Yahoo 2006 Annual Report Download - page 93

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Fair Value
Unrealized
Loss Fair Value
Unrealized
Loss Fair Value
Unrealized
Loss
Less than 12 Months 12 Months or Greater Total
December 31, 2006
United States Government
and agency securities . . . $138,000 $(223) $ 545,569 $ (5,133) $ 683,569 $ (5,356)
Municipal bonds ......... 2,029 (2) 6,147 (98) 8,176 (100)
Corporate debt securities . . . 514,183 (733) 527,485 (5,256) 1,041,668 (5,989)
Corporate equity
securities ............ — — 2,733 (1,320) 2,733 (1,320)
Total investments in
available-for-sale
securities........... $654,212 $(958) $1,081,934 $(11,807) $1,736,146 $(12,765)
The Company’s investment portfolio consists of government and high-quality corporate securities. Investments in
both fixed rate and floating rate interest earning instruments carry a degree of interest rate risk. Fixed rate securities
may have their fair market value adversely impacted due to a rise in interest rates, while floating rate securities may
produce less income than expected in interest rates fall. The longer the term of the securities, the more susceptible
they are to changes in market rates of interest and yields on bonds. Investments are reviewed periodically to identify
possible other-than-temporary impairment. When evaluating the investments, the Company reviews factors such as
the length of time and extent to which fair value has been below cost basis, the financial condition of the issuer and
the Company’s ability and intent to hold the investment for a period of time which may be sufficient for anticipated
recovery in market value. The Company has the intent and ability to hold these securities for a reasonable period of
time sufficient for a forecasted recovery of fair value up to (or beyond) the initial cost of the investment. The
Company expects to realize the full value of all of these investments upon maturity or sale.
Note 9 LONG-TERM DEBT
In April 2003, the Company issued $750 million of zero coupon senior convertible notes (the “Notes”) due April
2008, resulting in net proceeds to the Company of approximately $733 million after transaction fees of $17 million,
which have been deferred and are included on the consolidated balance sheets in long-term other assets. As of
December 31, 2006, $4 million of the transaction fees remained to be amortized. The Notes were issued at par and
bear no interest. The Notes are convertible into Yahoo! common stock at a conversion price of $20.50 per share,
which would result in the issuance of an aggregate of approximately 37 million shares, subject to adjustment upon
the occurrence of specified events. Each $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, 2006, the market price condition for convertibility of the Notes was satisfied with respect to the
fiscal quarter beginning January 1, 2007 and ending on March 31, 2007. 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
83
Yahoo! Inc.
Notes to Consolidated Financial Statements — (Continued)