Yahoo 2005 Annual Report Download - page 56

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enter into these structured stock repurchase transactions as part of our stock repurchase program. Of
these transactions, $650 million settled in 2005 resulting in cash received of $702 million. Transactions
totaling $250 million settled in January 2006 resulting in cash received of $272 million. Transactions
totaling $110 million settled in February 2006 resulting in our repurchase of 3 million shares at an average
price of $36.60 per share. The remaining tranches totaling $385 million will mature in the second quarter
of 2006. On each of the maturity dates, if the market price of Yahoo! common stock is at or above $33.99
for the $250 million tranche and $38.66 for the $135 million 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 12 million shares.
Subsequent to December 31, 2005, we entered into $250 million in structured stock repurchase
transactions in tranches of $50 million and $200 million, which will mature in July 2006. On the maturity
dates if the market price of Yahoo! common stock is at or above $34.50 for the $200 million tranche and
$33.90 for the $50 million tranche, we will have our investment returned with a premium, otherwise we will
repurchase up to an aggregate of 8 million shares.
Capital expenditures
Capital expenditures have generally comprised purchases of computer hardware, software, server
equipment and furniture and fixtures. Capital expenditures, net were $409 million in 2005 and are
expected to continue to increase in 2006 as we invest in the expansion of the Yahoo! Properties and its
offerings. This continued increase in capital expenditures, together with the increase in operating lease
commitments, is consistent with our increased headcount 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, 2005 (in millions):
Payments due by period
Total
Due in
2006
Due in
2007-2008
Due in
2009-2010 Thereafter
Long-term debt (1) $ 750 $ — $ 750 $ — $ —
Operating lease obligations (2) 838 75 178 171 414
Affiliate commitments (3) 211 199 12 — —
Non-cancelable obligations (4) 86 73 9 4 —
Total contractual obligations $ 1,885 $ 347 $ 949 $ 175 $ 414
(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. See Note 9 — “Long-Term Debt” in the consolidated
financial statements for additional information related to the long-term debt.
(2) We have entered into various non-cancelable operating lease agreements for our offices throughout the United States, and for
our international subsidiaries with original lease periods up to 23 years and expiring between 2006 and 2027. See Note 13 —
“Commitments and Contingencies” in the consolidated financial statements for additional information relating to our operating
leases.
(3) We are obligated to make payments under contracts to provide search services to our affiliates, which represent traffic
acquisition costs.
(4) We are obligated to make payments under various arrangements with vendors and other business partners, principally for
marketing, bandwidth and content arrangements.
As of December 31, 2005 and 2004, we did not have any relationships with unconsolidated entities or
financial partnerships, such as entities often referred to as structured finance or special purpose entities,