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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2015
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
___________________________________________
State or Other Jurisdiction
of Incorporation Exact Name of Registrant as specified in its Charter,
Address of Principal Executive Offices, Zip Code and
Telephone Number (Including Area Code)
Commission
File Number IRS Employer
Identification
No.
Delaware Alphabet Inc.
1600 Amphitheatre Parkway
Mountain View, CA 94043
(650) 253-0000
001-37580 61-1767919
Delaware Google Inc.
1600 Amphitheatre Parkway
Mountain View, CA 94043
(650) 253-0000
001-36380 77-0493581
___________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Alphabet Inc.:
Class A Common Stock
$0.001 par value Nasdaq Stock Market LLC
(Nasdaq Global Select Market)
Class C Capital Stock
$0.001 par value Nasdaq Stock Market LLC
(Nasdaq Global Select Market)
Google Inc.:
None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
Alphabet Inc.:
None
Google Inc.:
None
___________________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Alphabet Inc. Yes No
Google Inc. Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Alphabet Inc. Yes No
Google Inc. Yes No

Table of contents

  • Page 1
    ... Class C Capital Stock $0.001 par value Google Inc.: None Securities registered pursuant to Section 12(g) of the Act: Title of each class Alphabet Inc.: None Google Inc.: None _____ Name of each exchange on which registered Nasdaq Stock Market LLC (Nasdaq Global Select Market) Nasdaq Stock Market...

  • Page 2
    ... Act). Alphabet Inc. Google Inc. Yes Yes No No As of June 30, 2015, the aggregate market value of shares held by non-affiliates of Google Inc. (the predecessor issuer pursuant to Rule 12g-3(a) under the Securities Exchange Act) (based upon the closing sale prices of such shares on the Nasdaq Global...

  • Page 3
    ...and explanation has been provided. In addition, separate consolidated financial statements for each registrant, along with notes to the consolidated financial statements, are included in this report. Unless indicated otherwise, throughout this Annual Report on Form 10-K, we refer to Alphabet and its...

  • Page 4
    ... With Accountants on Accounting and Financial Disclosure Controls and Procedures Other Information 18 20 22 41 43 98 98 99 Directors, Executive Officers and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Stockholder...

  • Page 5
    ...stock repurchase; our intention to align our capital structure so that debt is held at the holding company level; as well as other statements regarding our future operations, financial condition and prospects, and business strategies. Forward-looking statements may appear throughout this report...

  • Page 6
    ... in search and advertising have made our website widely used and our brand one of the most recognized in the world. We generate revenues primarily by delivering online advertising that consumers find relevant and that advertisers find cost-effective. Google's core products such as Search, Android...

  • Page 7
    ... campaigns and in turn, generate revenue by distributing their ads such as the TrueView ads displayed on our YouTube videos. We have built a world-class ad technology platform for brand advertisers, agencies, and publishers to power their digital marketing businesses. We aim to ensure great user...

  • Page 8
    ... auction-based advertising program. Other operating systems and mobile device companies. Providers of online products and services that provide answers, information, and services. A number of our online products and services, including Gmail, YouTube, and Google Docs, compete directly with new...

  • Page 9
    ...convert Google Inc. into a limited liability company. Available Information Our websites are located at www.google.com and www.abc.xyz, and our investor relations website is located at www.abc.xyz/investor. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and our Proxy Statements are...

  • Page 10
    ... our business, financial condition, results of operations, cash flows, and the trading price of our common and capital stock. Risks Related to Our Businesses and Industries We face intense competition. If we do not continue to innovate and provide products and services that are useful to users, we...

  • Page 11
    ... time as a result of a number of factors, including increasing competition, changes in property mix, platform mix, and geographical mix the challenges in maintaining our growth rate as our revenues increase to higher levels, the evolution of the online advertising market, including the increasing...

  • Page 12
    ... management time and focus from operating our business to acquisition integration challenges. Failure to successfully further develop the acquired business or technology. Implementation or remediation of controls, procedures, and policies at the acquired company. Integration of the acquired company...

