Yahoo 2005 Annual Report Download - page 90

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84
$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, 2005, the market price condition for convertibility of the Notes was satisfied with
respect to the fiscal quarter beginning January 1, 2006 and ending on March 31, 2006. 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, 2005, 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 and minority interests are as
follows (in thousands):
Years Ended December 31,
2003 2004 2005
United States $322,863 $1,172,480 $2,047,284
Foreign (1) 20,309 12,544 496,298
Income before income taxes, earnings in equity interests and
minority interests $343,172 $1,185,024 $2,543,582
(1) Includes a non-cash gain of $338 million related to the divestiture of Yahoo! China in connection with the Alibaba transaction
(see Note 4 — “Investments in Equity Interests.”) The majority of the tax on the gain was provided in the United States as the
gain was not taxable in any foreign jurisdiction.