect of the Dividend, such that prior periods are comparable to current period presentation. Stock Plans We...

  • Page 77
    ... Class A common stock at the time of the sale over the exercise price of the TSO. The TSO program was discontinued as of November 29, 2013. This did not have a material impact on our consolidated financial statements. The total grant date fair value of stock options vested during 2011, 2012, and...

  • Page 78
    ... II ï' ïƒ... contents  ITEM 8. Notes to Consolidated Financial Statements The following table summarizes the activities for our unvested RSUs for the year ended December 31, 2013: Unvested Restricted Stock Units Weighted-Average Grant-Date Number Fair Value of Shares 10,994,927 $566.32 5,713...

  • Page 79
    ... to Consolidated Financial Statements PaRt II A retroactive extension of the 2012 federal research and development credit was signed into law on January 2, 2013 in accordance with The American Taxpayer Act of 2012. The benefit of $189 million related to the 2012 federal research and development...

  • Page 80
    ... year tax positions Decreases related to prior year tax positions Decreases related to settlement with tax authorities Increases related to acquisition Increases related to current year tax positions Balance as of December 31, 2012 Increases related to prior year tax positions Decreases related to...

  • Page 81
    ... we do not include this information in our measurement of the performance of our operating segments. Revenues by geography are based on the billing addresses of our customers for the Google segment and the ship-to-addresses of our customers for the Motorola Mobile segment. The following tables set...

  • Page 82
    ... Motorola Mobile will be presented as net income (loss) from discontinued operations on the Consolidated Statement of Income and assets and liabilities of Motorola Mobile to be disposed of will be presented as held for sale on the Consolidated Balance Sheets beginning in the first quarter of 2014...

  • Page 83
    ... control over financial reporting as of December 31, 2013 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in its report which is included in Item 8 of this Annual Report on Form 10-K. limitations on Effectiveness of Controls and Procedures In...

  • Page 84
    ..."Directors, Executive Officers and Corporate Governance-Corporate Governance and Board Matters-Compensation Committee Interlocks and Insider Participation" in the 2014 Proxy Statement and is incorporated herein by reference. ItEm 12. Security Ownership of Certain Beneficial Owners and management...

  • Page 85
    ... this Annual Report on Form 10-K: 1. Consolidated Financial Statements Reports of Independent Registered Public Accounting Firm 43 Financial Statements: Consolidated Balance Sheets 45 Consolidated Statements of Income 46 Consolidated Statements of Comprehensive Income 47 Consolidated Statements...

  • Page 86
    ... Officer) Date February 11, 2014 Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) February 11, 2014 Executive Chairman February 11, 2014 Co-Founder and Director February 11, 2014 Director February 11, 2014 Director February 11, 2014 Director...

  • Page 87
    ...2012 (File No. 000-50726) Registration Statement on Form S-1, August 18, 2004 as amended (File No. 333-114984) Current Report on Form 8-K April 23, 2007 (File No. 000-50726) Description Agreement and Plan of Merger, by and among Google Inc., RB98 Inc., and Motorola Mobility Holdings, Inc., dated...

  • Page 88
    ... consent order regarding Motorola Mobility Current Report on Form 8-K January 3, 2013 LLC and Google Inc. (File No. 000-50726) * Google 2012 Stock Plan-Form of Google Restricted Stock Unit Agreement * Google 2012 Stock Plan-Form of Google Stock Options Agreement * Computation of Earnings to Fixed...

  • Page 89
    ... Document 101.DEF XBRL Taxonomy Extension Definition Linkbase Document 101.LAB XBRL Taxonomy Extension Label Linkbase Document 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document ♥ Indicates management compensatory plan, contract, or arrangement. * Filed herewith. ‡ Furnished...

  • Page 90
    ... misleading with respect to the period covered by this report; Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and...

  • Page 91
    ... misleading with respect to the period covered by this report; Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and...

  • Page 92
    ... 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Annual Report on Form 10-K fairly presents, in all material respects, the financial condition and results of operations of Google Inc. Date: February 11, 2014 By: Name: Title: /s/ LARRY PAGE Larry Page...

  • Page 93
    ï' ïƒ... contents 

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    ï' ïƒ... contents 

  • Page 95
    ... Mountain View, California 94043 [email protected] You may also reach us by visiting the investor relations portion of our website at: http://investor.google.com If you wish to receive stockholder information online, you can register at: http://investor.google.com/notify.html Google's stock trades...

  • Page 96