  • Page 13
    ... or investments may not materialize. Our business depends on a strong brand, and failing to maintain and enhance our brand would hurt our ability to expand our base of users, advertisers, Google Network Members, and other partners. Our strong Google brand has significantly contributed to the success...

  • Page 14
    ...cause significant diversion of management attention. To the extent such intellectual 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...

  • Page 15
    ... that enable users to exchange information, advertise products and services, conduct business, and engage in various online activities both domestically and internationally. The law relating to the liability of providers of these online services and products for activities of their users is still...

  • Page 16
    ... the future, supply shortages and price increases driven by raw material availability, manufacturing capacity, labor shortages, industry allocations, natural disasters and significant changes in the financial or business condition of our suppliers. Workaround plans to address shortages could entail...

  • Page 17
    ... business, operating results, and financial condition. Our international operations are significant to our revenues and net income, and we plan to continue to grow internationally. International revenues accounted for approximately 54% of our consolidated revenues in 2015. In certain international...

  • Page 18
    .... Our quarterly, year-to-date, and annual expenses as a percentage of our revenues may differ significantly from our historical or projected rates. Our operating results in future quarters may fall below expectations. Any of these events could cause our stock price to fall. Each of the risk factors...

  • Page 19
    ... in a loss of existing users and advertisers, and increased costs, and could impair our ability to attract new users and advertisers, thereby harming our revenues and growth. New technologies could block online ads, which would harm our Google business. Technologies have been developed that can...

  • Page 20
    ... sale of our company or our assets, for the foreseeable future. In addition, because our Class C capital stock carries no voting rights (except as required by applicable law), the issuance of the Class C capital stock, including in future stock-based acquisition transactions and to fund employee...

  • Page 21
    ... outstanding voting stock unless the holder has held the stock for three years or, among other things, the board of directors has approved the transaction. Our board of directors could rely on Delaware law to prevent or delay an acquisition of us. Risks Related to Our Holding Company Reorganization...

  • Page 22
    ... April 3, 2014. Prior to that time, there was no public market for our Class C capital stock. The following table sets forth for the indicated periods the high and low sales prices per share for our Class C capital stock on the Nasdaq Global Select Market. Fiscal Year 2015 Quarters Ended: High Low...

  • Page 23
    ... earnings and do not expect to pay any cash dividends in the foreseeable future. Issuer Purchases of Equity Securities The following table presents information with respect to Alphabet's repurchases of Class C capital stock during the quarter ended December 31, 2015. Total Number of Shares Purchased...

  • Page 24
    ... with Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" and 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 historical results are not...

  • Page 25
    ... Google were as follows for the periods presented: Year Ended December 31, 2013(1) 2014(1) (in millions) 2011(1) 2012(1) 2015 Consolidated Statements of Income Data: Revenues $ Income from operations Net income from continuing operations Net income (loss) from discontinued operations Net income...

  • Page 26
    ... in the right context. This may also have different monetization profiles to our existing advertising business. These trends will continue to affect our monetization in the future. • Users are increasingly using multiple devices to access our products and services, and our advertising revenues are...

  • Page 27
    ...products and relevant advertising programs useful to our users in these markets. This has led to a trend of increased revenues from international markets over time and we expect that our results will continue to be impacted by our performance in these markets, particularly as low-cost mobile devices...

  • Page 28
    ... Annual Report on Form 10-K for further information. Consolidated Results of Operations The following table presents our operating results as a percentage of revenues for the periods presented: Year Ended December 31, 2013(1)(2) 2014(1)(2) 2015 Consolidated Statements of Income Data: Revenues Costs...

  • Page 29
    ... by our total number of paid clicks and represents the average cost of each engagement by users we charge advertisers. The rate of change in revenue and revenue growth, as well as the rate of change in paid clicks and cost-per-click on Google websites and Google Network Members' websites and their...

  • Page 30
    ... time as a result of a number of factors, including increasing competition, query growth rates, challenges in maintaining our growth rate as our revenues increase to higher levels, the evolution of the online advertising market, our investments in new business strategies, changes in our product mix...

