Yahoo 2004 Annual Report Download - page 81

Yahoo! Internet Guide, develop related Korean online navigational services, and conduct other related business. The
parties originally invested a total of $1 million in proportion to their respective equity interests. During March 2000, the
Company invested an additional $61 million in Yahoo! Korea. As a result, the Company recorded goodwill of approxi-
mately $20 million. The Company has a majority share of approximately 67 percent in the joint venture, and therefore,
has consolidated its financial results. Minority interests are presented separately on the consolidated balance sheets and
statement of operations.
Note 9 LONG-TERM DEBT
In April 2003, the Company issued $750 million of zero coupon senior convertible notes (the ‘‘Notes’’) due April 2008,
which resulted in net proceeds to the Company of approximately $733 million after transaction fees of $17 million,
which have been deferred and are included on the consolidated balance sheets in other assets. As of December 31, 2004,
approximately $11 million of the transaction fees remain to be amortized. The Notes were issued at par and bear no
interest. The Notes are convertible into Yahoo! common stock at a conversion price of $20.50 per share, which would
result in the issuance of an aggregate of approximately 37 million shares, subject to adjustment upon the occurrence of
specified events. Each $1,000 principal amount of the Notes will initially be convertible into 48.78 shares of Yahoo!
common stock.
The Notes are convertible prior to the final maturity date (1) during any fiscal quarter if the closing sale price of the
Company’s common stock for at least 20 trading days in the 30 trading-day period ending on the last trading day of the
immediately preceding fiscal quarter exceeded 110 percent of the conversion price on that 30th trading day, (2) during
the period beginning January 1, 2008 through the maturity date, if the closing sale price of the Company’s common
stock on the previous trading day was 110 percent or more of the then current conversion price, and (3) upon specified
corporate transactions. Upon conversion, the Company has the right to deliver cash in lieu of common stock. The
Company 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. The Company may not redeem the Notes prior to their maturity.
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 on March 31, 2005. During this period holders of the Notes will be
able to convert their Notes into shares of Yahoo! common stock at the rate of 48.78 shares of Yahoo! common stock for
each Note. The Notes will also be convertible into shares of Yahoo! common stock in subsequent fiscal quarters, if any,
with respect to which the market price condition for convertibility is met. As of December 31, 2004, the fair value of
the Notes was approximately $1.4 billion based on quoted market prices. The shares issuable upon conversion of the
Notes have been included in the computation of diluted net income per share since the Notes were issued.
Note 10 INCOME TAXES
The components of income before income taxes, earnings in equity interests, minority interests and cumulative effect of
accounting change are as follows (in thousands):
Years Ended December 31,
2002 2003 2004
United States $171,318 $322,863 $1,172,480
Foreign (13,843) 20,309 12,544
Income before income taxes, earnings in equity interests, minority interests and
cumulative effect of accounting change $157,475 $343,172 $1,185,024
75