VMware 2007 Annual Report Download - page 53

Table of Contents
Liquidity and Capital Resources
Our cash flows for 2007, 2006 and 2005 were as follows:
In 2007, our operating cash flow reflected net income generated during the period of $218.1, adjusted for non-cash items such as
depreciation and amortization expense of $104.0 and stock-based compensation of $92.4. Additionally, working capital, including short- and
long-
term deferred revenue, income taxes payable and deferred income taxes, generated cash flow of $138.0 primarily the result of an increase in
deferred revenue of $242.1 due to the growth in our business. This was offset by increases in accounts receivable of $89.0 also due to the growth
in our business and an increase in deferred income tax assets. As of December 31, 2007, our deferred revenue balance consisted of deferred
license revenues of $54.3 and deferred service revenues of $498.5, of which $363.3 was classified as current.
In 2006, our operating cash flow reflected net income generated during the period of $86.0, adjusted for non-cash items such as
depreciation and amortization expense of $66.6 and stock-based compensation of $51.2. Additionally, working capital, including short- and
long-term deferred revenue, income taxes payable and deferred income taxes, generated cash flow of $67.4, primarily the result of an increase in
total deferred revenue of $158.1. Our deferred revenue balance consisted of deferred license revenues of $65.4 and deferred services revenues of
$241.1 at December 31, 2006, of which $242.6 was classified as current. The increase in deferred revenue was partially offset by an increase in
accounts receivable of $98.0 due to increased revenue and an increase in net receivables due from EMC of $48.4.
In 2005, our operating cash flow reflected net income generated during the period of $66.8, adjusted for non-cash items such as
depreciation and amortization expense of $39.5 and stock-based compensation of $27.1. Working capital, including short- and long-term
deferred revenue, income taxes payable and deferred income taxes, generated cash flow of $104.7, primarily the result of an increase in total
deferred revenue of $79.5. Our deferred revenue balance consisted of deferred license revenues of $51.2 and deferred services revenues of $97.3
at December 31, 2005, of which $131.6 was categorized as current. Additionally, our operating cash flow was positively impacted by increased
income taxes payable to EMC of $44.1 and increased net payable due to EMC of $29.3. These increases in deferred revenue and amounts owed
to EMC were partially offset by an increase in accounts receivable of $52.0 due to increased revenue.
Cash used in investing activities was $403.7 in 2007, $142.4 in 2006 and $45.7 in 2005. Cash paid for business acquisitions, net of cash
acquired, was $82.5, $46.5 and $2.2 in 2007, 2006 and 2005, respectively. Capital additions were $269.0, $52.6 and $20.7 in 2007, 2006 and
2005, respectively. Capital additions increased in 2007 compared to 2006 primarily due to costs related to our new headquarters facilities. We
purchased furniture and fixtures for the new facilities and invested cash in the remaining buildings under development, as well as we purchased
the buildings already under construction from EMC for $132.6. In addition to investment in our headquarters facilities in 2007, we purchased
computer and network equipment to support increased personnel and related infrastructure requirements. The increase in capital additions from
2006 to 2005 was attributable to supporting the growth of the business. Capitalized software development costs, which exclude stock-based
compensation expenses, were $47.7, $32.5 and $21.6 in 2007, 2006 and 2005, respectively. The increase in capitalized software development
costs in 2007 compared to 2006 was due primarily to more resources working on products that reached technological feasibility in 2007. In
2006, our Virtual Infrastructure software product reached technological feasibility.
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For the Year Ended December 31,
2007 2006 2005
Net cash provided by operating activities
$
552.4
$
279.9
$
238.2
Net cash used in investing activities
$
(403.7
)
$
(142.4
)
$
(45.7
)
Net cash provided (used) by financing activities
$
906.3
$
—
$
(
190.0
)