Companies often budget selling expenses and general and administrative expenses (SGA) as a percentage of expected sales. Required 1. For both Apple and Google, list the prior three years' sales in dollars) and total selling expenses and general and administrative expenses (in dollars). Use the financial statements in Appendix A. 2. Compute the ratio of total selling expenses and general and administrative expenses to sales for each of the three years. 3. Using the data from part 2, predict both companies' total selling expenses and general and administrative expenses (in dollars) for the next two years. (If possible, compare your predictions to actual amounts for those years.) September 27, 2014 $ APPEARL CONSOLIDATED BALANCE SHEETS (In millions, except number of shares which are reflected in thousands and par value) September 26, 2015 ASSETS Current assets Cash and cash equivalents $ 21.120 Short-term marketable securities 20,481 Accounts receivable, less allowances of $82 and $86, respectively 16,849 Inventories 2,349 Deferred tax assets 5,546 Vendor non-trade receivables 13,494 Other current assets 9,539 Total current assets 89,378 Long-term marketable securities 164,065 Property, plant and equipment, net 22,471 Goodwill 5,116 3,893 Acquired intangible assets, net 5.556 Other assets $ Total assets 290,479 13,844 11,233 17,460 2,111 4,318 9,759 9,806 68,531 130.162 20,624 4,616 4.142 3.764 231,839 U#epubcfi(%2F6%2F1266%5Bdata-uuid-40d8d36fb2814f759ca4591346235312%5D!%2F4%2F4... C S 30.196 18,453 8,491 6,308 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable S Accrued expenses Deferred revenue Commercial paper Current portion of long-term debt Total current liabilities Deferred revenue -non-current Long-term debt Other non-current liabilities Total liabilities Commitments and contingencies Shareholders' equity Common stock and additional paid-in capital, S0.00001 par value: 12,600,000 shares authorized; 5,578,753 and 5,866,161 shares issued and outstanding, respectively Retained earnings Accumulated other comprehensive income Total shareholders' equity Total liabilities and shareholders' equity 35,490 25,181 8,940 8,499 2,500 80.610 3,624 53,463 33,427 171,124 0 63,448 3,031 28,987 24.826 120,292 27,416 92,284 (345) 119,355 290,479 23,313 87,152 1,082 111,547 231.839 See accompanying Notes to Consolidated Financial Statements. Page A-3 September 28, 2013 $ 170,910 106,606 64,304 Apple Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except number of shares which are reflected in thousands and per share amounts) ears ended September 26, 2015 September 27, 2014 Het sales $ 233,715 Cost of sales 182,795 140,089 112,258 Gross margin 93,626 70,537 Operating expenses Research and development 8,067 6,041 Selling, general and administrative 14,329 11,993 Total operating expenses 22,396 18,034 Operating income 71,230 52,503 Other income, net 980 Income before provision for income taxes 72,519 53,483 Provision for income taxes 19.121 13,973 Net income 53,394 39,510 Earnings per share: Basic 9.28 6.49 Diluted s 9.22 $ 6.45 Shares used in computing earnings per share: Basic 5,753,421 6,085,572 Diluted 5,793,069 6,122,663 1.98 1.82 Cash dividends declared per common share Sce accompanying Notes to Consolidated Financial Statements. 1.285 4,475 10,830 15,305 48,999 1.156 50,155 13.118 37,037 S S 5.72 5.68 6,477,320 6,521,634 S 1.64 Page A-4 Apple Inc. Page A-4 Apple Inc. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In millions) Years ended September 26, 2015 September 27, 2014 September 28, 2013 Net income s 53,394 $ 39,510 $ Other comprehensive income (loss): 37,037 Change in foreign currency translation, net of tax effects of $201, $50 and $35, respectively (411) (137) (112) Change in unrealized gains/losses on derivative instruments: Change in fair value of derivatives, net of tax benefit (expense) of S(441), S(297) and S(351), respectively 2,905 1,390 522 Adjustment for net losses (gains) realized and included in net income, net of tax expense (benefit) of S630, S(36) and $255, respectively (3,497) 149 (458) Total change in unrecognized gains/losses on derivative instruments, net of tax (592) 1,539 Change in unrealized gains/losses on marketable securities: Change in fair value of marketable securities, net of tax benefit (expense) of S264, S(153) and $458, respectively (483) 285 (791) Adjustment for net (gains) losses realized and included in net income, net of tax expense (benefit) of $(32). 