Yahoo 2006 Annual Report Download - page 58

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, 2006, the market price condition for convertibility of the Notes was satisfied
with respect to the fiscal quarter beginning January 1, 2007 and ending March 31, 2007. 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.
Stock repurchases
In March 2005, following the completion of the $0.5 billion 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, dependent on market conditions, share price and other factors.
Under this program, during the year ended December 31, 2006, we repurchased 93.1 million shares of common
stock at an average price of $29.84 per share, including 31.6 million shares received upon the maturity of structured
stock repurchase transactions, and substantially completed this program in October 2006. Total cash consideration
for the stock repurchases in 2006 was $2.8 billion which consisted of $1.8 billion direct stock repurchases,
$0.5 billion as a result of settlements of structured stock repurchase transactions originally entered into in 2005, and
$0.5 billion as a result of settlements of structured stock repurchase transactions originally entered into in 2006. See
Note 11 — “Stockholders’ Equity” in the consolidated financial statements for additional information.
In October 2006, our Board of Directors authorized a new stock repurchase program for us to repurchase up to
$3.0 billion of our outstanding shares of common stock from time to time over the next five years, depending on
market conditions, share price, and other factors. We 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. Repurchases may take place in the open market or in privately negotiated transactions, including derivative
transactions, and may be made under a Rule 10b5-1 plan.
Subsequent to December 31, 2006 we repurchased approximately 14 million shares of our common stock under the
current stock repurchase program at an average price of $29.97 per share, for a total amount of $408 million.
Capital expenditures
Capital expenditures have generally comprised purchases of computer hardware, software, server equipment,
furniture and fixtures, and real estate. Capital expenditures, net were $689 million in 2006, including $112 million
for a land purchase in Santa Clara, California, compared to $409 million in 2005. Our capital expenditures in 2007
are expected to be consistent with 2006 levels as we continue to invest in the expansion of the Yahoo! Properties and
our offerings. This level of expenditure, 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.
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