Yahoo 2005 Annual Report Download - page 55

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Europe and Korea and $54 million for the Verdisoft acquisition. The acquisitions of 3721, Kelkoo, and
Musicmatch in 2004 and Inktomi and Overture in 2003 were the main uses of the net cash consideration
for acquisitions in those years. Sales of equity securities generated cash in the amounts of $1,006 million,
$503 million and $2 million in 2005, 2004 and 2003, respectively.
Cash provided by (used in) financing activities is driven by our financing activities relating to employee
option exercises, stock repurchases and debt financing. Our cash proceeds from employee option exercises
increased to approximately $747 million in 2005, compared to $651 million and $353 million in 2004 and
2003, respectively as our employee numbers and the weighted average exercise prices of our options have
risen in each successive year. During 2005, we used $388 million in the direct repurchase of 11.7 million
shares of our common stock at an average price of $33.20 per share. There were no comparable
transactions in either 2004 or 2003. In 2005, we entered into structured stock repurchase transactions
resulting in a total cash outlay of $1,395 million. These instruments settle in cash or stock depending on
the market price of our common stock on the date of maturity. This $1,395 million cash outlay was offset
by cash receipts of $784 million from the settlement of structured stock repurchase transactions in 2005,
for a net cash usage of $611 million for these transactions in 2005. During 2004, we entered into structured
stock repurchase transactions resulting in a total cash outlay of $150 million, which was offset by cash
receipts of $80 million from the settlement of structured stock repurchase transactions, for a net cash usage
of $70 million for these transactions in 2004. We did not have any comparable transactions in 2003.
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, 2005, the market price
condition for convertibility of the Notes was satisfied with respect to the fiscal quarter beginning January 1,
2006 and ending March 31, 2006. 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.
Stock repurchases
In March 2005, following the expiration of the $500 million stock repurchase program that was authorized
in 2001 and extended in 2003, our Board of Directors authorized the repurchase of up to $3.0 billion of our
outstanding shares of common stock over the next five years, depending on market conditions, share price
and other factors. Repurchases may take place in the open market or in privately negotiated transactions
and may be made under a Rule 10b5-1 plan. Our Board of Directors and management believe that
additional repurchases made under appropriate market conditions are a prudent use of cash currently
available to us in order to enhance long-term stockholder value. In 2005, under the expired and current
stock repurchase programs, we repurchased 11.7 million shares of common stock at an average price of
$33.20 per share for a total amount of $388 million. Subsequent to December 31, 2005, we repurchased
19 million shares of our common stock under the current stock repurchase program at an average price of
$33.51 per share, for a total amount of $639 million.
Structured stock repurchases
In 2005, we entered into $1,395 million in structured stock repurchase transactions which settle in cash or
stock depending on the market price of our common stock on the date of maturity of the transaction. We