571 and 582, respectively 59 (134) (131) Total change in unrealized gains/losses on marketable securities, net of tax (424) 151 (922) (1,427) Total other comprehensive income (loss) 1,553 (970) s 51,967 Total comprehensive income 41063 36,067 See accompanying Notes to Consolidated Financial Statements. 64 S Page A-5 Apple Inc. CONSOLIDATED STATEMENT OF CITADEHOLDEDSTOUITY M MHE Reader O#epubcfi(%2F6%2F1266%5Bdata-uuid-40d8d36fb28147759ca4591346235312%5D!%2F4%2F JA Common Stock and URE Additional Paid-In Capital Comprehensive Tot Retained Shares Income Balances as of September 29, 2012 Amount Shareh Earnings (Loss 6,574,458 $ Equity Net income 16,422 $ 101,289 $ 499 $ 0 118,210 0 Other comprehensive income (loss) 37.037 0 0 37,037 Dividends and dividend equivalents declared 0 0 (970) (970) 0 Repurchase of common stock 0 (10,676) 0 (328,837) (10,676) 0 Share-based compensation (22,950) 0 (22,950) 0 2.253 Common stock issued, net of shares 0 0 2,253 withheld for employee taxes 48,873 (143) Tax benefit from equity awards, including (444) 0 (587) transfer pricing adjustments 0 1,232 0 0 Balances as of September 28, 2013 1.232 6,294,494 19,764 104,256 (471) Net income 123,549 0 39,510 0 39,510 Other comprehensive income (loss) 0 0 0 1.553 Dividends and dividend equivalents declared 1.553 0 0 (11,215) 0 (11.215) Repurchase of common stock (488,677) 0 (45,000) 0 (45,000) Share-based compensation 2,863 0 0 2,863 Common stock issued, net of shares withheld for employee taxes 60,344 (49) (399) 0 (448) Tax benefit from equity awards, including transfer pricing adjustments 735 735 Balances as of September 27, 2014 5,866,161 23,313 87,152 1,082 111 547 Net income 53,394 0 $3,394 Other comprehensive income (loss) 0 0 (1,427) (1.427) Dividends and dividend equivalents declared 0 (11,627) 0 Repurchase of common stock (325,032) 0 (36,026) (36,026) Share-based compensation 0 3,586 0 3.586 Common stock issued, net of shares withheld (840) for employee taxes 37.624 0 (231) Tax benefit from equity awards, including 748 transfer pricing adjustments 748 Balances as of September 26, 2015 5,578,753 $ 27.416 92,284 (345) S 0 0 0 0 0 0 0 0 119.355 sn_80fO#epubcfi(%2F6%2F1266%5Bdata-uuid-40d8d36fb2814f759ca4591346235312% Apple Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) Years ended September 26, 2015 Cash and cash equivalents, beginning of the year September 27, 2014 September 28, 2013 13.544 $ 14.259 S Operating activities: 10,746 Net income 53.394 39 510 Adjustments to reconcile net income to cash generated 37,037 by operating activities Depreciation and amortization 11.257 7.946 Share-based compensation expense 6,757 3.586 Deferred income tax expense 2,863 2,253 2.347 Changes in operating assets and liabilities 1.141 Accounts receivable, net 611 (4.232) (2,172) Inventories (238) (76) (973) Vendor non-trade receivables 0.735) (2.220) 223 Other current and non-current assets (179) 167 Accounts payable 5.400 5,938 2,340 Deferred revenue 1,042 1,460 1.459 Other current and non-current liabilities 8,746 6,010 4.521 Cash generated by operating activities 81.266 59,713 53.666 Investing activities: Purchases of marketable securities (166,402) (217,128) (148.489) Proceeds from maturities of marketable securities 14 538 18,810 20,317 Proceeds from sales of marketable securities 107,447 189,301 104,130 Payments made in connection with business acquisitions, net (343) (3,765) Payments for acquisition of property, plant and equipment (11.247) 19.571) (8,165) Payments for acquisition of intangible assets (241) (342) (911) Other (26) 16 (160) Cash used in investing activities (56.274) (22.579) 33.774) Financing activities Proceeds from issuance of common stock SE3 730 530 Excess tax benefits from equity awards 749 739 701 Taxes paid related to net share settlement of equity awards (1.158) Dividends and dividend equivalents paid (11.561) (11,126) (10,564) Repurchase of common stock (35.253) (45.000) (22.860) Proceeds from issuance of term debt, met 27.114 11.960 16.996 Change in commercial paper, net 2,191 6,306 0 Cash used in financing activities (17,716) (37.519 (16.379) Increase (decrease in cash and cash equivalents 7.276 (415) 3513 Cash and cash equivalents, end of the year 21,120 $ 13.844 14,259 Supplemental cash flow disclosure Cash paid for income taxes, et Cash paid for interest s 13.252 514 $ 10,026 $ 5 See accompanying Notes to Consolidated Financial Statements 2015 16,519 56,517 73.066 11.556 176 1.903 1,119 0,114 3,181 5,183 251 29,016 3,847 15,869 117,461 S S 1.931 Google Inc. CONSOLIDATED BALANCE SHEETS (In millions, except share and par value amounts which are reflected in thousands, and par value per share amounts) As of December 31 2014 Asets Current assets Cash and cash equivalents 18 17 Marketable securities 16.01 Total cash, cash equivalents, and marketable securities including securities and of 54,058 and 54,331 64,395 Accounts receivable, net of allowance of $225 and 5296 9,13 Receivable under reverse repurchase agreements 875 Income taxes receivable, net 591 Prepaid revenue share expenses and other assets 3,412 Total current assets 78.656 Prepaid revenue share expenses and other assets, non-current 3.187 Non-marketable investments 3.079 Deferred income taxes Property and equipment, net 23.83 Intangible assets, net 4,607 Goodwill 15.599 Tocal acts 129.187 Liabilities and Stockholders' Equity Current liabilities Accounts payable 1,715 Short-term debe 2,009 Accrued compensation and benefits 3,069 Accrued expenses and other current liabilities 4,408 Accrued revenue share 1,952 Securities lending payable 2,778 Deferred revenue 752 Income taxes payable, niet 96 Total current liabilities 16.779 Long-term det 3,228 Deferred revenue, non-current 104 Income taxes payable, 80-current 3.3.10 Deferred income taxes 758 Other long-term liabilities 1,118 Commitments and contingencies (Note II) Stockholders' equity Convertible preferred stock, 50.001 par value per share; 100,000 shares withorized, no shares issued and outstanding: 0.5 shares authorized, no share issued and outstanding Class A and Class B common stock, and Class C capital stock and additional paid in capital, 50.001 per value per share: 15.000.000 shares withorized (Class A 9,000,000, Class B 3,000,000. Class 3,000,000 680,172 (Class A 286.560, Class B 53,213, Class C 340.399), and par valucer Son Class A S267. Class B 553, Class C 40); and 15 shares authorized (Class A 05. Class B 0.5, Class C 0.5 0.3 (Class A 0.1 Class BO.1. Class Co.), and pur value of So, shares and outstanding 28.767 Accumulated other comprehensive income foss) 27 Retained earnings 75.00 Total stockholders' equity TOUNO Total liabilities and Mockholders' quity 129.187 3.539 4.768 2,329 19.310 1.995 151 3.663 189 0 31.313 90.892 12001 147.461 See accompanying notes ago 2014 66,001 2015 74,989 $ Google Inc. CONSOLIDATED STATEMENTS OF INCOME (In millions) Year Ended December 31 2013 Revenues 55.519 Costs and expenses Cost of revenues 21.993 Research and development 7,137 Sales and marketing 6,554 General and administrative 4,432 Total costs and expenses 40.116 Income from operations 15.403 Other income (expense).net 496 Income from continuing operations before income taxes 15.899 Provision for income taxes 2,739 Net income from continuing operations 13,160 Net income (loss) from discontinued operations (427) Net income 12.733 Less Adjustment Payment to Class C capital stockholders 0 Net income available to all stockholders 12.733 25.691 9,832 8.131 5.851 49,505 16,496 763 17,259 3,639 13,620 516 14,136 0 14,136 28,164 12,282 9.047 6,136 55.629 19,360 29 19,651 3,303 16,348 0 16,318 522 15826 $ S $ $ See accompanying notes Page A-12 2014 14,136 2015 16.348 $ (996) (1,067 Google Inc. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In millions) Year Ended December 31 2013 Net income 12,733 s Other comprehensive income (loss): Change in foreign currency translation adjustment 89 Available for sale investments: Change in net unrealized pains (losses) (392) Less: reclassification adjustment for net(gains) losses included in net income (162) Net change (net of tax effect of S212, 560, and S29) (554) Cash flow hedges: Change in net unrealized gains 112 Less reclassification adjustment for net gains included in net income (60) Net change (net of tax effect of $30, $196, and S115) 52 Other comprehensive loss (413) Comprehensive income 12,320 $ See accompanying notes SOS (134) 371 (715) 208 0507 651 (124) 527 (98) 14,038 676 (1,003) (327) (1,901) 14.447 Balance as of December 31, 2012 Common stock issued Stock-based compensation expense Stock-based compensation tax benefits Tax withholding related to vesting of restricted stock units Nct income Other comprehensive loss Balance as of December 31, 2013 Common and capital stock issued Stock-based compensation expense Stock-based compensation tax benefits Tax withhoking related to vesting of restricted stock units Net income Other comprehensive loss Balance as of December 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 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 (413) Total Retained Stockholders Earnings Equity 48,197 s 71.570 0 1.174 0 3,343 0 449 0 (1.879) 12,733 12,733 0 60,930 86,977 0 465 0 4.279 0 625 0 (2,524) 14.136 14.136 0 75,066 103.860 Class A and Class B Common Stock, Class C Accumulated Capital Stock and Other Additional Paid-In Capital Comprehensive Shares Amount Income (Loss) 659,958 S 22,835 $ 538 11,706 1.174 0 3,343 0 449 0 (1,879) 0 0 0 0 (413) 671,664 25,922 125 8.SON 465 0 4,279 0 625 0 (2,524) 0 0 0 0 (98) 680,172 28,767 27 6.659 331 O 5,151 0 815 0 (1.954) 0 (687.684) 0 0 (2.272) 0 853 475 0 0 0 0 (1,901) 0 31,313 S (1,874) S (98) 331 0 0 0 0 5,151 815 (1.954) 0 (2.272) 0 (522) 16,348 0 90,892 S 16,348 (1,901) 120,331 See accompanying notes. 2014 2015 14,136 $ 16,348 3.523 1456 4.279 (648) (104) (740) (390) 192 4,132 931 5.203 (518) (179) 0 212 CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) Year Ended December 31 2013 Operating activities Net income 12.733 Adjustments Depreciation and impairment of property and equipment 2.781 Amortization and impairment of intangible assets 1.158 Stock-based compensation expense Excess tax benefits from sokhased and activities (481) Deferred income taxes (437) Gain ch divestiture of business (700) (Gain) loss on marketable and non-marketable investments, net (166) Other 272 Changes in assets and liabilities, net of effects of acquisition Accounts receivable (1,307) Income taxes, net 588 Prepaid revenue share expenses and other assets (930) Accounts payable sos Accrued expenses and other liabilities 713 Accrued revenue share Deferred revenue Net cash provided by operating activities 18,659 Investing activities Purchases of property and equipment (7,358) Purchases of marketable securities Maturities and sales of marketable securities 38,314 Purchases of non-marketable investments (569) Cash collateral related to securities lending (299) Investments in reverse repurchase agreements 600 Proceeds from divestiture of business 2,525 Acquisitions et of cash acquired and purchases of intangibles and other assets (1.448) Net cash used in investing activities (13.679) Financing activities Net payments related to stock-based award activities (781) Excess tax benefits from stod based award activities 481 Adjustment Payment to Class C capital stockholders 0 Capital transactions with Alphabet 0 Proceeds from issuance of debt, set of costs 10,768 Repayments of debt Net cash used in financing activities (11.325) (857) Effect of exchange rate changes on cash and cash equivalents 13) Net Increase (decrease in case and can equivalents 4,120 Cash and cash equivalents beginning of period 14,778 Cash and cash equivalents at end of period 18 N98 (1,641) 591 459 436 757 245 (175) 22,376 2.094) {179) (318) 203 1,597 339 43 26,034 (10.959) (56,310) 51,315 (1,227) 19,915) (74,368) 62,905 2,172) (350) 425 (775) 386 (4.888) (21.055) (236) (23.711) (1.612) 548 (2.543) 13,705 (2,069) 6.18 0 0 11,625 (11.643) (1.49) (433) (351) 18.898 IR 47 677) 18,347 $ 16349 Supplemental disclosures of cash flow information Cash paid for taxes Cash paid for interest 1,932 $ 2819 86 3138 96 See accompanying Companies often budget selling expenses and general and administrative expenses (SGA) as a percentage of expected sales. Required 1. For both Apple and Google, list the prior three years' sales in dollars) and total selling expenses and general and administrative expenses (in dollars). Use the financial statements in Appendix A. 2. Compute the ratio of total selling expenses and general and administrative expenses to sales for each of the three years. 