  • Page 31
    ... of our products, advertisers, and user base, and an increase in the number of Google Network Members, partially offset by certain advertising policy changes. The decrease in the average cost-per-click from 2013 to 2014 was due to various factors, such as the geographic mix, device mix, property mix...

  • Page 32
    ... related to DoubleClick ad serving software revenues from Google other revenues to Advertising Revenues from Google Network Members' websites to conform with the current period presentation. Google other revenues consist primarily of Sales of apps and media content in the Google Play store; Sales...

  • Page 33
    ... Notes to Consolidated Financial Statements included in Part II of this Annual Report on Form 10-K. Use of Constant Currency and Constant Currency Growth The impact of exchange rates on our business is an important factor in understanding period to period comparisons. Our international revenues are...

  • Page 34
    ...the Notes to Consolidated Financial Statements included in Part II of this Annual report t on Form 10-K for further information. In 2015, our revenues from the Rest of the world (excluding the United Kingdom) were unfavorably impacted by changes in foreign currency exchange rates, primarily because...

  • Page 35
    ...2014 related to a patent licensing royalty asset acquired in connection with the Motorola acquisition that did not recur in 2015. The decrease in aggregate traffic acquisition costs as a percentage of advertising revenues was primarily a result of a shift of mix from Google Network Members' websites...

  • Page 36
    ... customer service functions; Advertising and promotional expenditures related to our products and services; and Stock-based compensation expense. Sales and marketing expenses increased $916 million and remained relatively flat as a percentage of revenues from 2014 to 2015. The increase in dollar...

  • Page 37
    ... and administrative expenses increased $285 million and decreased as a percentage of revenues from 2014 to 2015. The increase in dollar amount was primarily due to an increase in stock-based compensation expense of $136 million and an increase in labor and facilities-related costs of $69 million...

  • Page 38
    ... the Notes to Consolidated Financial Statements included in Part II of this Annual Report on Form 10-K. Our provision for income taxes and our effective tax rate decreased from 2014 to 2015, largely due to a discrete benefit recognized in 2015 as a result of the resolution of a multi-year audit in...

  • Page 39
    ...about our provision for income taxes. Quarterly Results of Operations The following tables presenting our quarterly results of operations should be read in conjunction with the consolidated financial statements and related notes included in Item 8 of this Annual Report on Form 10-K. We have prepared...

  • Page 40
    ... for Google pursuant to Rule 12g-3(a)): Mar 31, 2014(1) Jun 30, 2014(1) Sep 30, 2014(1) Quarter Ended Dec 31, Mar 31, 2014(1) 2015(1) (unaudited) Jun 30, 2015 Sep 30, 2015 Dec 31, 2015 Basic net income (loss) per share of Class A and B common stock: Continuing operations Discontinued operations...

  • Page 41
    ... Financial Statements included in Part II of this Annual Report on Form 10-K. Capital Resources and Liquidity As of December 31, 2015, we had $73.1 billion of cash, cash equivalents, and marketable securities. Cash equivalents and marketable securities are comprised of time deposits, money market...

  • Page 42
    ... by operating activities increased from 2014 to 2015 primarily due to increased net income adjusted for depreciation and stock-based compensation expense, and loss on sales of marketable and non-marketable securities. This is partially offset by a net decrease in cash from changes in working capital...

  • Page 43
    ... or returned from our securities lending program, as well as acquisitions and divestitures of businesses and intangible assets. Cash used in investing activities increased from 2014 to 2015 primarily due to net increases in purchases of marketable securities, activities related to security lending...

  • Page 44
    ...of operations, or cash flows. See Note 11 of Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for additional information regarding contingencies. Business Combinations We allocate the fair value of purchase consideration to the tangible assets acquired...

  • Page 45
    ..., we will write down the asset to its fair value and record the corresponding charge as other income (expense), net. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to financial market risks, including changes in currency exchange rates and interest rates. Foreign...

