Accounting

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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,

2013

As of December 31,

2014 Assets Current assets:

Cash and cash equivalents $ 18,898 $ 18,347 Marketable securities 39,819 46,048 Total cash, cash equivalents, and marketable securities (including securities loaned of $5,059 and $4,058) 58,717 64,395 Accounts receivable, net of allowance of $631 and $225 8,882 9,383 Receivable under reverse repurchase agreements 100 875 Deferred income taxes, net 1,526 1,322 Income taxes receivable, net 408 1,298 Prepaid revenue share, expenses and other assets 3,253 3,412 Total current assets 72,886 80,685

Prepaid revenue share, expenses and other assets, non-current 1,976 3,280 Non-marketable equity investments 1,976 3,079 Property and equipment, net 16,524 23,883 Intangible assets, net 6,066 4,607 Goodwill 11,492 15,599 Total assets $ 110,920 $ 131,133 Liabilities and Stockholders’ Equity Current liabilities:

Accounts payable $ 2,453 $ 1,715 Short-term debt 3,009 2,009 Accrued compensation and benefits 2,502 3,069 Accrued expenses and other current liabilities 3,755 4,434 Accrued revenue share 1,729 1,952 Securities lending payable 1,374 2,778 Deferred revenue 1,062 752 Income taxes payable, net 24 96 Total current liabilities 15,908 16,805

Long-term debt 2,236 3,228 Deferred revenue, non-current 139 104 Income taxes payable, non-current 2,638 3,407 Deferred income taxes, net, non-current 1,947 1,971 Other long-term liabilities 743 1,118 Commitments and contingencies Stockholders’ equity:

Convertible preferred stock, $0.001 par value per share, 100,000 shares authorized; no shares issued and outstanding 0 0 Class A and Class B common stock, and Class C capital stock and additional paid-in capital, $0.001 par value per share: 15,000,000 shares authorized (Class A 9,000,000, Class B 3,000,000, Class C 3,000,000); 671,664 (Class A 279,325, Class B 56,507, Class C 335,832) and par value of $672 (Class A $279, Class B $57, Class C $336) and 680,172 (Class A 286,560, Class B 53,213, Class C 340,399) and par value of $680 (Class A $287, Class B $53, Class C $340) shares issued and outstanding 25,922 28,767 Accumulated other comprehensive income 125 27 Retained earnings 61,262 75,706

Total stockholders’ equity 87,309 104,500 Total liabilities and stockholders’ equity $ 110,920 $ 131,133

See accompanying notes.

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Google Inc. CONSOLIDATED STATEMENTS OF INCOME

(In millions, except share amounts which are reflected in thousands and per share amounts)

Year Ended December 31, 2012 2013 2014

Revenues $ 46,039 $ 55,519 $ 66,001 Costs and expenses:

Cost of revenues (1) 17,176 21,993 25,691 Research and development (1) 6,083 7,137 9,832 Sales and marketing (1) 5,465 6,554 8,131 General and administrative (1) 3,481 4,432 5,851

Total costs and expenses 32,205 40,116 49,505 Income from operations 13,834 15,403 16,496 Interest and other income, net 635 496 763 Income from continuing operations before income taxes 14,469 15,899 17,259 Provision for income taxes 2,916 2,552 3,331 Net income from continuing operations $ 11,553 $ 13,347 $ 13,928 Net income (loss) from discontinued operations (816) (427) 516 Net income $ 10,737 $ 12,920 $ 14,444 Net income (loss) per share - basic:

Continuing operations $ 17.66 $ 20.05 $ 20.61 Discontinued operations (1.25) (0.64) 0.76

Net income (loss) per share - basic $ 16.41 $ 19.41 $ 21.37 Net income (loss) per share - diluted:

Continuing operations $ 17.39 $ 19.70 $ 20.27 Discontinued operations (1.23) (0.63) 0.75

Net income (loss) per share - diluted $ 16.16 $ 19.07 $ 21.02

Shares used in per share calculation - basic 654,426 665,692 675,935 Shares used in per share calculation - diluted 664,610 677,618 687,070

(1) Includes stock-based compensation expense as follows: Cost of revenues $ 359 $ 469 $ 535 Research and development 1,274 1,641 2,200 Sales and marketing 449 552 715 General and administrative 391 465 725 Discontinued operations 219 216 104 Total stock-based compensation expense $ 2,692 $ 3,343 $ 4,279

See accompanying notes.

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Google Inc. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

Year Ended December 31, 2012 2013 2014

Net income $ 10,737 $ 12,920 $ 14,444 Other comprehensive income (loss):

Change in foreign currency translation adjustment 75 89 (996) Available-for-sale investments:

Change in net unrealized gains (losses) 493 (392) 505 Less: reclassification adjustment for net gains included in net income (216) (162) (134) Net change (net of tax effect of $68, $212, $60) 277 (554) 371

Cash flow hedges: Change in unrealized gains 47 112 651 Less: reclassification adjustment for gains included in net income (137) (60) (124) Net change (net of tax effect of $53, $30, $196) (90) 52 527

Other comprehensive income (loss) 262 (413) (98) Comprehensive income $ 10,999 $ 12,507 $ 14,346

See accompanying notes.