3. Using the data from part 2, predict both companies' total selling expenses and general and administrative expenses (in dollars) for the next two years. (If possible, compare your predictions to actual amounts for those years.) September 27, 2014 $ APPEARL CONSOLIDATED BALANCE SHEETS (In millions, except number of shares which are reflected in thousands and par value) September 26, 2015 ASSETS Current assets Cash and cash equivalents $ 21.120 Short-term marketable securities 20,481 Accounts receivable, less allowances of $82 and $86, respectively 16,849 Inventories 2,349 Deferred tax assets 5,546 Vendor non-trade receivables 13,494 Other current assets 9,539 Total current assets 89,378 Long-term marketable securities 164,065 Property, plant and equipment, net 22,471 Goodwill 5,116 3,893 Acquired intangible assets, net 5.556 Other assets $ Total assets 290,479 13,844 11,233 17,460 2,111 4,318 9,759 9,806 68,531 130.162 20,624 4,616 4.142 3.764 231,839 U#epubcfi(%2F6%2F1266%5Bdata-uuid-40d8d36fb2814f759ca4591346235312%5D!%2F4%2F4... C S 30.196 18,453 8,491 6,308 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable S Accrued expenses Deferred revenue Commercial paper Current portion of long-term debt Total current liabilities Deferred revenue -non-current Long-term debt Other non-current liabilities Total liabilities Commitments and contingencies Shareholders' equity Common stock and additional paid-in capital, S0.00001 par value: 12,600,000 shares authorized; 5,578,753 and 5,866,161 shares issued and outstanding, respectively Retained earnings Accumulated other comprehensive income Total shareholders' equity Total liabilities and shareholders' equity 35,490 25,181 8,940 8,499 2,500 80.610 3,624 53,463 33,427 171,124 0 63,448 3,031 28,987 24.826 120,292 27,416 92,284 (345) 119,355 290,479 23,313 87,152 1,082 111,547 231.839 See accompanying Notes to Consolidated Financial Statements. Page A-3 September 28, 2013 $ 170,910 106,606 64,304 Apple Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except number of shares which are reflected in thousands and per share amounts) ears ended September 26, 2015 September 27, 2014 Het sales $ 233,715 Cost of sales 182,795 140,089 112,258 Gross margin 93,626 70,537 Operating expenses Research and development 8,067 6,041 Selling, general and administrative 14,329 11,993 Total operating expenses 22,396 18,034 Operating income 71,230 52,503 Other income, net 980 Income before provision for income taxes 72,519 53,483 Provision for income taxes 19.121 13,973 Net income 53,394 39,510 Earnings per share: Basic 9.28 6.49 Diluted s 9.22 $ 6.45 Shares used in computing earnings per share: Basic 5,753,421 6,085,572 Diluted 5,793,069 6,122,663 1.98 1.82 Cash dividends declared per common share Sce accompanying Notes to Consolidated Financial Statements. 1.285 4,475 10,830 15,305 48,999 1.156 50,155 13.118 37,037 S S 5.72 5.68 6,477,320 6,521,634 S 1.64 Page A-4 Apple Inc. Page A-4 Apple Inc. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In millions) Years ended September 26, 2015 September 27, 2014 September 28, 2013 Net income s 53,394 $ 39,510 $ Other comprehensive income (loss): 37,037 Change in foreign currency translation, net of tax effects of $201, $50 and $35, respectively (411) (137) (112) Change in unrealized gains/losses on derivative instruments: Change in fair value of derivatives, net of tax benefit (expense) of S(441), S(297) and S(351), respectively 2,905 1,390 522 Adjustment for net losses (gains) realized and included in net income, net of tax expense (benefit) of S630, S(36) and $255, respectively (3,497) 149 (458) Total change in unrecognized gains/losses on derivative instruments, net of tax (592) 1,539 Change in unrealized gains/losses on marketable securities: Change in fair value of marketable securities, net of tax benefit (expense) of S264, S(153) and $458, respectively (483) 285 (791) Adjustment for net (gains) losses realized and included in net income, net of tax expense (benefit) of $(32). 