  • Page 46
    ... debt securities, agency mortgage-backed securities, money market and other funds, municipal securities, time deposits, asset backed securities, and debt instruments issued by foreign governments. By policy, we limit the amount of credit exposure to any one issuer. Our investments in both fixed rate...

  • Page 47
    ... Google Inc. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Reports of Ernst & Young LLP, Independent Registered Public Accounting Firm Financial Statements of Alphabet Inc.: Consolidated Balance Sheets Consolidated Statements of Income Consolidated Statements of Comprehensive Income Consolidated...

  • Page 48
    ...and Google Inc. REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Stockholders of Alphabet Inc. We have audited the accompanying consolidated balance sheets of Alphabet Inc. as of December 31, 2014 and 2015, and the related consolidated statements...

  • Page 49
    ... and Google Inc. REPORT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Stockholders of Google Inc. We have audited the accompanying consolidated balance sheets of Google Inc. as of December 31, 2014 and 2015, and the related consolidated statements of...

  • Page 50
    ... of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Alphabet Inc. as of December 31, 2014 and 2015, and the related consolidated statements of income, comprehensive income, stockholders' equity and cash flows for each of the three years in the period...

  • Page 51
    ... of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Google Inc. as of December 31, 2014 and 2015, and the related consolidated statements of income, comprehensive income, stockholders' equity and cash flows for each of the three years in the period...

  • Page 52
    ... assets Total current assets Prepaid revenue share, expenses and other assets, non-current Non-marketable investments Deferred income taxes Property and equipment, net Intangible assets, net Goodwill Total assets Liabilities and Stockholders' Equity Current liabilities: Accounts payable Short-term...

  • Page 53
    ... and Google Inc. Alphabet Inc. CONSOLIDATED STATEMENTS OF INCOME (In millions, except per share amounts) Year Ended December 31, 2013 2014 2015 Revenues Costs and expenses: Cost of revenues Research and development Sales and marketing General and administrative Total costs and expenses Income from...

  • Page 54
    Table of Contents Alphabet Inc. and Google Inc. Alphabet Inc. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In millions) Year Ended December 31, 2013 2014 2015 Net income $ Other comprehensive income (loss): Change in foreign currency translation adjustment Available-for-sale investments: ...

  • Page 55
    ... 31, 2014 Common and capital stock issued Stock-based compensation expense Stock-based compensation tax benefits Tax withholding related to vesting of restricted stock units Repurchases of capital stock Adjustment Payment to Class C capital stockholders Net income Other comprehensive loss Balance as...

  • Page 56
    ... from stock-based award activities Deferred income taxes Gain on divestiture of business (Gain) loss on marketable and non-marketable investments, net Other Changes in assets and liabilities, net of effects of acquisitions: Accounts receivable Income taxes, net Prepaid revenue share, expenses...

  • Page 57
    ... assets Total current assets Prepaid revenue share, expenses and other assets, non-current Non-marketable investments Deferred income taxes Property and equipment, net Intangible assets, net Goodwill Total assets Liabilities and Stockholders' Equity Current liabilities: Accounts payable Short-term...

  • Page 58
    ...Google Inc. CONSOLIDATED STATEMENTS OF INCOME (In millions) Year Ended December 31, 2013 2014 2015 Revenues Costs and expenses: Cost of revenues Research and development Sales and marketing General and administrative Total costs and expenses Income from operations Other income (expense), net Income...

  • Page 59
    Table of Contents Alphabet Inc. and Google Inc. Google Inc. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In millions) Year Ended December 31, 2013 2014 2015 Net income $ Other comprehensive income (loss): Change in foreign currency translation adjustment Available-for-sale investments: Change...

  • Page 60
    ...-based compensation tax benefits Tax withholding related to vesting of restricted stock units Alphabet share exchange Capital transactions with Alphabet Adjustment Payment to Class C capital stockholders Net income Other comprehensive loss Balance as of December 31, 2015 659,958 11,706 $ 22,835...

