Yahoo 2003 Annual Report Download - page 76

Investment in Privately-Held Company. During 2002, Yahoo! tors does not have a stipulated maximum, therefore the
acquired an equity interest of approximately 16 percent in Company is not able to develop a reasonable estimate of
Sonera zed OY (‘‘Zed’’), a Finnish company and previ- the maximum liabilities. To date, the Company has not
ously wholly-owned subsidiary of a publicly-held telecom- incurred material costs as a result of such obligations and
munications company. Under the terms of the investment has not accrued any liabilities related to such indemnifica-
agreement, Yahoo! had call options to acquire the remain- tion obligations in its financial statements.
ing interests not owned by Yahoo! and a put option to
Contractual Obligations. Contractual obligations at Decem-
sell back its shares. In addition, Zed had a put option
ber 31, 2003 are as follows (in millions):
enabling Zed to require Yahoo! to acquire the remaining
interests not owned by Yahoo! if Yahoo! exercised its
Payments due by period
option to buy a majority of Zed’s outstanding shares. The
Less than More than
amount of the purchase price for the remaining equity
Total 1 year 1-3 years 3-5 years 5 years
interests in Zed not held by Yahoo! under these options
Long-term debt (1) $ 750 $ – $ – $ 750 $ –
was not determinable at December 31, 2003 but would
Operating lease obligations, net
have been based on an operating performance based valua-
of sublease income 229 36 52 37 104
tion of Zed. Yahoo! was not obligated to purchase addi-
Affiliate commitments (2) 92 74 17 1 –
tional equity in Zed unless it chose to exercise the option
Noncancelable purchase
described above. As part of the transaction, Yahoo! agreed
obligations 42 28 14 ––
to provide up to 4 million Euro in additional funding to
Total contractual obligations $ 1,113 $ 138 $ 83 $ 788 $ 104
Zed. Other than this amount, Yahoo! was not obligated to
guarantee any obligations of Zed or to provide any fund- (1) The long-term debt matures in April 2008, unless converted into
Yahoo! common stock at a conversion price of $41.00 per share,
ing to Zed. Yahoo!’s investment in Zed was immaterial to subject to adjustment upon the occurrence of certain events. Upon
its condensed consolidated balance sheet as of Decem- conversion, Yahoo! has the right to deliver cash in lieu of common
ber 31, 2003. See Note 15 – ‘‘Subsequent Events’’ regard- stock. See Note 10 – ‘‘Long-Term Debt’’ for further information
related to the long-term debt.
ing the exercise of the put arrangement and termination
of the investment agreement. (2) The Company is obligated to make payments under contracts to
provide search services to its affiliates, which represents traffic acqui-
Other Commitments. In the ordinary course of business, the sition costs.
Company enters into various arrangements with vendors
and other business partners, principally for marketing, At December 31, 2003 and 2002, the Company did not
bandwidth and content arrangements. There are no mate- have any relationships with unconsolidated entities or
rial commitments for these arrangements extending financial partnerships, such as entities often referred to as
beyond 2004. structured finance or special purpose entities, which would
have been established for the purpose of facilitating
In connection with Company’s commercial agreements, off-balance sheet arrangements or other contractually nar-
Yahoo! provides indemnifications of varying scope and row or limited purposes. As such, the Company is not
terms to customers, business partners and other parties exposed to any financing, liquidity, market or credit risk
with respect to certain matters, including, but not limited that could arise if the Company had engaged in such
to, losses arising out of the Company’s breach of such relationships.
agreements and out of intellectual property infringement
claims made by third parties. In addition, the Company On April 21, 2003, Overture completed its purchase of
has entered into indemnification agreements with its the Web Search unit of Fast Search and Transfer ASA, a
directors and certain of its officers that will require the Norway based developer of search and real-time filtering
Company, among other things, to indemnify them against technologies, for $70 million in cash, plus a contingent
certain liabilities that may arise by reason of their status earn-out payment of up to $30 million over three years
or service as directors or officers. The Company maintains based on specified operating criteria. The earn-out pay-
directors and officers insurance, which may cover certain ment is not included in the table above.
liabilities arising from its obligation to indemnify its direc-
tors and officers in certain circumstances. The indemnifi- See also Note 15 – ‘‘Subsequent Events.’’
cation provided by the Company to its officers and direc-
70