Google 2015 Annual Report Download - page 93

Table of Contents Alphabet Inc. and Google Inc.
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stock and Class C capital stock, par value $0.001 per share, from 9 billion shares, 3 billion shares and 3 billion shares,
respectively, to 500 shares of each class of stock, respectively. Additionally, the authorized number of shares of preferred
stock, par value $0.001 per share, was decreased from 100 million shares to 500 shares. As of December 31, 2015,
Google had 100 shares of Class A common stock, 100 shares of Class B common stock, and 100 shares of Class C
capital stock outstanding, of which Alphabet was the sole owner.
Alphabet Convertible Preferred Stock
Our board of directors has authorized 100 million shares of convertible preferred stock, $0.001 par value, issuable
in series. As of December 31, 2014 and 2015, there were no shares issued or outstanding.
Alphabet Class A and Class B Common Stock and Class C Capital Stock
Our board of directors has authorized three classes of stock, Class A and Class B common stock, and Class C
capital stock. The rights of the holders of each class of our common and capital stock are identical, except with respect
to voting. Each share of Class A common stock is entitled to one vote per share. Each share of Class B common stock
is entitled to 10 votes per share. Class C capital stock has no voting rights, except as required by applicable law.
Shares of Class B common stock may be converted at any time at the option of the stockholder and automatically
convert upon sale or transfer to Class A common stock.
Stock Plans
As a result of the Alphabet reorganization, on October 2, 2015, Google transferred to Alphabet, and Alphabet
assumed, sponsorship of all of Google's stock plans along with all of Google's rights and obligations under each plan.
During the year ended December 31, 2014, shares reserved for future grants under the 2004 Stock Plan expired
and we began granting awards from the 2012 Stock Plan (“Stock Plan”). Under our Stock Plan, RSUs or stock options
may be granted. An RSU award is an agreement to issue shares of our publicly traded stock at the time the award
vests. Incentive and non-qualified stock options, or rights to purchase common stock, are generally granted for a term
of 10 years. Options and RSUs granted to participants under the Stock Plan generally vest over four years contingent
upon employment or service with us on the vesting date.
As of December 31, 2015, there were 23,336,944 shares of stock reserved for future issuance under our Stock
Plan.
Stock-Based Compensation
The following table presents our aggregate stock-based compensation expense by type of costs and expenses
per the Consolidated Statements of Income (in millions):
Year Ended December 31,
2013 2014 2015
Cost of revenues $ 469 $ 535 $ 806
Research and development 1,641 2,200 2,687
Sales and marketing 552 715 899
General and administrative 465 725 861
Discontinued operations 216 104 0
Total stock-based compensation expense $ 3,343 $ 4,279 $ 5,253
For the years ended December 31, 2013, 2014, and 2015, we recognized tax benefits on total stock-based
compensation expense from continuing operations of $685 million, $867 million, and $1,133 million, respectively, and
from discontinued operations of $59 million, $30 million and $0 million, respectively. In addition, as a result of the Tax
Court ruling in Altera Corp. v. Commissioner, we have recorded a tax benefit of $522 million related to 2015 stock-
based compensation expense that will be subject to reimbursement of cost share payments if the tax court's opinion
is sustained. Refer to Note 15 for more detail regarding the Altera case.
Of the total stock-based compensation expense from continuing operations recognized in the years ended
December 31, 2013, 2014, and 2015, $0 million, $0 million, and $50 million, respectively, was associated with awards
ultimately settled in cash. Awards which will be ultimately settled in cash are classified as liabilities in our Consolidated
Balance Sheets.
Stock-based compensation associated with Alphabet equity awards granted to Google employees in the fourth
quarter ended December 31, 2015, was treated as a capital contribution from Alphabet to Google. Stock-based