571 and 582, respectively 59 (134) (131) Total change in unrealized gains/losses on marketable securities, net of tax (424) 151 (922) (1,427) Total other comprehensive income (loss) 1,553 (970) s 51,967 Total comprehensive income 41063 36,067 See accompanying Notes to Consolidated Financial Statements. 64 S Page A-5 Apple Inc. CONSOLIDATED STATEMENT OF CITADEHOLDEDSTOUITY M MHE Reader O#epubcfi(%2F6%2F1266%5Bdata-uuid-40d8d36fb28147759ca4591346235312%5D!%2F4%2F JA Common Stock and URE Additional Paid-In Capital Comprehensive Tot Retained Shares Income Balances as of September 29, 2012 Amount Shareh Earnings (Loss 6,574,458 $ Equity Net income 16,422 $ 101,289 $ 499 $ 0 118,210 0 Other comprehensive income (loss) 37.037 0 0 37,037 Dividends and dividend equivalents declared 0 0 (970) (970) 0 Repurchase of common stock 0 (10,676) 0 (328,837) (10,676) 0 Share-based compensation (22,950) 0 (22,950) 0 2.253 Common stock issued, net of shares 0 0 2,253 withheld for employee taxes 48,873 (143) Tax benefit from equity awards, including (444) 0 (587) transfer pricing adjustments 0 1,232 0 0 Balances as of September 28, 2013 1.232 6,294,494 19,764 104,256 (471) Net income 123,549 0 39,510 0 39,510 Other comprehensive income (loss) 0 0 0 1.553 Dividends and dividend equivalents declared 1.553 0 0 (11,215) 0 (11.215) Repurchase of common stock (488,677) 0 (45,000) 0 (45,000) Share-based compensation 2,863 0 0 2,863 Common stock issued, net of shares withheld for employee taxes 60,344 (49) (399) 0 (448) Tax benefit from equity awards, including transfer pricing adjustments 735 735 Balances as of September 27, 2014 5,866,161 23,313 87,152 1,082 111 547 Net income 53,394 0 $3,394 Other comprehensive income (loss) 0 0 (1,427) (1.427) Dividends and dividend equivalents declared 0 (11,627) 0 Repurchase of common stock (325,032) 0 (36,026) (36,026) Share-based compensation 0 3,586 0 3.586 Common stock issued, net of shares withheld (840) for employee taxes 37.624 0 (231) Tax benefit from equity awards, including 748 transfer pricing adjustments 748 Balances as of September 26, 2015 5,578,753 $ 27.416 92,284 (345) S 0 0 0 0 0 0 0 0 119.355 sn_80fO#epubcfi(%2F6%2F1266%5Bdata-uuid-40d8d36fb2814f759ca4591346235312% Apple Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) Years ended September 26, 2015 Cash and cash equivalents, beginning of the year September 27, 2014 September 28, 2013 13.544 $ 14.259 S Operating activities: 10,746 Net income 53.394 39 510 Adjustments to reconcile net income to cash generated 37,037 by operating activities Depreciation and amortization 11.257 7.946 Share-based compensation expense 6,757 3.586 Deferred income tax expense 2,863 2,253 2.347 Changes in operating assets and liabilities 1.141 Accounts receivable, net 611 (4.232) (2,172) Inventories (238) (76) (973) Vendor non-trade receivables 0.735) (2.220) 223 Other current and non-current assets (179) 167 Accounts payable 5.400 5,938 2,340 Deferred revenue 1,042 1,460 1.459 Other current and non-current liabilities 8,746 6,010 4.521 Cash generated by operating activities 81.266 59,713 53.666 Investing activities: Purchases of marketable securities (166,402) (217,128) (148.489) Proceeds from maturities of marketable securities 14 538 18,810 20,317 Proceeds from sales of marketable securities 107,447 189,301 104,130 Payments made in connection with business acquisitions, net (343) (3,765) Payments for acquisition of property, plant and equipment (11.247) 19.571) (8,165) Payments for acquisition of intangible assets (241) (342) (911) Other (26) 16 (160) Cash used in investing activities (56.274) (22.579) 33.774) Financing activities Proceeds from issuance of common stock SE3 730 530 Excess tax benefits from equity awards 749 739 701 Taxes paid related to net share settlement of equity awards (1.158) Dividends and dividend equivalents paid (11.561) (11,126) (10,564) Repurchase of common stock (35.253) (45.000) (22.860) Proceeds from issuance of term debt, met 27.114 11.960 16.996 Change in commercial paper, net 2,191 6,306 0 Cash used in financing activities (17,716) (37.519 (16.379) Increase (decrease in cash and cash equivalents 7.276 (415) 3513 Cash and cash equivalents, end of the year 21,120 $ 13.844 14,259 Supplemental cash flow disclosure Cash paid for income taxes, et Cash paid for interest s 13.252 514 $ 10,026 $ 5 See accompanying Notes to Consolidated Financial Statements 2015 16,519 56,517 73.066 11.556 176 1.903 1,119 0,114 3,181 5,183 251 29,016 3,847 15,869 117,461 S S 1.931 Google Inc. CONSOLIDATED BALANCE SHEETS (In millions, except share and par value amounts which are reflected in thousands, and par value per share amounts) As of December 31 2014 Asets Current assets Cash and cash equivalents 18 17 Marketable securities 16.01 Total cash, cash equivalents, and marketable securities including securities and of 54,058 and 54,331 64,395 Accounts receivable, net of allowance of $225 and 5296 9,13 Receivable under reverse repurchase agreements 875 Income taxes receivable, net 591 Prepaid revenue share expenses and other assets 3,412 Total current assets 78.656 Prepaid revenue share expenses and other assets, non-current 3.187 Non-marketable investments 3.079 Deferred income taxes Property and equipment, net 23.83 Intangible assets, net 4,607 Goodwill 15.599 Tocal acts 129.187 Liabilities and Stockholders' Equity Current liabilities Accounts payable 1,715 Short-term debe 2,009 Accrued compensation and benefits 3,069 Accrued expenses and other current liabilities 4,408 Accrued revenue share 1,952 Securities lending payable 2,778 Deferred revenue 752 Income taxes payable, niet 96 Total current liabilities 16.779 Long-term det 3,228 Deferred revenue, non-current 104 Income taxes payable, 80-current 3.3.10 Deferred income taxes 758 Other long-term liabilities 1,118 Commitments and contingencies (Note II) Stockholders' equity Convertible preferred stock, 50.001 par value per share; 100,000 shares withorized, no shares issued and outstanding: 0.5 shares authorized, no share issued and outstanding Class A and Class B common stock, and Class C capital stock and additional paid in capital, 50.001 per value per share: 15.000.000 shares withorized (Class A 9,000,000, Class B 3,000,000. Class 3,000,000 680,172 (Class A 286.560, Class B 53,213, Class C 340.399), and par valucer Son Class A S267. Class B 553, Class C 40); and 15 shares authorized (Class A 05. Class B 0.5, Class C 0.5 0.3 (Class A 0.1 Class BO.1. Class Co.), and pur value of So, shares and outstanding 28.767 Accumulated other comprehensive income foss) 27 Retained earnings 75.00 Total stockholders' equity TOUNO Total liabilities and Mockholders' quity 129.187 3.539 4.768 2,329 19.310 1.995 151 3.663 189 0 31.313 90.892 12001 147.461 See accompanying notes ago 2014 66,001 2015 74,989 $ Google Inc. CONSOLIDATED STATEMENTS OF INCOME (In millions) Year Ended December 31 2013 Revenues 55.519 Costs and expenses Cost of revenues 21.993 Research and development 7,137 Sales and marketing 6,554 General and administrative 4,432 Total costs and expenses 40.116 Income from operations 15.403 Other income (expense).net 496 Income from continuing operations before income taxes 15.899 Provision for income taxes 2,739 Net income from continuing operations 13,160 Net income (loss) from discontinued operations (427) Net income 12.733 Less Adjustment Payment to Class C capital stockholders 0 Net income available to all stockholders 12.733 25.691 9,832 8.131 5.851 49,505 16,496 763 17,259 3,639 13,620 516 14,136 0 14,136 28,164 12,282 9.047 6,136 55.629 19,360 29 19,651 3,303 16,348 0 16,318 522 15826 $ S $ $ See accompanying notes Page A-12 2014 14,136 2015 16.348 $ (996) (1,067 Google Inc. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In millions) Year Ended December 31 2013 Net income 12,733 s Other comprehensive income (loss): Change in foreign currency translation adjustment 89 Available for sale investments: Change in net unrealized pains (losses) (392) Less: reclassification adjustment for net(gains) losses included in net income (162) Net change (net of tax effect of S212, 560, and S29) (554) Cash flow hedges: Change in net unrealized gains 112 Less reclassification adjustment for net gains included in net income (60) Net change (net of tax effect of $30, $196, and S115) 52 Other comprehensive loss (413) Comprehensive income 12,320 $ See accompanying notes SOS (134) 371 (715) 208 0507 651 (124) 527 (98) 14,038 676 (1,003) (327) (1,901) 14.447 Balance as of December 31, 2012 Common stock issued Stock-based compensation expense Stock-based compensation tax benefits Tax withholding related to vesting of restricted stock units Nct income Other comprehensive loss Balance as of December 31, 2013 Common and capital stock issued Stock-based compensation expense Stock-based compensation tax benefits Tax withhoking related to vesting of restricted stock units Net income Other comprehensive loss Balance as of December 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 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 (413) Total Retained Stockholders Earnings Equity 48,197 s 71.570 0 1.174 0 3,343 0 449 0 (1.879) 12,733 12,733 0 60,930 86,977 0 465 0 4.279 0 625 0 (2,524) 14.136 14.136 0 75,066 103.860 Class A and Class B Common Stock, Class C Accumulated Capital Stock and Other Additional Paid-In Capital Comprehensive Shares Amount Income (Loss) 659,958 S 22,835 $ 538 11,706 1.174 0 3,343 0 449 0 (1,879) 0 0 0 0 (413) 671,664 25,922 125 8.SON 465 0 4,279 0 625 0 (2,524) 0 0 0 0 (98) 680,172 28,767 27 6.659 331 O 5,151 0 815 0 (1.954) 0 (687.684) 0 0 (2.272) 0 853 475 0 0 0 0 (1,901) 0 31,313 S (1,874) S (98) 331 0 0 0 0 5,151 815 (1.954) 0 (2.272) 0 (522) 16,348 0 90,892 S 16,348 (1,901) 120,331 See accompanying notes. 2014 2015 14,136 $ 16,348 3.523 1456 4.279 (648) (104) (740) (390) 192 4,132 931 5.203 (518) (179) 0 212 CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) Year Ended December 31 2013 Operating activities Net income 12.733 Adjustments Depreciation and impairment of property and equipment 2.781 Amortization and impairment of intangible assets 1.158 Stock-based compensation expense Excess tax benefits from sokhased and activities (481) Deferred income taxes (437) Gain ch divestiture of business (700) (Gain) loss on marketable and non-marketable investments, net (166) Other 272 Changes in assets and liabilities, net of effects of acquisition Accounts receivable (1,307) Income taxes, net 588 Prepaid revenue share expenses and other assets (930) Accounts payable sos Accrued expenses and other liabilities 713 Accrued revenue share Deferred revenue Net cash provided by operating activities 18,659 Investing activities Purchases of property and equipment (7,358) Purchases of marketable securities Maturities and sales of marketable securities 38,314 Purchases of non-marketable investments (569) Cash collateral related to securities lending (299) Investments in reverse repurchase agreements 600 Proceeds from divestiture of business 2,525 Acquisitions et of cash acquired and purchases of intangibles and other assets (1.448) Net cash used in investing activities (13.679) Financing activities Net payments related to stock-based award activities (781) Excess tax benefits from stod based award activities 481 Adjustment Payment to Class C capital stockholders 0 Capital transactions with Alphabet 0 Proceeds from issuance of debt, set of costs 10,768 Repayments of debt Net cash used in financing activities (11.325) (857) Effect of exchange rate changes on cash and cash equivalents 13) Net Increase (decrease in case and can equivalents 4,120 Cash and cash equivalents beginning of period 14,778 Cash and cash equivalents at end of period 18 N98 (1,641) 591 459 436 757 245 (175) 22,376 2.094) {179) (318) 203 1,597 339 43 26,034 (10.959) (56,310) 51,315 (1,227) 19,915) (74,368) 62,905 2,172) (350) 425 (775) 386 (4.888) (21.055) (236) (23.711) (1.612) 548 (2.543) 13,705 (2,069) 6.18 0 0 11,625 (11.643) (1.49) (433) (351) 18.898 IR 47 677) 18,347 $ 16349 Supplemental disclosures of cash flow information Cash paid for taxes Cash paid for interest 1,932 $ 2819 86 3138 96 See accompanying