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Google Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: October 30, 2012 06:02AM

Google Inc. (GOOG) filed Quarterly Report for the period ended 2012-09-30. Google, Inc. has a market cap of $220.8 billion; its shares were traded at around $675.15 with a P/E ratio of 20.4 and P/S ratio of 5.8. Google, Inc. had an annual average earning growth of 51.9% over the past 10 years. GuruFocus rated Google, Inc. the business predictability rank of 2.5-star.



Highlight of Business Operations:

We use foreign currency options designated as cash flow hedges to hedge certain forecasted revenue transactions denominated in currencies other than the U.S. dollar. The notional principal of foreign exchange contracts to purchase U.S. dollars with Euros was €2.8 billion (or approximately $3.8 billion) and €4.6 billion (or approximately $5.9 billion) at December 31, 2011 and September 30, 2012; the notional principal of foreign exchange contracts to purchase U.S. dollars with British pounds was £1.4 billion (or approximately $2.2 billion) and £1.9 billion (or approximately $3.0 billion) at December 31, 2011 and September 30, 2012; and the notional principal of foreign exchange contracts to purchase U.S. dollars with Canadian dollars was C$504 million (or approximately $490 million) and C$656 million (or approximately $644 million) at December 31, 2011 and September 30, 2012. These foreign exchange contracts have maturities of 36 months or less.

The total grant date fair value of stock options vested during the three and nine months ended September 30, 2011 was $172 million and $422 million. The total grant date fair value of stock options vested during the three and nine months ended September 30, 2012 was $112 million and $400 million. The aggregate intrinsic value of all stock options and warrants exercised during the three and nine months ended September 30, 2011 was $141 million and $454 million. The aggregate intrinsic value of all stock options and warrants exercised during the three and nine months ended September 30, 2012 was $406 million and $638 million. These amounts do not include the aggregate sales price of stock options sold under our TSO program.

Sales and marketing expenses increased $556 million from the three months ended September 30, 2011 to the three months ended September 30, 2012, which includes $375 million related to Motorola. The remaining increase of $181 million was primarily due to an increase in labor and facilities-related costs of $69 million, largely as a result of a 12% increase in sales and marketing headcount, as well as an increase in advertising and promotional expenses of $60 million. In addition, there was an increase in stock-based compensation expense of $22 million.

Cash provided by operating activities in the nine months ended September 30, 2012 was $11,950 million and consisted of net income of $7,851 million, adjustments for non-cash items of $3,871 million, a gain on divestiture of business of $188 million and cash generated in working capital and other activities of $416 million. Adjustments for non-cash items primarily consisted of $1,976 million of stock-based compensation expense, $1,358 million of depreciation and amortization expense on property and equipment, $651 million of amortization of intangible and other assets, and $113 million of excess tax benefits from stock-based award activities. In addition, the increase in cash from changes in working capital activities primarily consisted of an increase in income taxes, net, of $1,336 million, an increase in accrued expenses and other liabilities of $484 million, a decrease in inventories of $188 million, and an increase in deferred revenue of $182 million. These changes were partially offset by an increase in prepaid revenue share, expenses, and other assets of $1,215 million, a decrease in accounts payable of $274 million, and an increase of accounts receivable of $228 million.

Cash provided by operating activities in the nine months ended September 30, 2011 was $10,641 million and consisted of net income of $7,033 million, adjustments for non-cash items of $3,253 million, and cash provided by working capital and other activities of $355 million. Adjustments for non-cash items primarily consisted of $1,437 million of stock-based compensation expense, $1,011 million of depreciation and amortization expense of property and equipment, $526 million of deferred income taxes, and $337 million of amortization of intangible and other assets. In addition, the increase in cash from changes in working capital activities primarily consisted of a net increase in income taxes payable and deferred income taxes of $268 million and an increase in accrued expenses and other liabilities of $255 million. These increases were partially offset by an increase in accounts receivable of $247 million due to the growth in fees billed to our advertisers, and an increase in prepaid revenue share, expenses and other assets of $128 million. In addition, we paid $500 million related to the resolution of a Department of Justice investigation.

Read the The complete Report



Stocks Discussed: GOOG,
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