Yahoo 2004 Annual Report Download - page 88

Download and view the complete annual report

Please find page 88 of the 2004 Yahoo annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 114

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114

Other Commitments. In the ordinary course of business, the Company may provide indemnifications of varying scope and
terms to customers, vendors, lessors, business partners and other parties with respect to certain matters, including, but
not limited to, losses arising out of the Company’s breach of such agreements, services to be provided by the Company,
or from intellectual property infringement claims made by third parties. In addition, the Company has entered into
indemnification agreements with its directors and certain of its officers that will require the Company, among other
things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or
officers. The Company has also agreed to indemnify certain former officers, directors and employees of acquired compa-
nies in connection with the acquisition of such companies. The Company maintains director and officer insurance,
which may cover certain liabilities arising from its obligation to indemnify its directors, and officers and former directors,
officers and employees of acquired companies, in certain circumstances.
It is not possible to determine the maximum potential amount under these indemnification agreements due to the
limited history of prior indemnification claims and the unique facts and circumstances involved in each particular
agreement. Such indemnification agreements may not be subject to maximum loss clauses. Historically, the Company has
not incurred material costs as a result of obligations under these agreements and it has not accrued any liabilities related
to such indemnification obligations in its financial statements.
On April 21, 2003, Overture completed its purchase of the Web Search unit of Fast Search and Transfer ASA, a Norway
based developer of search and real-time filtering technologies, for $70 million in cash, plus a contingent earn-out
payment of up to $30 million over three years based on specified operating criteria. The earn-out payment is not
included in the contractual obligations table.
On January 2, 2004, the Company completed the acquisition of 3721. In January 2004, approximately $51 million in
cash consideration was paid. Under the terms of the acquisition, the Company also contingently agreed to pay an
additional amount up to a maximum of $70 million in cash, part of which will be an increase to the purchase price and
the remainder will be operating expense, over the two-year period ending December 31, 2005, if certain performance
criteria are met. At December 31, 2004, the Company recorded an additional $20 million of additional purchase price
and $3 million of additional operating expense, as 3721 achieved certain performance-based milestones. As of Decem-
ber 31, 2004, these amounts were included in accrued expenses and other current liabilities and will be paid in 2005.
The remaining contingent payment of up to $35 million is not included in the contractual obligations table below. See
Note 3 – ‘‘Acquisitions’’ for additional information related to this acquisition.
Contractual Obligations. 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 2010
Total Due in 2005 2006-2007 2008-2009 or after
Long-term debt(1) $ 750 $ – $ – $750 $ –
Operating lease obligations 409 44 75 67 223
Affiliate commitments(2) 390 99 291 – –
Non-cancelable obligations(3) 75 59 16 – –
Total contractual obligations $1,624 $202 $382 $817 $223
(1) The long-term debt matures in April 2008, unless converted into Yahoo! common stock at a conversion price of $20.50 per share, subject to
adjustment upon the occurrence of certain events. Upon conversion, the Company has the right to deliver cash in lieu of common stock. See
Note 9 – ‘‘Long-Term Debt’’ for additional information related to the long-term debt.
(2) The Company is obligated to make payments under contracts to provide sponsored search services to its affiliates, which represent traffic
acquisition costs.
(3) The Company is obligated to make payments under various arrangements with vendors and other business partners, principally for marketing,
bandwidth and content arrangements.
82