Yahoo 2004 Annual Report Download - page 50

$100 million transaction which will mature in four separate tranches through March 31, 2005. One of the four tranches
matured and settled in December 2004, resulting in us receiving a cash settlement of $26 million. On each of the
remaining maturity dates, if the market price of our common stock is at or above the pre-determined price agreed in
connection with such transaction, which ranges from $25.41 to $26.74 for the remaining three tranches, we will have
our investment returned with a premium. If the market price of our common stock is below the pre-determined price,
we will repurchase shares of our common stock, up to an aggregate of 3.1 million shares for the remaining three
tranches. In 2003, we generated net cash proceeds of $733 million from the issuance of long term convertible debt as
further described below. Cash provided by financing activities will be used for general corporate purposes, including
potential future acquisitions or other transactions.
Financing
In April 2003, we issued $750 million of zero coupon senior convertible notes (the ‘‘Notes’’) which are due in
April 2008. These Notes are convertible into Yahoo! common stock at a conversion price of $20.50 per share, subject to
adjustment upon the occurrence of certain events. Each $1,000 principal amount of the Notes will be convertible prior
to April 2008 if the market price of our common stock reaches a specified threshold for a defined period of time or
specified corporate transactions occur. Upon conversion, we have the right to deliver cash in lieu of common stock. As of
December 31, 2004, the market price condition for convertibility of the Notes was satisfied with respect to the fiscal
quarter beginning January 1, 2005 and ending March 31, 2005. We may be required to repurchase all of the Notes
following a fundamental change of the Company, such as a change of control, prior to maturity at face value. We may
not redeem the Notes prior to their maturity. See Note 9 – ‘‘Long-Term Debt’’ in the consolidated financial statements
for additional information related to the long-term debt.
Subsequent to December 31, 2004, we repurchased 4,907,230 shares of our common stock in open market transactions
at an average price of approximately $33.60 per share, for a total amount of approximately $165 million. Additionally,
we entered into a $100 million structured stock repurchase transaction which will mature in two separate tranches in
June 2005 and August 2005, respectively. On each of the maturity dates, if the market price of Yahoo! common stock is
at or above $30.69 for the June 2005 maturing tranche and $31.49 for the August 2005 maturing tranche, we will have
our investment returned with a premium. If the market price of the Yahoo! common stock is below the pre-determined
prices, we will repurchase shares of our common stock, up to an aggregate of 3.4 million shares.
Capital expenditures
Capital expenditures have generally comprised purchases of computer hardware, software, server equipment and furniture
and fixtures, and are currently expected to increase in 2005 as we invest in the expansion of our network and offerings.
We continue to increase capital expenditures and operating lease commitments, which is consistent with our increased
staffing and operational expansion, and we anticipate that this will continue in the future as business conditions merit.
Contractual Obligations and Commitments
The following table presents certain payments due under contractual obligations with minimum firm commitments as of
December 31, 2004 (in millions):
Payments due by period
Due in Due in Due in More than
Total 2005 2006-2007 2008-2009 5 years
Long-term debt(1) $ 750 $ – $ – $750 $ –
Operating lease obligations(2) 409 44 75 67 223
Affiliate commitments(3) 390 99 291 – –
Non-cancelable obligations(4) 75 59 16 – –
Total contractual obligations $1,624 $202 $382 $817 $223
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