10-Q/A 1 d10qa.htm AMENDMENT NO. 1 TO FORM 10-Q Amendment No. 1 to Form 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


FORM 10-Q/A

Amendment No. 1

 


(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2007

OR

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number: 000-50726

 


Google Inc.

(Exact name of registrant as specified in its charter)

 


 

Delaware   77-0493581

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

1600 Amphitheatre Parkway

Mountain View, CA 94043

(Address of principal executive offices)

(Zip Code)

(650) 253-0000

(Registrant’s telephone number, including area code)

 


Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  x    Accelerated filer  ¨    Non-accelerated filer  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

At April 30, 2007, the number of shares outstanding of Google’s Class A common stock was 231,472,129 shares and the number of shares outstanding of Google’s Class B common stock was 80,075,402 shares.

 



Table of Contents

GOOGLE INC.

INDEX

 

         Page No.
  PART I. FINANCIAL INFORMATION   

Item 1

  Financial Statements   
  Condensed Consolidated Balance Sheets—December 31, 2006 and March 31, 2007 (unaudited)    4
  Condensed Consolidated Statements of Income—Three Months Ended March 31, 2006 and 2007 (unaudited)    5
  Condensed Consolidated Statements of Cash Flows— Three Months Ended March 31, 2006 and 2007 (unaudited)    6
  Notes to Condensed Consolidated Financial Statements (Unaudited)    7

Item 2

  Management’s Discussion and Analysis of Financial Condition and Results of Operations    17

Item 3

  Quantitative and Qualitative Disclosures About Market Risk    30

Item 4

  Controls and Procedures    31
  PART II. OTHER INFORMATION   

Item 1

  Legal Proceedings    32

Item 1A

  Risk Factors    32

Item 2

  Unregistered Sales of Equity Securities and Use of Proceeds    43

Item 6

  Exhibits    44
  Signatures    45
  Exhibit Index   
  Certifications   

 

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EXPLANATORY NOTE

This Amendment No. 1 on Form 10-Q/A (this “Amendment”) amends our quarterly report on Form 10-Q for the fiscal quarter ended March 31, 2007 as filed with the Securities and Exchange Commission on May 9, 2007, and is being filed solely to amend Item 1A of Part II, in order to correct a typographical error.

This Amendment contains the complete text of the original report with the corrected information appearing in Item 1A of Part II.

 

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PART I—FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

GOOGLE INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par value)

 

    

As of

December 31,

2006

  

As of

March 31,

2007

          (unaudited)

Assets

     

Current assets:

     

Cash and cash equivalents

   $ 3,544,671    $ 4,081,340

Marketable securities

     7,699,243      7,854,579

Accounts receivable, net of allowance of $16,914 and $18,562

     1,322,340      1,477,090

Deferred income taxes, net

     29,713      51,259

Prepaid revenue share, expenses and other assets

     443,880      616,506
             

Total current assets

     13,039,847      14,080,774

Prepaid revenue share, expenses and other assets, non-current

     114,455      129,903

Non-marketable equity securities

     1,031,850      1,030,952

Property and equipment, net

     2,395,239      2,826,717

Intangible assets, net

     346,841      326,526

Goodwill

     1,545,119      1,620,566
             

Total assets

   $ 18,473,351    $ 20,015,438
             

Liabilities and Stockholders’ Equity

     

Current liabilities:

     

Accounts payable

   $ 211,169    $ 181,828

Accrued compensation and benefits

     351,671      180,708

Accrued expenses and other current liabilities

     265,872      300,068

Accrued revenue share

     370,364      448,121

Deferred revenue

     105,136      105,771

Income taxes payable

     375      37,857
             

Total current liabilities

     1,304,587      1,254,353

Deferred revenue, long-term

     20,006      20,979

Deferred income taxes, net

     40,421      18,821

Income taxes payable, long-term

     —        267,209

Other long-term liabilities

     68,497      76,866

Commitments and contingencies

     

Stockholders’ equity:

     