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Google Inc. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In millions, except for share amounts which are reflected in thousands)

Class A and Class B Common Stock, Class C

Capital Stock and Additional Paid-In Capital

Accumulated Other

Comprehensive Income

Retained Earnings

Total Stockholders’

Equity Shares Amount

Balance at December 31, 2011 649,790 $ 20,264 $ 276 $ 37,605 $ 58,145 Common stock issued 10,168 736 0 0 736 Stock-based compensation expense 2,692 0 0 2,692 Stock-based compensation tax benefits 166 0 0 166 Tax withholding related to vesting of restricted stock units (1,023) 0 0 (1,023) Net income 0 0 10,737 10,737 Other comprehensive income 0 262 0 262 Balance at December 31, 2012 659,958 22,835 538 48,342 71,715 Common stock issued 11,706 1,174 0 0 1,174 Stock-based compensation expense 3,343 0 0 3,343 Stock-based compensation tax benefits 449 0 0 449 Tax withholding related to vesting of restricted stock units (1,879) 0 0 (1,879) Net income 0 0 12,920 12,920 Other comprehensive income 0 (413) 0 (413) Balance at December 31, 2013 671,664 25,922 125 61,262 87,309 Common and capital stock issued 8,508 465 0 0 465 Stock-based compensation expense 4,279 0 0 4,279 Stock-based compensation tax benefits 625 0 0 625 Tax withholding related to vesting of restricted stock units (2,524) 0 0 (2,524) Net income 0 0 14,444 14,444 Other comprehensive income 0 (98) 0 (98) Balance at December 31, 2014 680,172 $ 28,767 $ 27 $ 75,706 $ 104,500

See accompanying notes.

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Google Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

Year Ended December 31, 2012 2013 2014 Operating activities Net income $ 10,737 $ 12,920 $ 14,444 Adjustments:

Depreciation expense and loss on disposal of property and equipment 1,988 2,781 3,523 Amortization and impairment of intangible and other assets 974 1,158 1,456 Stock-based compensation expense 2,692 3,343 4,279 Excess tax benefits from stock-based award activities (188) (481) (648) Deferred income taxes (266) (437) (104) Gain on divestiture of businesses (188) (700) (740) Gain on equity interest 0 0 (126) Gain on sale of non-marketable equity investments 0 0 (159) Other (28) 106 87 Changes in assets and liabilities, net of effects of acquisitions:

Accounts receivable (787) (1,307) (1,641) Income taxes, net 1,492 401 283 Prepaid revenue share, expenses and other assets (532) (930) 459 Accounts payable (499) 605 436 Accrued expenses and other liabilities 762 713 757 Accrued revenue share 299 254 245 Deferred revenue 163 233 (175)

Net cash provided by operating activities 16,619 18,659 22,376 Investing activities Purchases of property and equipment (3,273) (7,358) (10,959) Purchases of marketable securities (33,410) (45,444) (56,310) Maturities and sales of marketable securities 35,180 38,314 51,315 Investments in non-marketable equity investments (696) (569) (1,227) Cash collateral related to securities lending (334) (299) 1,403 Investments in reverse repurchase agreements 45 600 (775) Proceeds from divestiture of businesses 0 2,525 386 Acquisitions, net of cash acquired, and purchases of intangibles and other assets (10,568) (1,448) (4,888) Net cash used in investing activities (13,056) (13,679) (21,055) Financing activities Net payments related to stock-based award activities (287) (781) (2,069) Excess tax benefits from stock-based award activities 188 481 648 Proceeds from issuance of debt, net of costs 16,109 10,768 11,625 Repayments of debt (14,781) (11,325) (11,643) Net cash provided by (used in) financing activities 1,229 (857) (1,439) Effect of exchange rate changes on cash and cash equivalents 3 (3) (433) Net increase (decrease) in cash and cash equivalents 4,795 4,120 (551) Cash and cash equivalents at beginning of period 9,983 14,778 18,898 Cash and cash equivalents at end of period $ 14,778 $ 18,898 $ 18,347 Supplemental disclosures of cash flow information Cash paid for taxes $ 2,034 $ 1,932 $ 2,819 Cash paid for interest $ 74 $ 72 $ 86 Non-cash investing and financing activities:

Receipt of notes receivable in connection with the divestiture of Motorola Mobile $ 0 $ 0 $ 1,314 Receipt of Lenovo shares in connection with the divestiture of Motorola Mobile $ 0 $ 0 $ 750

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Receipt of Arris shares in connection with the divestiture of Motorola Home $ 0 $ 175 $ 0 Fair value of stock-based awards assumed in connection with the acquisition of Motorola $ 41 $ 0 $ 0 Leases recorded on the balance sheet during the period $ 0 $ 258 $ 250

See accompanying notes.

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