  • Page 61
    ... from stock-based award activities Deferred income taxes Gain on divestiture of business (Gain) loss on marketable and non-marketable investments, net Other Changes in assets and liabilities, net of effects of acquisitions: Accounts receivable Income taxes, net Prepaid revenue share, expenses...

  • Page 62
    ... Limited (Lenovo). The financial results of Motorola Mobile are presented as net income (loss) from discontinued operations on the Consolidated Statements of Income for the years ended December 31, 2013 and 2014. See Note 9 for further discussion of the sale. On August 10, 2015, we announced plans...

  • Page 63
    ... each time a user clicks on one of the ads that appears next to the search results or content on Google websites or our Google Network Members' websites. For those advertisers using our cost-per-impression pricing, we recognize as revenues the fees charged to advertisers each time their ads are...

  • Page 64
    ... accompanying Consolidated Balance Sheets. Cost of Revenues Cost of revenues consists of traffic acquisition costs which are the advertising revenues shared with our Google Network Members and the amounts paid to our distribution partners who distribute our browser or otherwise direct search queries...

  • Page 65
    ... view these securities as available to support current operations, we classify highly liquid 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...

  • Page 66
    ... Alphabet Inc. and Google Inc. We have accounted for our non-marketable investments that meet the definition of a debt security as availablefor-sale securities. Since these securities do not have contractual maturity dates and we do not intend to liquidate them in the next 12 months, we have...

  • Page 67
    ... of our international subsidiaries is the local currency. We translate the financial statements of these subsidiaries to U.S. dollars using month-end exchange rates for assets and liabilities, and average rates for the annual period derived from month-end exchange rates for revenues, costs, and...

  • Page 68
    ... significant impact relates to the accounting for equity investments. It will impact the disclosure and presentation of financial assets and liabilities. ASU 2016-01 is effective for annual reporting periods, and interim periods within those years beginning after December 15, 2017. Early adoption by...

  • Page 69
    ... our time deposits are foreign deposits. The balances as of December 31, 2014 and 2015 were related to cash collateral received in connection with our securities lending program, which was invested in reverse repurchase agreements maturing within three months. See section titled "Securities Lending...

  • Page 70
    ... of other income (expense), 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...

  • Page 71
    ...December 31, 2014 and 2015. These foreign exchange contracts have maturities of 36 months or less. In 2012, we entered into forward-starting interest rate swaps with a total notional amount of $1.0 billion and terms calling for us to receive interest at a variable rate and to pay interest at a fixed...

  • Page 72
    ... December 31, 2014 and 2015. We also use exchange-traded interest rate futures contracts and "To Be Announced" (TBA) forward purchase commitments of mortgage-backed assets to hedge interest rate risks on certain fixed income securities. The TBA contracts meet the definition of derivative instruments...

  • Page 73
    ... 31, 2014 Fair Value of Derivatives Designated as Hedging Instruments Fair Value of Derivatives Not Designated as Hedging Instruments Balance Sheet Location Total Fair Value Derivative Assets: Level 2: Foreign exchange contracts Interest rate contracts Prepaid revenue share, expenses and...

  • Page 74
    ... 964 Gains Reclassified from AOCI into Income (Effective Portion) Year Ended December 31, Derivatives in Cash Flow Hedging Relationship Location 2013 2014 2015 Foreign exchange contracts Interest rate contracts Total Revenues Other income (expense), net $ 95 0 95 $ 171 4 175 $ 1,399 5 1,404...

  • Page 75
    ...Recognized in Income on Derivatives Year Ended December 31, Derivatives Not Designated As Hedging Instruments Location 2013 2014 2015 Foreign exchange contracts Interest rate contracts Total Other income (expense), net, and net loss from discontinued operations Other income (expense), net $ 118...

  • Page 76
    ...), net, in the accompanying Consolidated Statements of Income. We determined that certain renewable energy investments included in our non-marketable equity investments are VIEs. However, we do not consolidate these entities in our financial statements because we do not have the power to direct the...

  • Page 77
    ... the fair value of these securities, we use a combination of valuation methodologies, including market and income approaches based on prior transaction prices; estimated timing, probability, and amount of cash flows; and illiquidity considerations. Financial information of private companies may...

