Facebook 2013 Annual Report Download - page 37

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35
We believe that FCF is one of the key financial indicators of our business performance over the long term and provides useful
information regarding how cash provided by operating activities compares to the property and equipment investments required to maintain
and grow our business. We have chosen to subtract both purchases of property and equipment and property and equipment acquired under
capital leases in our calculation of FCF because we believe that these two items collectively represent the amount of property and equipment
we need to procure to support our business, regardless of whether we finance such property or equipment with a capital lease. The market
for financing servers and other technical equipment is dynamic and we expect our use of capital leases could vary significantly from year
to year.
We have chosen our definition for FCF because we believe that this methodology can provide useful supplemental information to
help investors better understand underlying trends in our business. We use FCF in discussions with our senior management and board of
directors.
FCF has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of other GAAP
financial measures, such as net cash provided by operating activities. Some of the limitations of FCF are:
• FCF does not reflect our future contractual commitments; and
• other companies in our industry present similarly titled measures differently than we do, limiting their usefulness as
comparative measures.
Management compensates for the inherent limitations associated with using the FCF measure through disclosure of such limitations,
presentation of our financial statements in accordance with GAAP, and reconciliation of FCF to the most directly comparable GAAP
measure, net cash provided by operating activities, as presented below.
The following is a reconciliation of FCF to the most comparable GAAP measure, net cash provided by operating activities:
Year Ended December 31,
2013 2012 2011 2010 2009
(in millions)
Net cash provided by operating activities (1) $ 4,222 $ 1,612 $ 1,549 $ 698 $ 155
Purchases of property and equipment (1,362) (1,235) (606) (293) (33)
Property and equipment acquired under capital leases (11) (340) (473) (217) (56)
Free cash flow $ 2,849 $ 37 $ 470 $ 188 $ 66
(1) For the year ended December 31, 2012, net cash provided by operating activities was reduced by $451 million of income tax refundable from income tax loss
carrybacks due to the recognition of tax benefits related to share-based compensation from RSUs granted prior to January 1, 2011. We received substantially all of
this refund in 2013 which increased our net cash provided by operating activities and FCF for the year ended December 31, 2013.