Class A and Class B common stock, $0.001 par value: 9,000,000 shares authorized; 308,997 (Class A 227,670, Class B 81,327) and par value of $309 (Class A $228, Class B $81) and 310,396 (Class A 230,168, Class B 80,228) and par value of $310 (Class A $230, Class B $80) shares issued and outstanding, excluding 1,296 (Class A 1,045, Class B 251) and 973 (Class A 791, Class B 182) shares subject to repurchase at December 31, 2006 and March 31, 2007

     309      310

Additional paid-in capital

     11,882,906      12,211,590

Accumulated other comprehensive income

     23,311      36,942

Retained earnings

     5,133,314      6,128,368
             

Total stockholders’ equity

     17,039,840      18,377,210
             

Total liabilities and stockholders’ equity

   $ 18,473,351    $ 20,015,438
             

See accompanying notes.

 

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GOOGLE INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

 

    

Three Months Ended

March 31,

     2006    2007
     (unaudited)

Revenues

   $ 2,253,755    $ 3,663,971

Costs and expenses:

     

Cost of revenues (including stock-based compensation expense of $2,283 and $4,389)

     904,119      1,470,426

Research and development (including stock-based compensation expense of $73,086 and $120,787)

     246,599      408,384

Sales and marketing (including stock-based compensation expense of $15,929 and $27,250)

     190,943      302,552

General and administrative (including stock-based compensation expense of $23,366 and $31,440)

     169,395      261,400
             

Total costs and expenses

     1,511,056      2,442,762
             

Income from operations

     742,699      1,221,209

Interest income and other, net

     67,919      130,728
             

Income before income taxes

     810,618      1,351,937

Provision for income taxes

     218,327      349,775
             

Net income

   $ 592,291    $ 1,002,162
             

Net income per share of Class A and Class B common stock:

     

Basic

   $ 2.02    $ 3.24
             

Diluted

   $ 1.95    $ 3.18
             

See accompanying notes.

 

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GOOGLE INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

    

Three Months Ended

March 31,

 
     2006     2007  
     (unaudited)  

Operating activities

    

Net income

   $ 592,291     $ 1,002,162  

Adjustments:

    

Depreciation and amortization of property and equipment

     95,868       170,289  

Amortization of intangibles and other

     15,290       34,703  

In-process research and development

     4,000       —    

Stock-based compensation

     114,664       183,866  

Excess tax benefits from stock-based award activity

     (77,285 )     (74,084 )

Other

     —         (6,386 )

Changes in assets and liabilities, net of effects of acquisitions:

    

Accounts receivable

     (155,221 )     (153,562 )

Income taxes, net

     216,527       337,702  

Prepaid revenue share, expenses and other assets

     (26,525 )     (185,478 )

Accounts payable

     30,232       (29,256 )

Accrued expenses and other liabilities

     (39,295 )     (139,886 )

Accrued revenue share

     51,216       77,864  

Deferred revenue

     3,042       1,659  
                

Net cash provided by operating activities

     824,804       1,219,593  
                

Investing activities

    

Purchases of property and equipment

     (344,938 )     (596,893 )

Purchases of marketable securities

     (13,111,471 )     (5,225,160 )

Maturities and sales of marketable securities

     11,755,756       5,079,364  

Acquisitions, net of cash acquired, and purchases of intangible and other assets

     (187,964 )     (34,441 )
                

Net cash used in investing activities

     (1,888,617 )     (777,130 )
                

Financing activities

    

Net proceeds from stock-based award activity

     42,611       14,426  

Excess tax benefits from stock-based award activity

     77,285       74,084  
                

Net cash provided by financing activities

     119,896       88,510  
                

Effect of exchange rate changes on cash and cash equivalents

     1,922       5,696  
                

Net increase (decrease) in cash and cash equivalents

     (941,995 )     536,669  

Cash and cash equivalents at beginning of year

     3,877,174       3,544,671  
                

Cash and cash equivalents at end of period

   $ 2,935,179     $ 4,081,340  
                

Supplemental disclosures of cash flow information

    

Cash paid for interest

   $ 8     $ 342  
                

Cash paid for income taxes

   $ 1,126     $ 12,774  
                

See accompanying notes.