  • Page 78
    ... long-term debt) and capital lease obligation were as follows (in millions): Years Ending 2016 2017 2018 2019 Thereafter Total $ $ 1,225 0 0 0 2,000 3,225 In January 2016, the board of directors of Alphabet authorized the company to issue up to $5.0 billion of commercial paper from time to time...

  • Page 79
    ...) 29,016 Property under capital lease with a cost basis of $258 million was included in land and buildings as of December 31, 2015. Prepaid Revenue Share, Expenses and Other Assets, Non-Current Note Receivable In connection with the sale of our Motorola Mobile business on October 29, 2014 (see Note...

  • Page 80
    ... from AOCI to the Consolidated Statement of Income Year Ended December 31, AOCI Components Location 2013 2014 2015 Unrealized gains (losses) on availablefor-sale investments Other income (expense), net Net Income (loss) from discontinued operations Provision for income taxes Net of tax $ 158 $ 153...

  • Page 81
    ... Google Inc. stock in relation to this acquisition, part of which will be accounted for as compensation expense. The fair value of the shares of capital stock issued was determined based on the closing market price of Alphabet's Class C capital stock as of the close date. The Class C capital stock...

  • Page 82
    ..., a life science company with a mission to harness advanced technologies to increase our understanding of the biology that controls lifespan. Calico's results of operations and statement of financial position are included in our consolidated financial statements. As of December 31, 2015, Google has...

  • Page 83
    ...2014, and 2015. During the year ended December 31, 2014, we recorded an impairment charge in other cost of revenues of $378 million related to a patent licensing royalty asset acquired in connection with the Motorola acquisition, which we retained subsequent to the sale of Motorola Mobile. The asset...

  • Page 84
    ... on the Consolidated Statements of Income. The following table presents financial results of the Motorola Mobile business included in net income (loss) from discontinued operations for the years ended December 31, 2013 and 2014 (in millions): Year Ended December 31, 2013 2014 (1) Revenues Loss from...

  • Page 85
    ... Motorola Home through the date of divestiture are presented as net income (loss) from discontinued operations on the Consolidated Statement of Income. The following table presents financial results of the Motorola Home business included in net income (loss) from discontinued operations for the year...

  • Page 86
    ...of other income (expense), net, were as follows (in millions): Year Ended December 31, 2013 2014 2015 Interest income Interest expense Gain (loss) on marketable securities, net Foreign currency exchange losses, net (1) Gain (loss) on non-marketable investments, net Loss on divestiture of businesses...

  • Page 87
    ... Balance Sheet as of December 31, 2015. These amounts are presented as an asset and corresponding non-current liability, which represents our estimate of construction costs incurred to date. They have been excluded from the table above. Rent expense under operating leases, including co-location...

  • Page 88
    ... regarding search and ads. In September 2015, FAS found that there has been a competition law infringement in Android mobile distribution. We will respond to the CCI's report and have filed an appeal of the FAS decision. In July 2015, the Taiwan Fair Trade Commission informed us that it was closing...

  • Page 89
    ... the diluted net income per share of Class A common stock, the undistributed earnings are equal to net income for that computation. Stock Split Effected In Form of Stock Dividend In January 2014, our board of directors approved the distribution of shares of Class C capital stock as a dividend to our...

  • Page 90
    ...-average effect of dilutive securities Add: Conversion of Class B to Class A common shares outstanding Employee stock options Restricted stock units and other contingently issuable shares Number of shares used in per share computation Diluted net income (loss) per share: Continuing operations...

  • Page 91
    ... Weighted-average effect of dilutive securities Add: Conversion of Class B to Class A common shares outstanding Employee stock options Restricted stock units and other contingently issuable shares Number of shares used in per share computation Diluted net income per share: Continuing operations...

  • Page 92
    ... Weighted-average effect of dilutive securities Add: Conversion of Class B to Class A common shares outstanding Employee stock options Restricted stock units and other contingently issuable shares Number of shares used in per share computation Diluted net income per share: Continuing operations...

