VMware 2009 Annual Report Download - page 58

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Table of Contents
We have been included in the EMC consolidated group for U.S. federal income tax purposes, and expect to continue to be included in such
consolidated group for periods in which EMC owns at least 80% of the total voting power and value of our outstanding stock. Each member of a
consolidated group during any part of a consolidated return year is jointly and severally liable for tax on the consolidated return of such year and
for any subsequently determined deficiency thereon. Should EMC’s ownership fall below 80% of the total voting power or value of our
outstanding stock in any period, then we would no longer be included in the EMC consolidated group for U.S. federal income tax purposes, and
thus no longer be liable in the event that any income tax liability was incurred, but not discharged, by any other member of the EMC
consolidated group. Additionally, our U.S. federal income tax would be reported separately from that of the EMC consolidated group.
Our future effective tax rate may be affected by such factors as changes in tax laws, regulations or rates, changing interpretation of existing
laws or regulations, the impact of accounting for stock-based compensation, the impact of accounting for business combinations, changes in our
international organization, shifts in the amount of income before tax earned in the U.S. as compared with other regions in the world, and changes
in overall levels of income before tax.
Liquidity and Capital Resources
Our cash flows for 2009, 2008, and 2007 were as follows:
In evaluating our liquidity internally, we focus on long-term, sustainable growth in free cash flows and in non-GAAP cash flows from
operating activities (“non-GAAP operating cash flows”). We define non-
GAAP operating cash flows as net cash provided by operating activities
less capitalized software development costs plus the excess tax benefits from stock-based compensation. We define free cash flows, a non-
GAAP financial measure, as non-GAAP operating cash flows less capital expenditures. See “Liquidity—Non-GAAP Financial Measures” for
additional information.
Our non-GAAP operating cash flows and free cash flows for 2009, 2008, and 2007 were as follows:
55
December 31,
2009
2008
Cash and cash equivalents
$
2,486.5
$
1,840.8
For the Year Ended December 31,
2009
2008
2007
Net cash provided by operating activities
$
985.6
$
800.1
$
552.4
Net cash used in investing activities
(562.4
)
(421.9
)
(403.7
)
Net cash provided by financing activities
222.4
231.4
906.3
Net increase in cash and cash equivalents
$
645.6
$
609.6
$
1,055.0
For the Year Ended December 31,
2009
2008
2007
Net cash provided by operating activities
$
985.6
$
800.1
$
552.4
Capitalized software development costs
(68.6
)
(90.9
)
(47.7
)
Excess tax benefits from stock
-
based compensation
26.2
85.8
—
Non
-
GAAP operating cash flows
$
943.2
$
795.0
$
504.7
Capital expenditures
(103.4
)
(191.6
)
(269.0
)
Free cash flows
$
839.8
$
603.4
$
235.7