 

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GOOGLE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Google Inc. and Summary of Accounting Policies

Nature of Operations

We were incorporated in California in September 1998. We were re-incorporated in the State of Delaware in August 2003. We provide highly targeted advertising and global internet search solutions as well as intranet solutions via an enterprise search appliance.

Basis of Consolidation

The Condensed Consolidated Financial Statements include the accounts of Google and our wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated.

Unaudited Interim Financial Information

The accompanying Condensed Consolidated Balance Sheet as of March 31, 2007, the Condensed Consolidated Statements of Income for the three months ended March 31, 2006 and 2007, and the Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2006 and 2007 are unaudited. These unaudited interim Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles. In our opinion, the unaudited interim Condensed Consolidated Financial Statements include all adjustments of a normal recurring nature necessary for the fair presentation of our financial position as of March 31, 2007, our results of operations for the three months ended March 31, 2006 and 2007, and our cash flows for the three months ended March 31, 2006 and 2007. The results of operations for the three months ended March 31, 2007 are not necessarily indicative of the results to be expected for the year ending December 31, 2007.

These unaudited interim Condensed Consolidated Financial Statements should be read in conjunction with the consolidated financial statements and related notes included in our 2006 Annual Report on Form 10-K filed on March 1, 2007.

Use of Estimates

The preparation of interim Condensed Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements and the accompanying notes. Actual results could differ materially from these estimates. On an ongoing basis, we evaluate our estimates, including those related to the accounts receivable, fair values of marketable and non-marketable securities, fair values of intangible assets and goodwill, useful lives of intangible assets and property and equipment, fair values of options to purchase our common stock, and income taxes, among others. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. We engage third-party valuation consultants to assist management in the allocation of the purchase price of significant acquisitions.

Effect of Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 does not require any new fair value measurements, but provides guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of the information. This statement is effective for us beginning January 1, 2008. We are currently evaluating the impact of the adoption of SFAS No. 157 on our financial statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities- including an Amendment of FASB Statement No. 115, which allows an entity to choose to measure certain financial instruments and liabilities at fair value. Subsequent measurements for the financial instruments and liabilities an entity elects to fair value will be recognized in earnings. SFAS No. 159 also establishes additional disclosure requirements. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007, with early adoption permitted provided that the entity also adopts SFAS No. 157. We are currently evaluating whether to adopt SFAS No. 159.

 

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Note 2. Net Income per Share of Class A and Class B common stock

The following table sets forth the computation of basic and diluted net income per share of Class A and Class B common stock (in thousands, except per share amounts, unaudited):

 

    

For the Three Months Ended

March 31,

 
     2006     2007  
     Class A     Class B     Class A     Class B  
     (unaudited)  

Basic net income per share:

        

Numerator:

        

Allocation of undistributed earnings

   $ 410,663     $ 181,628     $ 740,449     $ 261,713  

Denominator:

        

Weighted average common shares outstanding

     205,894       91,063       229,432       80,994  

Less: Weighted average unvested common shares subject to repurchase or cancellation

     (2,122 )     (939 )     (894 )     (217 )
                                

Number of shares used in per share computations

     203,772       90,124       228,538       80,777  
                                

Basic net income per share

   $ 2.02     $ 2.02     $ 3.24     $ 3.24  
                                

Diluted net income per share:

        

Numerator:

        

Allocation of undistributed earnings for basic computation

   $ 410,663     $ 181,628     $ 740,449     $ 261,713  

Reallocation of undistributed earnings as a result of conversion of Class B to Class A shares

     181,628       —         261,713       —    

Reallocation of undistributed earnings to Class B shares

     —         (353 )     —         (1,330 )
                                

Allocation of undistributed earnings

   $ 592,291     $ 181,275     $ 1,002,162     $ 260,383  

Denominator:

        

Number of shares used in basic computation

     203,772       90,124       228,538       80,777  

Weighted average effect of dilutive securities

        

Add:

        

Conversion of Class B to Class A common shares outstanding

     90,124       —         80,777       —    

Unvested common shares subject to repurchase or cancellation

     3,061       939       399       217