  • Page 93
    ... Plan. Stock-Based Compensation The following table presents our aggregate stock-based compensation expense by type of costs and expenses per the Consolidated Statements of Income (in millions): Year Ended December 31, 2013 2014 2015 Cost of revenues Research and development Sales and marketing...

  • Page 94
    ... authorized the company to repurchase up to $5,099,019,513.59 of its Class C capital stock, commencing in the fourth quarter of 2015. The repurchases are being executed from time to time, subject to general business and market conditions and other investment opportunities, through open market 90

  • Page 95
    ... shares of Alphabet Class C capital stock for an aggregate amount of approximately $1,780 million. Alphabet's share repurchases in the year ended December 31, 2015 were funded by Google via a return of capital to Alphabet. In January 2016, the board of directors of Alphabet authorized the company...

  • Page 96
    ... related to the case and the potential impact on our consolidated financial statements. Deferred Income Taxes Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income...

  • Page 97
    ..., 2014 2015 Deferred tax assets: Stock-based compensation expense State taxes Investment loss Legal settlement accruals Accrued employee benefits Accruals and reserves not currently deductible Net operating losses Tax credits Basis difference in investment of Arris Prepaid cost sharing Other Total...

  • Page 98
    ... 12 months. Note 16. Information about Segments and Geographic Areas In conjunction with the Alphabet reorganization, in the fourth quarter of 2015, we implemented legal and operational changes in how our Chief Operating Decision Maker (CODM) manages our businesses, including resource allocation...

  • Page 99
    ... generates revenues primarily from advertising, sales of digital content, apps and cloud services, as well as sales of Google branded hardware. Other Bets - Other Bets is a combination of multiple operating segments that are not individually material. Other Bets includes businesses such as Access...

  • Page 100
    ... in the quarter ended June 30, 2015 is not material to our consolidated financial statements for the year ended December 31, 2015. Consolidated revenues are not impacted. We elected to revise previously issued consolidated financial statements contained within this Annual Report on Form 10-K for...

  • Page 101
    ... related to ASU 2015-17 "Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes." Refer to Note 1 for further information. The following table presents the impact of these corrections on affected Consolidated Statements of Income line items, including net income per share...

  • Page 102
    ... internal control over financial reporting as of December 31, 2015 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 10K. Limitations on Effectiveness of Controls and Procedures...

  • Page 103
    ...to 2016) where he was responsible for global accounting, financial services and financial reporting. Previously, Jim was based in Europe, responsible for Intel's international finance operations. He has also been manager of Intel's Financial Information Systems, responsible for designing, developing...

  • Page 104
    ... Officers, and Corporate Governance-Corporate Governance and Board Matters-Compensation Committee Interlocks and Insider Participation" in the 2016 Proxy Statement and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER...

  • Page 105
    ... STATEMENT SCHEDULES (a) We have filed the following documents as part of this Annual Report on Form 10-K: 1. Consolidated Financial Statements Reports of Ernst & Young LLP, Independent Registered Public Accounting Firm Financial Statements of Alphabet Inc.: Consolidated Balance Sheets Consolidated...

  • Page 106
    ... 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized. Date: February 11, 2016 ALPHABET INC. By: /S/ LARRY PAGE Larry Page Chief Executive Officer (Principal Executive...

  • Page 107
    ... Inc. and Google Inc. Date /S/ LARRY PAGE Larry Page Chief Executive Officer, Co-Founder and Director (Principal Executive Officer of Alphabet Inc.) Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer of Alphabet Inc.) February 11, 2016 /S/ RUTH PORAT...

  • Page 108
    ... Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized. Date: February 11, 2016 GOOGLE INC. By: /S/ SUNDAR PICHAI Sundar Pichai Chief Executive Officer (Principal Executive Officer...

  • Page 109
    ... and Chief Financial Officer (Principal Financial and Accounting Officer of Google Inc.) February 11, 2016 /S/ RUTH PORAT Ruth Porat February 11, 2016 /S/ ERIC E. SCHMIDT Eric E. Schmidt Executive Chairman February 11, 2016 /S/ LARRY PAGE Larry Page Co-Founder and Director February 11...

  • Page 110
    ... Specimen Class C Capital Stock certificate Indenture, dated as of May 19, 2011 between Google Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee Form of 2.125% Note due 2016 Form of 3.625% Note due 2021 Form of 3.375% Note due 2024 Alphabet Inc. Deferred Compensation Plan Terms of...

  • Page 111
    ...of the Registrants Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm Power of Attorney (incorporated by reference to the signature page of this Annual Report on Form 10-K) Certification of Chief Executive Officer of Alphabet Inc. pursuant to Exchange Act Rules 13a-14(a) and...

  • Page 112
    Table of Contents Alphabet Inc. and Google Inc. Incorporated by reference herein Description Form Date Exhibit Number 31.03 * 31.04 * 32.01 ‡ 32.02 ‡ 101.INS 101.SCH 101.CAL 101.DEF 101.LAB 101.PRE Certification of Chief Executive Officer of Google Inc. pursuant to Exchange Act Rules...

  • Page 113
    ... 16 Person") as of the Grant Date and/or as of the Participant's death, then such vesting acceleration shall not be applicable and all of the then outstanding and unvested GSUs shall be forfeited effective as of the Termination Date, and (ii) any delivery of shares of Capital Stock to be made to the...

  • Page 114
    ...acknowledges that Company (i) does not make any representation or undertaking regarding the treatment of any Tax-Related Item in connection with any aspect of the GSUs, including the grant, vesting and settlement of the GSUs, or the subsequent sale of shares of Capital Stock acquired upon settlement...

  • Page 115
    ... are settled, then the Committee shall, pursuant to such procedures as it may specify from time to time, withhold a number of shares of Capital Stock otherwise issuable upon settlement of the GSUs, or portion thereof, having an aggregate Fair Market Value sufficient to satisfy the federal, state and...

  • Page 116
    ... qualification of such shares of Capital Stock under any federal or state law or under the rulings or regulations of the Securities and Exchange Commission or any other governmental regulatory body, or under any stock exchange on which the shares of Capital Stock are listed for trading, which the...

  • Page 117
    ... that the Company may hold certain personal information about him or her, including, but not limited to, the Participant's name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of Capital Stock or...

  • Page 118
    ... to the Participant, to the extent that Alphabet determines that the application of such terms and conditions is necessary or advisable in order to comply with local law or facilitate the administration of the Plan. The Appendix constitutes part of this Agreement. 19. Acceptance. The Participant...

  • Page 119
    ... 2014 2015 Earnings: Pre-tax income from continuing operations Add: Fixed charges Pre-tax income from continuing operations plus fixed charges Fixed charges: Interest expense and amortization of capitalized expenses related to indebtedness Estimated interest component included in rent expense Total...

  • Page 120
    ...subsidiaries of Alphabet Inc., omitting subsidiaries which, considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary as of December 31, 2015: Name of Subsidiary Google Inc. Google Ireland Holdings Jurisdiction of Incorporation or Organization Delaware Ireland

  • Page 121
    .... 2006 Stock Plan, Motorola Mobility Holdings, Inc. 2011 Incentive Compensation Plan and Alphabet Inc. Deferred Compensation Plan of our reports dated February 11, 2016, with respect to the consolidated financial statements and schedule of Alphabet Inc. and the effectiveness of internal control over...

  • Page 122
    ... to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 11, 2016 /S/ LARRY PAGE Larry Page Chief...

  • Page 123
    ...in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who...

  • Page 124
    ...in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who...

  • Page 125
    ...in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who...

  • Page 126
    ... 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 Alphabet Inc. Date: February 11, 2016 By: Name: Title: /S/ LARRY PAGE Larry Page Chief Executive Officer...

  • Page 127
    ...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, 2016 By: Name: Title: /S/ SUNDAR PICHAI Sundar Pichai...